Doubling the sugar tax will serve a bitter blow to the sugar industry

More than 20 years ago farmer Mbukeni Nyembe planted his first hectare of sugar cane on a parcel of land in Pongola, KwaZulu-Natal. Over the years his farm has expanded to 10ha, with the money he has earned from selling cane putting his 14 children through school.

Nyembe is one of 21,000 small-scale growers who rely on farming sugar cane to feed their families. They also employ thousands of workers living in rural communities in cane growing regions in the country.

However, a number of factors in recent years have threatened the sustainability of their businesses, including the inflow of cheap sugar imports that have driven down their profits, as well as the recent looting and violence in KwaZulu-Natal, which has resulted in R84.5m in revenue losses for growers.

Another big threat has been the introduction of the Health Promotion Levy or “sugar tax” by the national government in 2018. This well-intentioned tax was introduced to decrease the demand for sugar-sweetened products among SA consumers and, as a result, drive down obesity levels in the country.

However, there has been little to no evidence produced by the government to date that shows the tax has had the desired effect on obesity levels. In fact, the SA National Health & Nutrition Examination Survey released in May revealed that more than half of South Africans gained weight over the past year, largely due to the socioeconomic impact of the Covid-19 lockdowns.

Conversely, there is ample evidence of the dire impact of the sugar tax on the already struggling sugar industry, including small scale growers such as Nyembe. A report commissioned by the National Economic Development & Labour Council (Nedlac), “Economic Impact of the Health Promotion Levy on the Sugar Market Industry”, shows that in the first year of the tax’s implementation there were 16,621 job losses across the industry and 9,000 job losses in the cane growing sector alone.

Most of these job losses have been in communities living in rural areas, where poverty levels are highest. The report also highlighted that the sugar farming sector’s output had declined by a cumulative R414.2m by 2019 as a result of the sugar tax (we saw a decline of R214.7m in 2018 and R199.5m in 2019), while the sugar processing sector’s output had declined by a cumulative R772.1m by 2019. The sugar tax also resulted in a R653m decline in investment into the economy.

Of concern is that these findings only cover the first year of the implementation of the sugar tax, so these figures are no doubt far higher as a result of the tax still being in place three years later. It is therefore extremely concerning to hear calls by lobbyists, such as the Healthy Living Alliance and a small group of public health scholars, for the national government to double the sugar tax when the three-year moratorium on increasing the tax ends next year.

It is clear that a tax hike will result in thousands more jobs losses across the sugar sector at a time when our national unemployment rate already stands at 44%. Perhaps one of the reasons the devastating economic impact of the tax has been downplayed by the group of scholars is because the majority are based at overseas universities and therefore do not understand the dire economic situation our country finds itself in, or the hardships so many rural people face.

Thankfully, the government has recognised the serious situation in which the sugar industry finds itself after having been battered by a number of severe headwinds, including droughts, increasing production costs and cheap imports. That is why it has worked closely with our industry and other social partners to develop the SA Sugarcane Value Chain Masterplan, to create a more diversified and sustainable sugar industry.

Under the master plan a task team has also been established to review the effect of the sugar tax on rural communities and economies in sugar cane growing areas, as well as the financial sustainability of the industry. With the Nedlac report providing ample evidence of how the tax has killed jobs and businesses across the sector, we hope the task team supports our calls for the government to scrap the sugar tax.

This is critical for the success of the master plan, the recovery of the sector, and the protection of the 1-million livelihoods it supports, among them Nyembe and the families who rely on him.

SA Canegrowers values the co-operative relationship it enjoys with the government and looks forward to continue engaging with it and other industry stakeholders on key challenges facing the sector, including the sugar tax. We trust that, working together, we can balance the need for a healthier population while ensuring the survival of our industry.

• Russell chairs the SA Canegrowers Association.