Picture: 123RF / PUHHHA
Picture: 123RF / PUHHHA

Farming bodies are lobbying the government to halt the sugar tax, pending a full socioeconomic impact study of the controversial levy that is meant to stem the rising tide of obesity.

The government introduced a tax on sugar-sweetened beverages in April 2018 as part of its efforts to improve the health of South Africans, and reduce the related cost implications for the public and private health-care systems.

What the Treasury calls a health-promotion levy has been set at 2.1c for every gram of sugar per 100ml above a 4g threshold: the first 4g of sugar per 100ml are thus exempt from the levy.

The Treasury said it has collected R3.4bn in the first year that the tax was implemented and expects to net R2.2bn more in 2019.  

While the tax has been broadly welcomed by health experts and advocacy groups as a first step in the right direction, it has left many producers reeling, a situation worsened by low international prices and changing consumption patterns.

The SA Canegrowers Association and the SA Farmers’ Development Association called on finance minister Tito Mboweni to halt the tax, pending a full socioeconomic impact assessment. This was ahead of his medium-term budget policy statement on Wednesday.

Job losses

The associations said the health-promotion levy has already cost the sugar industry about R1.5bn since its implementation in 2018, amounting to the loss of about 9,000 jobs.

The financial and human costs are escalating rapidly, they said. In February 2019 industry costs were nearing R1bn, and 6,500 jobs were consequently expected to be lost.

According to a joint statement by the associations, the sugar industry is on its knees.

“Weak protection against cheap imports, drought and plunging sugar prices are already hurting the sugar sector. The sugar tax, if not reconsidered by the Treasury, will be the kiss of death for an industry that supports 1-million livelihoods,” they said.

“The most vulnerable in the sector, being small-scale sugar-cane farmers and farmworkers, will be the most affected in this scenario. This is because they have few, if any, options, meaning that any decrease in local demand for sugar will ensure the demise of their businesses.

In crisis

“The resultant decay and degradation of our deep rural areas in KwaZulu-Natal and Mpumalanga could prove catastrophic to these communities,” the statement reads.

The associations said that the government has acknowledged that the sugar industry is in crisis, and work is being done on a “master plan” to rescue it.

“While sugar-cane growers welcome the master plan process, we realise that the sugar industry cannot be rescued with the current sugar tax in place.

Mboweni recently released an “impressive economic policy document that aims to create 1-million jobs over the next decade. If this target is to be achieved, government must ensure that unnecessary and job-killing taxes like the health-promotion levy are abandoned,” the statement reads.

phakathib@businesslive.co.za