You probably don’t know it, but if you pick up a can of Sprite or Iron Brew at a shop, what you’re getting is a whole lot of artificial sweeteners.

This is just one of the rather bizarre unintended consequences of SA’s sugar tax, one year after it was implemented. And the way the industry tells it, the new tax has also contributed to a jobs bloodbath among SA’s 24,000 small-scale sugar farmers.

Last year, the National Treasury imposed a tax of 2.21c on every gram of sugar in sugar-sweetened beverages that exceed 4g/100ml. The rationale, officials said at the time, was that while "the tax alone will not solve the problem of obesity, it will certainly make a contribution".

But, says Illovo Sugar MD Mamongae Mahlare, the tax has instead caused havoc in the sugar industry and led to consumers unwittingly lapping up a whole lot more artificial sweeteners than they suspect.

"Before, you had about 11g of sugar per 100ml in a can of typical soda. Now, companies want to avoid the tax, but keep the sweetness. So they’re keeping the actual sugar at less than 4g and making up the rest with artificial sweeteners."

This is evident on the shelves. Sprite now has 3.1g of sugar per 100ml; Iron Brew 3.5g; and Creme Soda 3.7g. The big daddy, Coca-Cola, remains unmoved at 10.6g per 100ml.

The upshot, says Mahlare, is that people who drink soft drinks have, in most cases, swapped a natural source for an artificial sweetener like aspartame. The irony, she says, is that the Treasury will in time also not get the money expected from the tax, as companies have reformulated their products to avoid this cost.

But Ismail Momoniat, deputy director-general at the Treasury, tells the FM that the tax on sugary beverages was never about raising money.

"We did this to implement health policy, to reduce the consumption and concentration of sugar in beverages," he says. "And the beverage markets responded by lowering sugar, which is positive. So now, it’s up to the health professionals to assess whether the new offering, with whatever substitutes, doesn’t have similar health issues," he says.

Still, the tax has netted R3.2bn for the government so far: surely not money it’s going to turn its nose up at, especially with Eskom guzzling as much cash as the government can throw at it.

Coca-Cola SA spokesperson Camilla Osborne tells the FM her company has slashed its sugar content in the country by 26% over the past two years.

"This is ahead of our industry commitment, which was 16%," she says.

As for swapping sugar for artificial sweeteners, Osborne says Coca-Cola is simply using ingredients that have been tested and approved by global health agencies.

"We know the World Health Organisation is looking to produce guidelines for daily amounts for artificial sweeteners, and we’ll take guidance from them. Depending on what their research says, we’ll review our use of sweeteners," she says.

A study released by University of Sussex researchers last month casts doubt over how safe the most widely used sweetener, aspartame, really is. In the paper, Prof Erik Millstone argues that there is "sufficient evidence to indicate aspartame is not acceptably safe".

Nick Stacey, a Wits University research fellow, says this has created a new debate.

"Yes, there is some evidence that artificial sweeteners may cause some diseases, but the reality is we know that excess sugar definitely does create harm. So it’s about balancing the relative harm," he says.

Stacey says it’s easy for companies such as Tongaat Hulett and Illovo to scapegoat the sugar tax as the source of the industry’s woes, when in reality there are other issues at play, such as SA’s global competitiveness. "What I’d like to have seen is the revenue from the sugar tax being directed into health promotion and helping the small-scale farmers diversify away from a commodity that is bad for people to other crops that aren’t as bad," he says.

But this hasn’t happened. And while it isn’t happening, jobs are being lost as demand for sugar plummets.

Momoniat says the Treasury is worried about the loss of jobs. "But there are structural issues in the sugar industry. I think the imports from Swaziland and Brazil had more of an impact on the farmers than the sugary beverage tax," he says. The government’s trade & industry department is "engaging with the industry".

SA Canegrowers Association president Rex Talmage, who runs a 682ha farm next to Tongaat’s Amatikulu sugar mill, disagrees.

While he concedes the industry has been battling a host of problems, he singles out the sugar tax as "the one policy that has more seriously affected the industry".

He points to new figures, taken from a survey of the 24,000 cane farmers who make up the membership of his association.

