In his maiden Budget Speech on Wednesday, 23 February 2022 Minister Godongwana must scrap the Health Promotion Levy (the “sugar tax”). Research has shown how much the sugar tax has already cost the country in terms of investment, contribution to Gross Domestic Product and, most importantly, jobs.
South Africa cannot afford the sugar tax at its current level and any increase in the sugar tax would be catastrophic.
SA Canegrowers has previously drawn Treasury’s attention to the findings of the socio-economic assessment commissioned by NEDLAC which shows that the sugar tax cost South Africa more than 16,000 jobs and R2,05 billion in the first year of its implementation alone.
These findings are especially devastating when we consider that there has been no evidence that the sugar tax has been effective in achieving its primary objective, to reduce obesity levels in South Africa. Yet health activists have continued to call for an increase in the sugar tax instead of taking a holistic approach to health that takes into account all of the factors that contribute to obesity in South Africa. This scapegoating of one industry will have a heavy cost to the country and its workers.
SA Canegrowers recently commissioned the Bureau for Food and Agricultural Policy (BFAP) to conduct modelling on the future impact of the sugar tax under different scenarios. The study showed that if the sugar tax remains in place at the current level, it will be a major contributing factor towards a decline of 46, 600 hectares of area under cane over the next ten years. This is 13% of the current hectares under cane. South Africa already lost 14,6% of its area under cane between 2005 and 2015 but this decline had stabilised by 2016.
Unfortunately, the sugar tax was introduced in 2018 and, along with an inflow of cheap sugar imports from Eswatini and climate change, has resulted in area under cane declining once again.
The modelling also shows that should the sugar tax be doubled, which has been called for by some lobby groups, this could lead to an additional 17,000 hectares of cane going out of production over and above the projected 46,600 hectare reduction if the tax remains the same. The impact of this additional loss on the industry and farming communities would be devastating.
When it comes to jobs, it is projected that should the tax remain the same, 6,198 permanent jobs and 9,786 seasonal jobs would be under threat. Doubling the sugar tax would threaten an additional 2,257 permanent jobs and 3,564 seasonal jobs at farm level for a total of 21,805 jobs lost. These are jobs in the most vulnerable communities, with the least alternative employment available.
Both government and industry stakeholders have devoted immense effort towards the successful implementation of the Sugarcane Value Chain Masterplan, and it would be a travesty to see these efforts hobbled by the continuation of a policy that is unsupported by data. Should an increase in the sugar tax remove an additional 100,000 tons of demand from the local market, it would completely undo the success of the first year of the Masterplan that has seen industry stakeholders restore more than 150,000 tons of local demand as required by the plan.
This year’s Budget Speech must support, not sabotage, the recovery and growth of the industry. Most importantly, it must promote job creation. The sugar tax does exactly the opposite. If maintained, it will contribute to the decline of the industry; if increased, it will accelerate job losses. South Africa simply cannot afford this.
SA Canegrowers is committed to the protection of the one million livelihoods that the sugar industry already supports, and to the expansion of opportunities in the sugarcane growing sector. This much was acknowledged by the President in his State of the Nation Address. We intend to continue this work, drawing a new generation of growers into an exciting future that holds new possibilities in products like sustainable aviation fuels.
But to grow, the industry must first survive and recover. The sugar tax has been no help in this regard and increasing it will cripple the industry. For the sake of the country’s 21,000 small-scale growers, 65,000 direct workers, and 270,000 indirect workers, Minister Godongwana must scrap the sugar tax with immediate effect.