Ahead of Finance Minister Enoch Godongwana’s Budget Speech on February 21, industry body the South African Cane Growers’ Association (SA Canegrowers) has called on National Treasury to prioritise measures to aid economic recovery and job retention in the sector, including by not increasing the Health Promotion Levy (HPL).
It has been a trying five-year period for the sugar industry, SA Canegrowers says, adding that an increase in the levy, also called the sugar tax, would be destructive and unjustifiable.
The sugar industry is already grappling with the combined effects of loadshedding, high input cost inflation, natural disasters and deteriorating logistics infrastructure – much like other sectors of the economy. It also continues to face the challenge posed by the ongoing business rescue proceedings at sugar producer Tongaat Hulett and the Gledhow sugar mills.
Bureau for Food and Agricultural Policy’s research on the HPL shows that an increase or expansion thereof would cost the sugar industry 6 000 farm-level jobs and impact 3 000 small-scale canegrowers over a few years. This would be over and above the losses in jobs and revenue that have already been caused by the sugar tax since its implementation in 2018.
SA Canegrowers emphasises that small-scale growers suffer disproportionately from spiralling costs and too many livelihoods depend on the industry in an exceedingly difficult economic climate.
The association, alongside other industry stakeholders such as South African Sugar Association (SASA), has long urged government to provide data that demonstrates the effectiveness of the HPL or to justify increasing the levy further.
In the 2023 Budget Speech, Godongwana announced that an HPL increase would be delayed for two years until April 2025, to allow for further consultation with all relevant stakeholders.
SASA told Engineering News in February 2023 that the sugar industry had lost about 10 000 jobs and R4.8-billion in revenue since the implementation of the HPL in 2018.
Over the past 20 years, yearly sugar production declined by nearly 25%, from 2.75-million tonnes to just more than two-million tonnes a year owing to various micro- and macroeconomic factors, however, an increase to the HPL could see an additional 27 400 ha going out of production.
SASA asked government to put a moratorium on the sugar tax to provide the industry time to diversify, since sugarcane is a flexible crop that can be used to produce other commodities such as bioplastics and bioenergy.