Pause on sugar tax increment a welcome relief to South African sugar producers

SOUTH AFRICA –  South Africa has paused further on the Health Promotion Levy (HPL), otherwise known as the sugar tax for two years in an effort to shield the industry from collapse.

The announcement from the Minister of Finance, Enoch Godongwana, during the presentation of the 2023 national budget is a much-welcome relief to players in the sector.

It follows persistent requests from players in the sugar industry such as the Sugar Association of South Africa and the South African Cane Crowers’ Association, who said that an increase in the levy would prove detrimental to the already struggling industry.

The SA Canegrowers had written to the chairperson of Parliament’s Standing Committee on Finance requesting oversight into the National Treasury’s policy-making.

This was done after the national treasury failed to respond to a request under the Promotion of Access to Information Act to provide the reasoning behind the ongoing implementation and the planned increase of the levy.

Finance Minister Enoch Godongwana announced during the budget speech on February 22 that government would soon publish a discussion paper on the levy for consultation on proposals to extend the levy to pure fruit juices.

In making this decision, the government took into account challenges stemming from greater regional competitiveness, the damage incurred from the floods in April 2022 and civil unrest in July 2021.

The players disclosed that this will allow the industry more time to advance its diversification efforts, since an above-inflation increase to the HPL, or lowering of the threshold would result in a significant sugar demand decrease.

The sugar industry, like many sectors that contribute to the national economy, has been immensely affected by the crippling impacts of the current energy crisis in the nation.

This together with high inflation and deteriorating infrastructure on account of the recurring floods threatens the future sustainability of the industry together with the one-million livelihoods it supports.

According to the South Africa Sugar Association, the increase in the sugar tax would have led to the loss of more than 6000 jobs and jeopardized nearly 3000 small-scale grower businesses.

SA growers also compiled some data whose findings revealed that farmers already expect to lose about R700 million (US$ 38M) in 2023 owing to the implementation of load-shedding at stages 4 to 6.

Among the efforts to help grow the industry, the players recently came up with the Sugarcane Master Plan, an intervention aimed at stabilizing the sugar industry and putting it on an upward growth trajectory.

The South African sugarcane industry produces about 18 million tonnes of sugarcane a year and two million tonnes of refined sugar, much of which is exported to the Southern African Customs Union (SACU).

The industry contributes about 0.27% to the gross domestic product, with export earnings totalling about R3 billion (US$163.6M) a year.

The ambitious plan seeks to ensure that 95% of sugar is locally procured and that local demand doubles from 150 000 tonnes to 300 000 tonnes by 2023.

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