Trade, industry and competition minister Ebrahim Patel. Picture: BLOOMBERG/WALDO SWIEGERS
Trade, industry and competition minister Ebrahim Patel. Picture: BLOOMBERG/WALDO SWIEGERS

The government is moving to boost the struggling sugar industry and putting in place measures to ensure it is designated a priority supplier in SA.

The local sugar industry generates an income of about R14bn a year and is responsible for at least 350,000 jobs. However, it has been on the brink of collapse in recent times due to several headwinds, including a drop in sales volumes, partly due to the sugar tax, falling prices and stiff competition from cheap imports mainly from Brazil.   

During a parliamentary question and answer session on Tuesday, trade, industry and competition minister Ebrahim Patel said the industry master plan will soon be gazetted, giving effect to some of the proposed measures to stabilise the sector.

The sugar industry master plan focuses on growing and transforming the sector.

“On the growth side is the concern that demand is shrinking because of decline in consumption ... and expansion of imports,” Patel said, adding that the demand for sugar is shrinking globally and thus prioritisation of local producers and diversification is crucial in stabilising the sector.

“We have looked at the opportunities and other uses for sugar, such as bio-fuels and bio-plastics. We want to encourage greater industrial diversification on sugar farms, such as planting of nuts and [creating] bio-oils,” he said.

Patel said the government and key industry stakeholders, including local food and beverage producers, have agreed to prioritise local sugar players.

“We sat down with key role-players and bigger users of sugar, such as beverage makers, and we have an in-principle agreement for them to buy more local sugar, as well as give an opportunity for the deeper restructuring of the sector,” Patel said.

“We will be gazetting a notice providing a brief summary of the sugar master plan and designating the sugar industry [as priority] in terms of the Competition Act that will allow the industry the opportunity to meet and give effect to the master plan, and deepen the use of local products.”

Sugar tax

Patel said the crises in the sector started before Covid-19. “There is no question that if we don’t address the crises they will affect the small players, many of which are black.”

DA MP and trade and industry spokesperson Dean Macpherson highlighted that the challenges facing the sector largely have to do with the sugar tax “which government refuses” to do away with. Patel said the sugar tax is a global phenomenon and the industry needs to find other ways to remain profitable.

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 healthcare 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.

Macpherson also asked Patel about how a “transformed” economy will look like after Covid-19 and whether it will include the rollout of more state-owned entities, such as a bank and the use of prescribed assets.

Patel said economic reconstruction will require a mix of government intervention and a greater level of private entrepreneurship.

phakathib@businesslive.co.za