SA’s sugar industry is a lifeline for rural communities in Mpumalanga and KwaZulu-Natal, where rolling hills and small-scale farms are well-suited to cane growing but unsuitable for most other crops. This sector supports nearly 1-million livelihoods, providing critical employment where opportunities are scarce. Yet, despite its economic importance, the industry faces an ongoing threat — not from market forces or climate change, but from tax policy.
The 2018 introduction of a sugar tax, officially called the Health Promotion Levy, was a severe blow to farmers and workers, causing widespread job losses. Now activists from the foreign-funded NGO Heala are calling for an increase in the sugar tax in the February budget, arguing that delays in raising the tax have contributed to diabetes-related deaths.
Such claims are not only misleading, but also dangerous. They divert attention from real solutions while devastating an industry on which millions rely. The notion that higher sugar taxes improve health outcomes is not supported by evidence. In fact, a comprehensive study on SA’s sugar tax, conducted by the National Economic Development and Labour Council (Nedlac), found that 16,000 jobs were lost in the first year alone, with more than 9,000 of these directly in the sugar farming sector.
For many small-scale growers profit margins were already razor-thin. The tax forced many growers out of business, leaving workers without jobs and families without income in areas where alternative employment is scarce. Such losses are devastating, particularly for children in affected households.
The tax forced many growers out of business, leaving workers without jobs and families without income in areas where alternative employment is scarce.
Should finance minister Enoch Godongwana raise the sugar tax in his budget speech this week, he will be worsening poverty and hunger among SA’s poorest citizens.
Policymakers often talk about inclusive economic growth, but the sugar tax achieves the opposite. It disproportionately harms the poorest growers and workers, driving up unemployment and making it harder for families to afford food.
Ironically, many of the same health activists under the Heala banner who advocate for higher sugar taxes also highlight SA’s hunger crisis, noting that one in four children does not get enough to eat. This is undeniably a national tragedy. However, to suggest — as Heala does in its webinars, YouTube videos and petitions — that raising the sugar tax will help combat hunger, is naive at best and disinformation at worst.
In reality, sugar tax revenue has never been ring-fenced for public health initiatives. It has neither improved school feeding schemes nor been channelled into meaningful public health interventions. Instead, it has become just another government revenue stream, squeezing workers and cane growers, without delivering any measurable health benefits.
The economic harm caused by SA’s sugar tax is well documented, yet no firm evidence exists of any positive impact on the health of South Africans over the past seven years. Raising the tax further will lead to more job losses, further undermining a vital sector.
Revenue or public health?
While SA faces record unemployment, policies that destroy jobs should be closely scrutinised. The government must ask itself: does this tax genuinely improve public health, or is it simply another way to raise revenue at the expense of the rural poor?
Taxing the cane-growing sector to reduce sugar consumption could also reduce farm profitability, which lowers tax revenues paid in the form of income tax and payroll tax. Cane growers pay higher interest rates on debt as banks have factored in the sugar tax as a risk, which ultimately affects their bottom line.
After the sugar tax was imposed, two sugar mills closed down — again leaving less income and tax for the fiscus. This means the sugar tax is not only failing as a health measure but also is economically counterproductive.
The belief that a single tax can change population-wide behaviour is also misguided. Anyone who has ever tried to diet knows that eating habits are complex and difficult to alter. Expecting a single tax to shift millions of people’s consumption patterns is unrealistic — it is simply too blunt a measure.
Instead, consumers are likely to switch to cheaper alternatives. As the price of sugary drinks rises, it will hurt premium brands while boosting sales of discount labels — a shift that does little to reduce overall sugar consumption.
Even research cited by a Wits academic research unit and proponents of the sugar tax, Priceless, raises serious concerns. A study conducted before the tax was introduced found that South Africans were, on average, consuming about three teaspoons of sugar per day from sugary drinks — a level not considered excessive by World Health Organisation standards before the tax.
If South Africans were consuming small amounts of sugar in drinks before the tax then the question to be asked is what is driving diabetes?
Why such a low level of sugar from drinks is thought of as the cause of disease rates, obesity or diabetes in SA is unclear. What is needed is a full dietary intake study that tracks everything South Africans eat or drink that would offer evidence on causes of disease, rather than blaming a single product for illnesses.
What is clear, however, is that the sugar tax has already cost thousands of jobs, and any further increases are likely to cause even greater economic harm.
The truth is that the sugar tax has failed to improve health, but has succeeded in harming farmers, workers and SA’s economy. If policymakers are serious about economic growth, job creation and genuine public health progress, they should reconsider this flawed policy before even more livelihoods are lost.
• Mdluli chairs SA Canegrowers.
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