MTBPS: Sugar tax continues to handicap Small-Scale Growers facing bitter cost pressures
25 October 2022
As he delivers his Midterm Budget Policy Statement tomorrow, SA Canegrowers is calling on Finance Minister Enoch Godongwana to provide a signal on the future of the Health Promotion Levy. With high input costs already weighing down the agricultural sector, the added burden of the Health Promotion Levy on the sugar industry (despite there being no evidence that the tax has reduced obesity levels in the country) poses an existential threat to South Africa’s 21,000 Small-Scale Growers and must be eliminated.
At his Budget Speech in February 2022, Minister Godongwana announced an increase in the tax, but this was subsequently postponed to April 2023 in order allow for further consultation on lowering the 4g threshold and extending the levy to fruit juices.
While this postponement provided some relief for growers, the prolonged enforcement of the HPL has continued to hamstring the industry, which has also been faced with other cost pressures including a spike in fertiliser and energy prices along with ongoing bouts of load shedding.
While SA Canegrowers has written to Minister Godongwana to request a meeting to discuss the HPL, we have received no response to date. We have therefore also written to President Ramaphosa requesting his intervention in this long-running problem to provide desperately needed relief for the industry by eliminating the sugar tax.
The tax was introduced in 2018 with the objective of reducing obesity levels in South Africa so as to reduce the burden of disease on the country’s healthcare system. Despite being in force for more than four years, there remains no credible evidence that the intervention has reduced obesity levels in the country.
But the economic impact of the tax has been consistently demonstrated by credible research.
In June 2021 a study commissioned by the National Economic Development and Labour Council showed that the tax had cost the country 16,621 jobs losses, a R653 million decline in investment into the economy, and a R1,19 billion decline in the first year of its implementation.
Further research conducted by the Bureau for Food and Agricultural Policy has also showed that maintaining the sugar tax at the current level will cost the industry a further 15,984 jobs and contribute towards a decline of 46,600 hectares under cane over the next ten years. The effect of an increase would therefore be devastating, threatening the survival of the industry’s 21,000 Small-Scale Growers as well as the jobs created by commercial growers.
South Africa is not in a position to imperil desperately needed jobs. This is especially true for the rural communities in KwaZulu-Natal and Mpumalanga. For the sake of the one million livelihoods that depend on the industry, Minister Godongwana must use the opportunity of the Midterm Budget Policy Statement to finally signal the elimination of the calamitous and ineffective sugar tax. SA Canegrowers remains committed to working with government to come up with a holistic plan to tackle obesity levels in the country, which does not unfairly target one industry and the livelihoods that depend on it.
Issued by Kabelo Kgobisa on behalf of SA Canegrowers Association, 25 October 2022
