Friday, February 3, 2023

Industry asks for elimination of sugar tax

Estimated reading time: 3 minutes

SA Canegrowers has made a submission to National Treasury, calling on minister Enoch Godongwana to not only suspend the increase in sugar tax but to eliminate the tax entirely in light of the crisis in which the South African sugar industry finds itself and the fact that to date, there is no evidence that the tax has had a positive impact on obesity levels in the country. 

The submission was made pursuant to a call for comments on the Budget Review 2023 issued by National Treasury in November 2022. SA Canegrowers made a similar submission to the National Council of Province’s Select Committee on Finance in response to a call for comments on the 2022 Rates and Monetary Amounts and Amendment of Revenue Laws Bill in the same month.

Read more about the sugar tax here.

These calls for comment came shortly after the board at Tongaat Hulett decided to put the company’s South African operations into business rescue. Tongaat Hulett alone serves more than 12 000 growers who employ more than 14 000 farmworkers in KwaZulu-Natal’s rural communities. This season, Tongaat Hulett operations are estimated to crush over 4,78m tons of sugarcane, which is valued at about R3,23 billion. This is vital revenue that neither the industry, province, nor national economy can afford to lose. 

The sugar industry is structured in such a way that there is one revenue pot from which growers and millers all receive a share. It is therefore impossible to isolate the consequences of any hardship to one section of the industry; when millers suffer, growers suffer and vice versa.

Read more about Sa Canegrowers’ support for small-scale growers here.

Sugar tax is handicapping the industry

There is currently a grower-led consortium seeking to save Tongaat Hulett operations. This will be difficult enough to accomplish with the sugar tax handicapping the industry; it will be virtually impossible if the sugar tax is increased. And Tongaat Hulett is not the only milling company under pressure. SA Canegrowers has long pointed to the financial pressure the sugar tax places on the entire industry.

The industry is therefore rightly concerned that the continued implementation of the sugar tax may yet cause further casualties in the milling sector. Two sugar mills have already closed, with devastating consequences for the entire sugar value chain and the one million mostly rural livelihoods it sustains.

Moreover, under the terms of the Sugarcane Value Chain Masterplan, the industry is constrained in the price increases and the effect they can have on its products. This has been an enormous burden on the industry in an inflationary environment to the detriment of growers and millers alike. Increasing the sugar tax under these circumstances would further cripple the industry and lead to thousands of job losses, in addition to the more than 16 000 jobs already lost because of the sugar tax.

As it stands, simply maintaining the sugar tax in the current economic environment continues to cause financial harm to growers, workers, and the communities that depend on the sugar cane industry for their livelihoods.

Modelling by the Bureau for Food and Agricultural Policy has shown that maintaining the sugar tax at the current level will cost the industry a further 15 984 seasonal and permanent jobs and will be a major contributing factor towards a decline of 46 600 hectares of area under cane over the next ten years.

SA Canegrowers, therefore, calls on minister Godongwana to help the industry in this time of crisis and to help us save the one million livelihoods it supports. We remain committed to working with government to develop a holistic plan that identifies the causes of obesity in the country and provides solutions that tackle this problem without destroying one sector of the economy. â€“ Press release, SA Canegrowers

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