Agriculture

Farmer associations appeal to government to scrap sugar tax

SA Canegrowers and the South African Farmers Development Association (SAFDA) said they are extremely concerned that any increase to the already devastating sugar tax (the Health Promotion Levy – HPL) or lowering of the threshold will decimate the sugarcane growing sector.

The associations say this will consequently drive 25 000 cane farmers out of business and plunge hundreds of thousands of families into abject poverty.

The said the Minister of Finance Enoch Godongwana afforded them a two-year reprieve on any sugar tax increases in February 2023, to accord them space to diversify the industry and restructure. However, the associations say their intensive research indicates that a period of two years is inadequate for the realisation of product diversification.

“Therefore, we implore President Cyril Ramaphosa and his administration to either scrap the sugar tax entirely, or at the very least extend the HPL moratorium until 2030, which is in line with the Sugarcane Value Chain Master Plan to 2030, a brainchild of the president which saved the industry from an existential crisis,” said SAFDA Executive Chairman Dr Siyabonga Madlala and SA Canegrowers Chairman Higgins Mdluli in a joint statement.

They state that the Masterplan processes (which sees government and industry work together to address threats and opportunities), around the sugar tax issue, must be allowed to run their course without the ever-present threat of uncertainty pertaining to the HPL.

Since its introduction in April 2018, remarked the associations, the sugar tax has wreaked havoc in the sugar industry, leading to a multi-billion-rand revenue loss, causing substantial job losses (in a country with one of the highest unemployment rates in the world) and occasioned the permanent closure of two mills in KwaZulu-Natal.

The NEDLAC-commissioned study on the socio-economic impact of the HPL found that the industry (both sugarcane farming and sugar milling sectors) had lost a cumulative 13 536 (12 860 farm jobs) by 2019. In its first year of implementation, the industry lost 250 000 tons of sugar sales.

A recent study by BFAP, an independent agricultural consultancy, revealed that a decrease in the threshold of the levy would result in a reduced demand for locally refined sugar by 125 000 tonnes in 2023/2024, followed by an additional 35 000 tonnes reduction in 2024/2025. Furthermore, the impact relating to the reduction of area under cane, as the direct result of decreasing the HPL threshold, is estimated to cost 1 975 permanent jobs, 2 076 seasonal jobs and would see 1 630 small-scale growers at risk of going out of business.

“We cannot allow the destructive sugar tax to kill the industry, which has been in recovery mode, thanks to phase one of the Masterplan. Actually, any increase to the HPL or lowering of the threshold would be tantamount to undoing all the great work and progress achieved under the auspices of the Masterplan.

“It must also be pointed out that there continues to be no credible studies showing that the HPL has led to the intended decrease in obesity and diabetes. There is no credible research in South Africa and worldwide to show that sugar taxes work.

“Why then punish us as cane farmers who make a major economic contribution to deeply rural and job-starved areas of KwaZulu-Natal and Mpumalanga? We plead with our government to ensure the encumbered success of the Masterplan by ensuring policy alignment among departments – the Masterplan is the centre here, and the centre must hold.

“We need sufficient time to pursue identified product diversification opportunities as we move from being a sugar industry to a sugarcane-based industry. As our research has shown, we should have finalised our diversification endeavours by 2030,” concluded Dr Madlala and Mdluli.

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