By Khulile Thwala
South Africa’s sugar industry risks retrenching 9 151 jobs through 2031 and losing as much as 16 per cent of its cane-growing area if the government raises a levy on sugar-sweetened drinks and expands the tax to other products.
This is according to a new report commissioned by the South African Sugar Association. According to media reports from Bloomberg, as much as 53 800 hectares may be shed through 2031 due to higher and more broad-ranging taxes that sap local demand for refined sugar, tariff-free imports from neighbouring Eswatini, and increased production costs, according to a paper by the Bureau for Food and Agricultural Policy published Monday.
When engaged by the Eswatini Financial Times, Southern Africa Customs Union (SACU) Executive Secretary Thabo Khasipe said this was a domestic policy issue within South Africa and there was not much SACU could do to intervene in the matter.
Commentators say the SA sugar industry is facing a crisis partly due to a flood of cheap imports, with annual production dropping by almost a quarter over the past two decades and the number of sugarcane farmers falling by 60 per cent.
Sector representatives say the tax on sugar-sweetened beverages that came into effect in 2018 has led to losses of E8 billion in revenue, almost 10 000 jobs and the shutdown of two sugar mills, and have petitioned lawmakers to halt increases in the duty for at least three years.
The government raised about E2.2 billion from the so-called health promotion levy on sugar-sweetened drinks in the fiscal year through March 2022.
Finance Minister Enoch Godongwana is expected to push through a 4.5 per cent increase in the tax, which was postponed by a year to April 2023, and propose changes for the next three years.
Demand for refined white sugar has dropped by about 13% since 2016 when the tax was first announced, as buyers consumed less and beverage producers reformulated recipes to include artificial sweeteners, BFAP said.
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It will probably fall by an additional 160 000 tonnes, or 11 per cent of the local refined sugar market, through 2025 and lead to “significant adverse consequences” for the milling sector, growers and the rural economy,” it said.
The drop in demand will reduce the industry’s turnover by about E600 million per year from the current annual average of more than E18 billion, BFAP said.
Income losses in the eastern KwaZulu-Natal and Mpumalanga provinces, where most of the country’s sugarcane is grown, will also affect food affordability, food security and poverty incidence in the regions, it said.