Sugar industry sees glimmer of hope

SA’s sugar industry, which has been on the verge of collapse in recent years, is seeing a glimmer of hope for recovery, but has warned that the sugar tax or health promotion levy, which has reduced demand, is a major threat to sustainable growth.

Thomas Funke, the CEO of industry body SA Canegrowers Association, said on Monday a government-backed industry master plan signed by stakeholders in 2020 has to date managed to draw attention to the multiple challenges facing the sector. The master plan has been backed by major retailers such as the Shoprite Group, and large users of sugar have committed to procuring at least 80% of their needs from local growers.

“Short-term interventions by government, including the assistance following the July unrest, have certainly assisted the industry, but the road to long-term recovery is still long and there needs to be more action in implementing the main interventions under the master plan, such as a review of the health promotion levy or ‘sugar tax’  to stabilise the industry,” Funke said. 

“We also need to address growing threats such as the industry’s declining milling capacity. This work will continue in 2022 and will hopefully pave the way for a better future,” he said.

The industry generates income of about R14bn a year, directly employs about 85,000 workers and supports at least 350,000 jobs across the value chain. However, it has been on the brink of collapse in recent times due to falling prices, stiff competition from cheap imports, mainly from Brazil, and a drop in sales volumes, partly due to the sugar tax .

The levy was introduced in 2018 as part of government’s efforts to improve the health of South Africans, and to try to reduce the related costs for the public and private healthcare systems. 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 counting their losses. The situation is worsened by low international prices and changing consumption patterns. 

The sugar industry has said the levy has cost it in excess of R1.5bn since its implementation, with more than 16,000 jobs lost.

According to industry figures, annual sugar production in SA has dropped from 2.75-million tonnes to 2.1-million tonnes a year, over the past 20 years. The number of sugar cane farmers has also declined by 60% during this period, and sugar industry-related jobs are estimated to have fallen by 45%.

Subsequently, the sector has been pushing for various interventions to stop the slide.

Late in 2020, the SA Canegrowers Association launched a buy-local campaign known as ‘Home Sweet Home’ as part of the master plan to put the sector on a sustainable path. The campaign intended to highlight the importance of buying local sugar and the “devastating impact that cheap imports has had on the jobs and livelihoods supported by the local sugar industry”.

On Monday, the association announced that it had partnered with Shoprite to encourage consumers to buy locally-produced sugar. 

The partnership will see the Shoprite Group prioritising selling only locallyproduced sugar in its 1,189 Shoprite, Checkers, Checkers Hyper and Usave supermarkets in SA, and promoting the ‘Home Sweet Home’ campaign to its customers. Shoprite has rolled out in-store advertising in the sugar aisles of all their stores that encourages consumers to buy local sugar. 

“We hope to see more retailers and other industry stakeholders follow Shoprite’s example and commitment to helping us secure the future of the industry and its workers,” SA Canegrowers chairperson Andrew Russell said.

In 2021, Coca-Cola Beverages SA announced it would collaborate with its suppliers in SA to increase the volume of sugar it procures from black sugar cane farmers. This is part of the company’s revised merger conditions with three bottling operations that the competition authorities approved.

phakathib@businesslive.co.za