"The survey indicates that the workforce in sugar cane-growing enterprises has been reduced by as much as 14% between 2016 and 2018. That means that as many as 10,000 jobs have already been lost in the cane-farming sector during this period alone," he says.

The fall in demand, says Talmage, has contributed to a nightmare scenario in which sales have fallen back to 1983 levels.

On his farm, Baton Rouge, Talmage has tried to diversify into new crops — but that hasn’t been easy. "Farmers are diversifying but the reality is that there is not much, at this scale, that they could be diversifying into," he says.

Some have tried vegetables, macadamia nuts and, most promisingly, ethanol.

But it’s been a hard sell.

The way the SA industry works is that all the proceeds from sugar sales are put into one pot, and the 24,000 growers get 64% of the revenue, while the millers — Illovo, Tongaat, TSB and others — get the other 36%. But with lower demand, there is less money to go around.

"A lot of deep rural jobs are in jeopardy," says Mahlare. "There are probably a minimum of 350,000 people, right across the chain, who rely on the sugar industry. These aren’t urban jobs — these are in deep rural enclaves, where people grow sugar cane and sell it to the millers. If there’s no market, what do those families have? Literally nothing."

One can understand Mahlare’s despair at the impact of the tax.

Illovo, along with rivals Tongaat (also, inconveniently, suffering an accounting scandal) and RCL Foods, has already been battered by global sugar prices tumbling 25% over the past five years.

The sugar tax has caused local demand to fall further. "The sugar tax is a structural blow to the industry: it has permanently taken out between 20% and 25% of the local demand," says Mahlare. She points out that a few years ago, about 1.5Mt of sugar was sold locally. Now, 400,000t of that has been wiped out.

For Illovo, it’s complicated by the fact that, three years ago, it was bought and delisted from the JSE by Associated British Foods (ABF), the second-largest sugar producer in the world. Almost immediately, the market soured and Illovo began making losses.

Mahlare says that with global sugar prices where they are, nobody is making money.

"We can’t have an industry where nobody — not the farmers, not the millers, nobody — is making money for three to five years. You can’t just keep taking on debt, waiting for the cycle to turn," she says.

The prognosis isn’t great either. A projection of the market, released by Research & Markets last month, says it is likely to grow just 1% a year until 2024.

The mandate Mahlare has been given from ABF is to look at cutting costs. "We need to look at every cost element — what can we afford to live without, and what’s the minimum I can keep doing to remain viable, and what I can defer," she says.

Over at Tongaat, cost cuts are the order of the day too. But there, CEO Gavin Hudson is also trying to unravel the accounting scandal, in which the company overstated the value of its sugar cane fields, as well as land sales.

"Yes, we’re facing an incredibly tough market and the sugar tax hasn’t helped," he says. "But we also created problems for ourselves internally, so our focus is now to ensure that we’re the lowest-cost producer around."

Tongaat is cutting about 2% of its workforce — about 600 people — as it seeks to get back on its feet. It, like Illovo, is desperately seeking new sources of revenue, such as using sugar to produce fuel ethanol and alcohol. Says Mahlare: "It’s a huge gap to fill. So the reality is our business viability is being sorely tested."

There’s no disputing the fact that the sugar market is in crisis, and that part of this is due to the sugar tax. But if the idea is to make the country healthier, then you could argue this is a necessary pain — even in a country where unemployment has hit 29%.

The Treasury’s Momoniat says the tax was all about addressing SA’s obesity epidemic. "Kids at school are drinking the stuff, and there’s no health benefit. The science is clear about it," he says. He also flatly rejects the notion that the tax is just another way for the government to raise money from a financially exhausted population.

"That’s just nonsense, really. We’d have to be quite dumb to go through two years of pain to impose a tax that just collected R3.2bn. If we didn’t care about doing the right things and influencing behaviour, there’d be far easier ways to raise it," he says.

So has the sugar tax worked from a public health standpoint?

Stacey says the answer is nuanced. "Treasury’s explicit goal right in the beginning was for the beverage makers to reduce their sugar content, so in that sense it has worked.

"But has it led to a wider fall in SA’s sugar intake? We don’t have hard evidence for that yet."