MTBPS: Infrastructure investment of limited benefit while sugar tax throttles canegrowers

26 October 2022

SA Canegrowers welcomes the commitment by Minister Godongwana in his Medium Term Budget Policy Statement to address the damage to infrastructure caused by the floods of April 2022 in KwaZulu Natal. We are, however, disappointed that he failed to give any indication on the future of the Health Promotion Levy, an existential issue for South Africa’s canegrowing industry and broader sugar value chain. 

Much of South Africa’s canegrowing takes place in KwaZulu Natal, and canegrowers were adversely affected by the floods. Investment in the repair of critical infrastructure is a necessary intervention, but it is of limited value while the industry struggles under the burden of the unsubstantiated sugar tax.

The job-killing sugar tax continues to stifle the sugar industry’s growth and contribution to South Africa’s economy. As it stands, the industry is a major employer in rural communities across KwaZulu Natal and Mpumalanga. Figures from the National Economic Development and Labour Council (NEDLAC) indicate that the sugar tax cost the industry more than 16,000 jobs in its first year alone, and figures recently cited by Beverage Association of South Africa suggest that job losses may now be as high as 25,000. 

In an economic climate marked by low growth and high unemployment, the country cannot afford to sacrifice more jobs to the sugar tax. This is especially so in the absence of any evidence that the sugar tax in fact reduces obesity as is its stated objective.

Sadly, modelling suggests that further job-losses will be the result of continuing to implement the tax. Modelling by the Bureau for Food and Agricultural Policy indicates that maintaining the sugar tax at the current level is expected to cost the industry a further 15,984 jobs and contribute towards a decline of 46,600 hectares under cane over the next ten years. It is primarily small-scale growers and rural communities who will bear the brunt of this decline.

Worse still, based on the Budget Speech in February 2022, Minister Godongwana looks set to increase in the tax, possibly lowering the 4g threshold and extending the levy to fruit juices. The impact of such a move will be catastrophic and will further corrode any progress made to secure the future of the industry under the auspices of the Sugarcane Value Chain Masterplan.

SA Canegrowers has initiated engagements with the Presidency and Treasury on the impact of the sugar tax. We will continue these efforts, especially in light of the stated intention to increase the devastating tax. We can only hope that the Finance Minister’s failure to address the sugar tax is an indication that the planned increase is not set in stone, and that the government will finally accede to the industry’s requests to scrap the destructive tax.

Issued by Kabelo Kgobisa on behalf of SA Canegrowers, 26 October 2022