Publication of the sugar tax increase without consultation threatens thousands more livelihoods in the industry

31 August 2023

SA Canegrowers is deeply concerned about the recently published Draft Rates and Monetary Amounts and Amendment of Revenue Laws Bill, which includes an increase in the Health Promotion Levy that is due to take effect on 1 April 2025. Government has repeatedly undertaken to consult the sugar industry and its stakeholders regarding the effectiveness of the levy, also known as the sugar tax, and its socio-economic impact on the sector. The publication of the increase in the absence of such consultation is therefore a bad faith move by the National Treasury that will have far-reaching negative implications for the already struggling industry, its stakeholders, and workers throughout the value chain.

The increase in the Health Promotion Levy was first announced in February 2022. Its implementation was subsequently postponed to 1 April 2023 to allow for further engagement with all relevant stakeholders. However, no consultation took place thereafter.

In his Budget Speech in February 2023, Minister of Finance, Enoch Godongwana, then announced that the increase would be further delayed for a period of two years, recognising the difficult environment within which growers operate. However, since this announcement, no consultation with the industry has taken place.

The Parliamentary Portfolio Committee on Trade Industry and Competition also scheduled a colloquium on the sugar tax, with both Minister Ebrahim Patel and Minister Thoko Didiza expected to attend. However, this was subsequently postponed following the announcement of the two-year pause on the increase and has yet to be rescheduled. The value of any future engagement in this regard with Parliament or government is called into question by the recently published Bill, as the publication suggests a predetermined outcome – an increase of the sugar tax.

The publication of the increase in the absence of any consultation with the industry is especially troubling since National Treasury has also failed to respond to a Promotion of Access to Information Act request by SA Canegrowers on the information relied upon by government when it comes to introducing the sugar tax as well as subsequent decisions to increase the tax. These failures stand at odds with the constitutional values of accountable and transparent governance.

As things stand, government has produced no data demonstrating the effectiveness of the Health Promotion Levy or to justify increasing the levy further.

At the same time, the uncertain future faced by South Africa’s sugarcane growers is evident, especially considering that two mills are currently in business rescue. This hardship has been exacerbated by a hike in input costs even as irrigated growers continue to struggle with loadshedding and the implications of a potentially drier, hotter summer over the coming months.

The negative impact of the tax on the sugar industry is also plain to see. It caused tens of thousands of job losses in the first year of its implementation alone and cost the country more than R2 billion. Subsequent research from the Bureau for Food and Agricultural Policy showed that simply maintaining the tax would cause a reduction in hectares under cane over the next 10 years. Increasing the tax will therefore have catastrophic effects resulting in thousands more job losses and less cane being farmed in poor rural areas where poverty and unemployment are already at alarming levels.

SA Canegrowers will therefore be making a submission on the Bill calling on Minister Enoch Godongwana to remove the increase from the legislation until a fair, open-minded engagement process has been concluded with the industry and its stakeholders. We will also be calling on the Minister to comply with SA Canegrowers’ PAIA request so that industry engagements can be carried out with full information, and will be writing to the portfolio committee on Trade, Industry and Competition to request that the sugar tax colloquium be re-scheduled as a matter of urgency.

SA Canegrowers is committed to the protection of the one million livelihoods the industry supports, and to the expansion of opportunities for future generations. But we cannot achieve this without the support and cooperation of government. The first step must be the postponement of any increase in the sugar tax until full and meaningful consultation has taken place.

Issued by Thomas Funke, Chief Executive Officer, SA Canegrowers, 30 August 2023