The shrinking of the sugar industry is inevitable. File Photo: IOL

JOHANNESBURG  - The South African Sugar Association (SASA) said on Thursday it was disappointed by the announcement that there will be an increase in the Health Promotion Levy (HPL), commonly known as "sugar tax".            

During his budget speech on Thursday, Finance Minister Tito Mboweni said government has decided to hike the sugar tax by 5.2 percent.

Hans Hackmann, SASA chairman, said the sugar tax had already caused serious damage in the sugar industry.

"The HPL has already had a significant impact on the volumes of refined sugar sales in the local market and a consequent increase in the exposure of the sugar industry to the loss-making export market," Hackmann said.

"It is estimated that the impact represents a decline in local demand for sugar of approximately 200,000 tons per annum, reducing industry revenue by approximately R1 billion per annum."

Sugar production contributes about R14 billion to South Africa's gross domestic product (GDP) and the industry employs 85,000 people directly, and a further 350,000 indirectly through food processing and other sectors.

Hackmann said it was regrettable that the implementation of mitigation measures, as recommended by the Nedlac Task Team, had been delayed.

The sugar tax has already dealt a huge blow to a sector struggling with the impact of drought, plunging sugar prices and weak protection against cheap imports. 

The industry is currently facing a number of serious challenges threatening its sustainability and survival, and the need for the industry to pursue diversification has become even more urgent.

Hackman said they will seek engagement with government and Parliament on the way forward to discuss the process of expediting the implementation of mitigation measures, including the raising of the import duty on dumped sugar to a more appropriate level.

Last year, the portfolio committee on trade and industry came to the rescue of the industry when it applied to the International Trade Administration Commission of South Africa (ITAC) for an increase in the dollar-based reference price (DBRP) from U.S.$566 to U.S.$856. 

This after the minister of trade and industry Rob Davis agreed to the raising of import duties to U.S.$680 per ton, after cries from the industry.

"We would have been worse off, had it not been for the interventions by the President, the portfolio committee. We hope the same spirit will prevail, with the relevant stakeholders, when it comes to addressing the exigent issue of the HPL," Hackmann said.

- African News Agency (ANA)