MTBPS: Rural livelihoods at risk on account of job-killing Sugar Tax increase

30 October 2023

With Minister of Finance Enoch Godongwana delivering the Midterm Budget Policy Statement on Wednesday, SA Canegrowers is calling on him to reverse the decision to table an increase in the Health Promotion Levy (or ‘the sugar tax’) in the Draft Rates and Monetary Amounts and Amendment of Revenue Laws Bill. The tabling of the increase, due to take effect in April 2025 without any consultation with the sugar industry and other affected stakeholders, and with no evidence that the tax has actually reduced obesity levels, will have devastating implications for South Africa’s rural communities at a time when the unemployment and poverty are at record levels.

In his Budget Speech delivered in February 2023, Minister Godongwana announced a two-year postponement in the implementation of the increase. The stated reason for the delay was to allow for further consultation. Notwithstanding this commitment, no consultation has taken place to date on the destructive impact of the sugar tax for South Africa’s growers, millers and rural communities.

The folly of an increase at this critical time for the industry is compounded by the ongoing milling crisis, with Tongaat Hulett and Gledhow still in business rescue. SA Canegrowers remains deeply concerned about the future of these mills in the long-term, as well as their ability in the short-term to conduct the off-crop maintenance necessary to operate effectively next season. These material concerns must be considered by National Treasury before any decision to increase the sugar tax is taken.

As things stand, the sugar industry supports an estimated one million livelihoods, predominantly in the country’s most rural communities in KwaZulu-Natal and Mpumalanga. The loss of vital jobs in the industry would leave thousands of South Africans reliant on social grants at a time when National Treasury can least afford it.

The job losses on account of the sugar tax are not theoretical. An independent study by NEDLAC showed that more than 16,000 jobs and R2 billion were lost in the first year of the tax alone. Further modelling by the highly respected Bureau for Food and Agricultural Policy demonstrated that merely maintaining the sugar tax would lead to the loss of thousands of hectares under cane over the next 10 years, causing further jobs losses.

With the national fiscus in a perilous state, and the economy battered by inflation and joblessness, South Africa cannot afford this ill-timed intervention. This is even more troubling as there remains no evidence to date that the sugar tax has in fact achieved its objective of reducing obesity.

While the sugar tax is viewed by some as a revenue source for the fiscus, this is a short-sighted view that will have calamitous long-term costs, especially in our rural communities. SA Canegrowers is therefore calling on Minister Godongwana to take a long-term view on the economy and protect the livelihoods that depend on the sugar industry. Engagement is critical to avoid unnecessary jobs losses in KwaZulu-Natal and Mpumalanga.

Issued by Kabelo Kgobisa on behalf of SA Canegrowers Association, 30 October 2023