Upping sugar tax will devastate KZN’s emerging farmers, warns SAFDA
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CALLS on government to increase the sugar tax give very little consideration to what this might mean for the sector, and livelihoods, warns the SA Farmers Development Association (SAFDA).
It said the sugarcane industry was worth protecting because it provided many jobs, was vital to many manufacturing processes and earned the country much-needed foreign currency.
The industry was also crucial in the fight being waged against the Covid-19 pandemic as it provided raw material used for personal protection equipment (PPE).
SAFDA executive chairman Dr Siyabonga Madlala said that while the increase in sugar tax would affect the entire industry, including the secondary and tertiary industries, it was the small cane growers who would suffer the most.
"This rung of growers is already under siege. At a time when jobs were also decimated by Covid-19, agriculture showed resilience and became the last defence against the impact of a tanking economy.
"That was until the unrest broke out in July this year, and we are still recovering from the aftermath,” he said.
SAFDA said that during the unrest, sugarcane fields around 53 towns in KwaZulu-Natal, including small-scale farms owned by families, were burned.
The industry had suffered major losses and disruptions, including an entire season’s crops and inputs (fertiliser and insecticides), loss of harvested goods rejected by the mills, destruction of farming equipment and machinery, and interruptions in employment, including seasonal employment. Millions of rands were lost by growers due to the unrest.
Industry figures showed that during the unrest, 10 mills stopped production, over R100 million was lost in revenue, two warehouses were looted, and 2 580 tons of sugar was stolen. Over 500 000 tons of sugar cane was burnt by arsonists and 121 614 tons could not be processed in that week alone.
Madlala said that to make matters worse, the industry was already operating under tight financial margins due to a drop in demand. This could be further worsened by the proposed 20 percent sugar tax, which had been suggested by some groups.
He said the introduction of any increase in the sugar tax would be a disaster, given that unemployment was at a historical high of 34.4 percent.
“Supporters of an additional tax have not given sufficient attention to the fact that rural communities have already been greatly impacted and as such a further increase would be catastrophic.
"According to a report by the National Economic Development and Labour Council (NEDLAC) 16 621 jobs were lost in the first year of implementation of the sugar tax, of which 9 154 were lost in the sugarcane-growing sector alone. Not only have jobs been lost since then, but the loss of livelihoods has continued unabated,” said Madlala.
SAFDA said small-scale growers used sugarcane proceeds to survive, as well as clothe and send their children to school.
Madlala said the industry was also recovering from the effects of a drastic sugar price drop, which had resulted in small-scale growers incurring debt in the 2018 season due to the very low final RV price.
He said this was on top of a reduction in the number of black small-scale growers – from 50 000 in the 2000s, to around 21 000 in the current season.
Briefing the media last week, SA Sugar Association executive director Trix Trikam said the sugar tax was among challenges faced by the industry.
“In the first year (2018/2019 season) of its implementation, 250 000 tons of sales to the beverage sector were lost, with the industry experiencing a loss of at least R1.2 billion in revenue,” said Trikam.
The ideal solution would be to remove the sugar tax, but if this was not likely to happen, “this devastating levy must not be extended to other products”, he said.
BUSINESS REPORT ONLINE