The SA Canegrowers Association is calling on Finance Minister Enoch Godongwana to address sugar tax when he tables the medium-term budget policy statement on Wednesday afternoon.
Sugar tax remains the elephant in the room as the agriculture sector awaits the minister’s decision on the reduction of the Health Promotion Levy (HPL). The 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 would increase from 2.21c/g to 2.3c/g.
There is also a possibility that the levy would be extended to fruit juices, but the changes are not yet in effect, as the minister had proposed to revisit the matter in April 2023 to allow for further consultation.
Nevertheless, the wait is becoming unbearable for the sector.
Kabelo Kgobisa, spokesperson for the SA Canegrowers Association, cautioned in a statement on Tuesday that an increase in the levy poses a great threat to small-scale growers across the country.
“With high input costs already weighing down the agricultural sector, the added burden of the Health Promotion Levy on the sugar industry [despite there being no evidence that the tax has reduced obesity levels in the country] poses an existential threat to South Africa’s 21 000 small-scale growers and must be eliminated,” said Kgobisa.
“While this postponement provided some relief for growers, the prolonged enforcement of the HPL has continued to hamstring the industry, which has also been faced with other cost pressures including a spike in fertiliser and energy prices along with ongoing bouts of loadshedding.”
The association is also concerned about possible job losses if the changes in sugar tax are adopted. Quoting a research study, Kgobisa said the economic impact of the tax has been consistently proven.
“In June 2021, a study commissioned by the National Economic Development and Labour Council showed that the tax had cost the country 16 621 jobs, a R653-million decline in investment into the economy, and a R1.19-billion decline in the first year of its implementation,” said Kgobisa.
“Further research conducted by the Bureau for Food and Agricultural Policy has also showed that maintaining the sugar tax at the current level will cost the industry a further 15 984 jobs and contribute towards a decline of 46 600 hectares over the next 10 years.
“The effect of an increase would therefore be devastating, threatening the survival of the industry’s 21 000 small-scale growers, as well as the jobs created by commercial growers.”
Kgobisa said for the sake of rural communities dependent on the sector, the minister must signal the scrapping of the sugar tax during his speech, adding that the SA Canegrowers is committed to assist find a better plan to tackle obesity.
“South Africa is not in a position to imperil desperately needed jobs. This is especially true for the rural communities in KwaZulu-Natal and Mpumalanga.
“For the sake of the 1-million livelihoods that depend on the industry, minister Godongwana must use the opportunity of the mid-term budget policy statement to finally signal the elimination of the calamitous and ineffective sugar tax.”
Meanwhile, the sector is also patiently waiting to see if the new budget will allow it to grow and maintain food security amid rising economic crisis.
According to Greg Talbot, CEO of Tal-Tec, the industry is waiting to see what portion of the budget will be targeted at “meaningful growth initiatives and investments into improving water, road and electricity infrastructure”.
According to Talbot, the agriculture sector boosted the economy in 2020, making an enormous contribution towards the gross domestic product (GDP). He noted that the sector, which also contributed nearly R129-billion to the GDP in 2021, is an “unsung hero”.
“This year, however, has been more challenging with rising input costs including higher fuel and fertilizer prices, rising interest rates impacting the cost of debt, high inflation, and amongst the most severe loadshedding experienced in years.
“Challenging conditions in the second quarter of 2022 resulted in activity in the agriculture, forestry, and fishing sectors declining by 7.7%, according to Statistics South Africa.
“The recent Transnet strike, which led to the logistics utility declaring force majeure at its port operations, has not helped given that the fourth quarter is typically a busy one for agricultural exports.
“South Africa exports about half of its agricultural produce. Exports of food, fibre and beverages in the fourth quarter of 2021 constituted 23% of the total value of the exports last year, amounting to $2.8bn [R50-billion].
“Encouragingly, government has recognised the value of the agri sector both in terms of ensuring food security, as well as its contribution to GDP. The Department of Agriculture, Land Reform and Rural Development was allocated R17.3-billion in the 2022/23 budget, a R400-million increase from the previous year,” said Talbot.
Although South Africa is currently on the safe side in regards to food security, experts have warned that the country cannot afford to be complacent, saying it needs to continue focusing on improving its food security by expanding agricultural production and job creation.
An increase in interest rates, inflation and infrastructure complications, as well as energy and water crises, are weighing heavily on agriculture, said Talbot, noting that for the sector to grow, investments need to be made.
“There is no question that investments are required if the agricultural sector is to grow. The knock-on effect of higher interest rates, inflation and failing municipal infrastructure has implications for the agricultural sector.
“The deteriorating road infrastructure, for example, exacts a heavy price on farming operations, as does loadshedding, water insecurity and port inefficiencies for agricultural exporters.
“In March this year, government launched the Agri-Industrial Fund, which is intended to address funding constraints facing black farmers and help them to eliminate barriers to entry to commercial farming activities.
“The fund aims to support the development and expansion of the agricultural sector by assisting qualifying black producers and investees to develop, expand, acquire and integrate operations in prioritised value chains. A total of R1-billion has been committed to the fund.”
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