New report shows sugar tax a disaster for SA economy

New report shows sugar tax a disaster for SA economy

New report confirms catastrophic impact of the Sugar Tax on jobs and the economy

A new report on the socio-economic impact of the Health Promotion Levy (HPL or sugar tax), introduced in 2018, highlights the devastating impact the tax has had on the sugar industry as well as the broader economy and jobs.

The report titled Economic Impact of the Health Promotion Levy on the Sugar Market Industry, commissioned by the National Economic Development and Labour Council (NEDLAC) at the request of the Portfolio Committee of Trade and Industry, reveals that by 2019, the sugar tax had resulted in:

  • 16 621 total job losses in the overall economy
  • a R653 million decline in investment into the economy
  • a R1,19 billion decline in Sugar Industry’s Gross Value Added (GVA) contribution to the South Africa’s Gross Domestic Product (GDP) in 2019 alone (GVA is the measure of an industry’s net output. It is used to quantify the contribution of each industry to GDP.)

As a result of these losses, the sugar industry’s total contribution to South Africa’s GDP declined by a cumulative R2,05 billion that year.

The report also reveals that prior to the implementation of the sugar tax, sugarcane growers supported 94,621 direct, indirect, and induced jobs in 2017 – which accounted for 11,2% of all South African agricultural workers. However, by 2019, the sugar tax had cost the sector 9,154 jobs, almost 10% of its workforce.

Furthermore, while sugarcane farming contributed R10,5 billion to the national GDP in 2017, this figure fell by an estimated R214,7 million a year after the sugar tax was introduced, and a cumulative R414,2 million after the second year.

It is important to highlight, that these findings only cover the first year of the implementation of the sugar tax and therefore these figures are no doubt far higher as a result of the tax still being in place three years later.

The sugar tax was also implemented at a time when the sugar industry had already been battered by other severe headwinds including droughts, increasing production costs and cheap sugar imports. It is clear from the report that the tax was the final nail in the coffin for thousands of rural cane growers and farm workers. 

And for all these catastrophic consequences, there is no evidence that the tax has achieved its stated objective to reduce national obesity levels. This has created the worst possible scenario with the sugar industry bearing the brunt of a health intervention that is not supported by any evidence.

SA Canegrowers is pleased that the release of the report coincides with the recent establishment of the Sugarcane Value Chain Masterplan Task Team on Product Tax Policy. The task team has been tasked with reviewing the impact of the sugar tax on rural communities and economies in sugarcane growing areas as well as the financial sustainability of the industry.

NEDLAC has also referred the report to the Portfolio Committee of Trade and Industry, and we look forward to engaging with committee members on the findings.

We are hopeful that the report will result in government finally responding to the sugar industry’s calls to scrap the sugar tax. This is critical for the success of the Sugarcane Value Chain Masterplan and, ultimately, the recovery of the sector.

SA Canegrowers will continue to engage with the government and other industry stakeholders on key challenges facing the sector, including the sugar tax. We trust that, working together, we can unshackle the country from this tax, which has already cost our industry, its workers, and the national economy far too much.  

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