Ahead of Wednesday’s budget speech, SA’s sugar industry has intensified its calls for the sugar tax to be scrapped with immediate effect, saying the policy is unsupported by data.
“This year’s budget speech must support, not sabotage, the recovery and growth of the industry,” said Andrew Russell, the chair of industry body SA Canegrowers Association.
“Most importantly, it [the budget speech] must promote job creation. The sugar tax does exactly the opposite. If maintained, it will contribute to the decline of the industry; if increased, it will accelerate job losses. SA simply cannot afford this,” Russell said.
The industry generates income about R14bn a year, directly employs about 85,000 workers and supports at least 350,000 jobs across the value chain. However, it has been on the brink of collapse in recent times due to falling prices, stiff competition from cheap imports, mainly from Brazil, and a drop in sales volumes, in part due to the sugar tax.
The levy was introduced in 2018 as part of the government’s efforts to improve the health of South Africans, and to try to reduce the related costs for the public and private healthcare systems. While the tax has been broadly welcomed by health experts and advocacy groups as a first step in the right direction, it has left many producers reeling. The situation is worsened by low international prices and changing consumption patterns.
The sugar industry says the levy has cost it more than R2bn since its implementation, with more than 16,000 jobs lost.
According to industry figures, annual sugar production in SA has dropped from 2.75-million tonnes to 2.1-million tonnes a year, over the past 20 years. The number of sugar cane farmers has also declined by 60% during this period, and sugar industry-related jobs are estimated to have fallen by 45%.
Russell said the industry has previously drawn Treasury’s attention to the findings of the socioeconomic assessment commissioned by Nedlac, the policy-making body made up of government, business, labour and communities. That assessment shows that the sugar tax cost SA more than 16,000 jobs and R2,05bn in the first year of its implementation alone.
“These findings are especially devastating when we consider that there has been no evidence that the sugar tax has been effective in achieving its primary objective, to reduce obesity levels in SA. Yet health activists have continued to call for an increase in the sugar tax instead of taking a holistic approach to health that takes into account all of the factors that contribute to obesity. This scapegoating of one industry will have a heavy cost to the country and its workers,” Russell said.
He highlighted that the industry had recently commissioned the Bureau for Food and Agricultural Policy (BFAP) to conduct modelling on the future effect of the sugar tax under different scenarios. The study showed that if the sugar tax remains in place at the current level (2.1c per gram of sugar per 100ml), it will be a major contributing factor towards a decline of 46,600ha under cane over the next 10 years. This is 13% of the current hectares under cane. SA already lost 14,6% of its area under cane between 2005 and 2015 but this decline had stabilised by 2016, Russell said.
“The modelling also shows that should the sugar tax be doubled, which has been called for by some lobby groups, this could lead to an additional 17,000ha of cane going out of production over and above the projected 46,600ha reduction if the tax remains the same. The impact of this additional loss on the industry and farming communities would be devastating.”
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