Uncertain future for South African cane growers as Unilateral Sugar Tax increase looms

SOUTH AFRICA – South Africa’s sugarcane industry is facing an ominous threat as the National Treasury pushes forward with a unilateral increase in the Health Promotion Levy (HPL), commonly known as the sugar tax, set to come into effect on April 1, 2025.

This decision, made without prior consultation with industry stakeholders, has casted a dark shadow over an already troubled sector, jeopardizing cane growers, the broader value chain, and its workforce.

Dr. Thomas Funke, the CEO of SA Canegrowers, the sugarcane industry body, expressed concerns about the lack of engagement with the sector, despite previous promises by the government to consult on the levy’s effectiveness and its socioeconomic impact.

 Moreover, he noted that no substantive data has been provided to justify the need for an increased levy.

The South African sugarcane industry is grappling with immense challenges, including escalating input costs, erratic power supply due to load shedding, and potential climate-related issues.

 Two mills are already in business rescue, underscoring the industry’s distress.

The sugar tax has already had devastating consequences, resulting in tens of thousands of job losses in its initial year of implementation and costing the nation over R2 billion.

Further research indicates that if the tax increase goes ahead, it could lead to a reduction in cane cultivation hectares over the next decade, exacerbating job losses and impacting impoverished rural areas already suffering from high levels of poverty and unemployment.

SA Canegrowers has raised concerns about transparent governance aligned with constitutional values, given the absence of consultation and the Treasury’s failure to respond to a Promotion of Access to Information Act (PAIA) request.

 In response, they plan to submit a proposal to Finance Minister Enoch Godongwana, urging the removal of the tax increase from the legislation until a fair and transparent engagement process takes place with industry stakeholders.

Additionally, SA Canegrowers is calling on Minister Godongwana to comply with the PAIA request, enabling informed industry discussions, and requesting the rescheduling of the Sugar Tax Colloquium by the Portfolio Committee on Trade, Industry, and Competition as a matter of urgency.

The increase in the HPL was initially announced in February 2022, postponed to April 1, 2023, for further stakeholder dialogue, but no consultations took place.

In his February 2023 Budget Speech, Minister Godongwana further delayed the increase by two years, recognizing the challenges faced by growers.

 However, a parliamentary colloquium on the sugar tax, involving Ministers Ebrahim Patel and Thoko Didiza, was postponed and has yet to be rescheduled, leaving SA Canegrowers skeptical about the potential for meaningful engagement.

Dr. Funke emphasized SA Canegrowers’ commitment to protecting the livelihoods of the one million people sustained by the industry and creating opportunities for future generations.

However, he stressed that meaningful consultation with the government is paramount, making the postponement of any sugar tax increase a crucial first step toward ensuring the industry’s survival and prosperity.

For all the latest food industry news from Africa and the World, subscribe to our NEWSLETTER, follow us on Twitter and LinkedIn, like us on Facebook and subscribe to our YouTube channel.