SA Canegrowers again calls for rethink of sugar tax as MTBPS looms

30th October 2023 By: Marleny Arnoldi - Deputy Editor Online

Industry body SA Canegrowers has once again called on Finance Minister Enoch Godongwana to not table an increase in the Health Promotion Levy (HPL), or sugar tax, in the upcoming Medium-Term Budget Policy Statement (MTBPS).

This is in response to a tabling of the increase in the Draft Rates and Monetary Accounts and Amendment of Revenue Laws Bill that is due to take effect in April 2025.

SA Canegrowers says the sugar industry was not consulted over the increase and that there is no evidence that the tax has actually reduced obesity levels, as originally intended by the tax.

In his Budget Speech in February, Godongwana announced a two-year postponement in the implementation of the increase. The stated reason for the delay was to allow for further consultation. Notwithstanding this commitment, no consultation has taken place to date on the destructive impact of the sugar tax on South Africa’s growers, millers and rural communities, SA Canegrowers explains.

The association adds that the HPL has already resulted in the beverages sector reformulating its products away from sugar to avoid the levy, which led to substantial revenue losses for the sugar industry.

The HPL is currently set at 2.21c/g.

The organisation adds that the folly of an increase at this critical time for the industry is compounded by the ongoing milling crisis, with Tongaat Hulett and Gledhow still in business rescue.

SA Canegrowers remains deeply concerned about the future of these mills in the long term, as well as their ability in the short term to conduct the off-crop maintenance necessary to operate effectively next season. These material concerns must be considered by National Treasury before any decision to increase the sugar tax is taken.

As things stand, the sugar industry supports an estimated one-million livelihoods, predominantly in the country’s most rural communities in KwaZulu-Natal and Mpumalanga.

The loss of vital jobs in the industry would leave thousands of South Africans reliant on social grants at a time when Treasury can least afford it.

The job losses on account of the sugar tax are not theoretical, SA Canegrowers points out, citing an independent study by National Economic Development and Labour Council that finds more than 16 000 jobs and R2-billion were lost in the first year (2018) of the HPL alone.

Further modelling by the Bureau for Food and Agricultural Policy demonstrates that merely maintaining the sugar tax would lead to the loss of thousands of hectares under cane over the next ten years, causing further jobs losses.

With the national fiscus in a perilous state, and the economy battered by inflation and joblessness, South Africa cannot afford this ill-timed intervention. This is even more troubling as there remains no evidence to date that the sugar tax has in fact achieved its objective of reducing obesity, SA Canegrowers says.

While the HPL is viewed by some as a revenue source for the fiscus, this is a short-sighted view that will have calamitous long-term costs, especially in rural communities, it asserts.

SA Canegrowers is calling on Godongwana to take a long-term view on the economy and protect the livelihoods that depend on the sugar industry. “Engagement is critical to avoid unnecessary jobs losses in KwaZulu-Natal and Mpumalanga.”