The SA Canegrowers Association has called on Finance Minister Enoch Godongwana to not only suspend an increase in sugar tax but to scrap it all together to shield the industry from collapsing.
The association made its submission to the Treasury in accordance with a call for comments on the Budget Review 2023 issued in November.
It said that with sugar-producing giant Tongaat Hulett facing a financial crisis and currently undergoing business rescue, the industry is faced with more difficulties now than ever, noting that increasing the sugar tax will only cripple the industry further.
“These calls for comment came shortly after the board at Tongaat Hulett decided to put the company’s South African operations into business rescue. Tongaat Hulett alone serves more than 12 000 growers who employ more than 14 000 farmworkers in KwaZulu-Natal’s rural communities,” the association said on Thursday.
“This season, Tongaat Hulett operations are estimated to crush over 4.78-million tons of sugarcane, which is valued at about R3.23-billion. This is vital revenue that neither the industry, province, nor national economy can afford to lose.”
The sugar tax, also known as health promotion levy, was introduced to the sector in 2018 as an intervention to reduce sugar consumption to prevent obesity and diabetes.
In his Budget Speech in February, Godongwana announced an increase in tax, which stipulated that the levy for beverages with more than 4g of sugar content per 100ml, will increase from 2.21c/g to 2.3c/g.
There is also a possibility that the levy will be extended to fruit juices, but the changes are not yet in effect, as the minister has proposed to revisit the matter in April 2023 to allow for further consultation.
Nevertheless, the wait is becoming unbearable for the sector. It has, on multiple occasions, denounced its purpose, saying that “there is no evidence that the tax has had a positive impact on obesity levels in the country”.
Ahead of the medium-term budget policy statement in October, the association appealed to Godongwana to address the matter in his speech. At the time, the sector wanted the minister to determine what kind of relief will be offered.
The cane growers are concerned that the levy poses a significant threat to small-scale growers. It has been said that maintaining the levy during this stagnant economy causes financial harm to cane growers, workers, and communities that are dependent on sugarcane for their livelihoods.
“Modelling by the Bureau for Food and Agricultural Policy has shown that maintaining the sugar tax at the current level will still cost the industry a further 15 984 seasonal and permanent jobs and will be a major contributing factor towards a decline of 46 600 hectares of area under cane over the next 10 years,” said the grower’s association.
“SA Canegrowers therefore calls on Finance Minister Enoch Godongwana to help the industry in this time of crisis, and to help us save the 1-million livelihoods it supports.
“We remain committed to working with government to develop a holistic plan that identifies the causes of obesity in the country and provide solutions that tackle this problem without destroying one sector of the economy.”
Also read: Agri sector wants Godongwana to address sugar tax in mini-budget
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