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Not sweet Godongwana. Jobs are at stake, says sugar body

Sasa says the sugar tax goes against the objectives and principles of the all-important Sugarcane Value Chain Master Plan to 2030, which has seen the industry in recovery mode. | Bloomberg

Sasa says the sugar tax goes against the objectives and principles of the all-important Sugarcane Value Chain Master Plan to 2030, which has seen the industry in recovery mode. | Bloomberg

Published Feb 24, 2022

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SOUTH African Sugar Association (Sasa), a sugar industry organisation, yesterday lambasted Finance Minister Enoch Godongwana’s Budget after he announced a 4.5 percent increase in the rate of the sugar tax, called the Health Promotion Levy (HPL), saying the move will knock jobs.

Sasa said the sugar tax went against the objectives and principles of the all-important Sugarcane Value Chain Master Plan to 2030, which has seen the industry in recovery mode.

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Sindi Mabaso-Koyana, the independent chairperson of Sasa, said yesterday that the master plan included Task Team 7, which had been set up to investigate and develop an industry proposal for a long-term policy framework. It also looked at the approach to the taxation of sugar and sugar-derived products with a view to engaging the government on strategies and policies to provide certainty and predictability in support of investment and planning by both the industry and the government.

The work of this task team was still ongoing.

President Cyril Ramaphosa had previously emphasised the critical importance of master plans for various industries/sectors with regard to assisting them with their economic recovery and sustainability.

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Mabaso-Koyana said, “Since the introduction (implementation) of the HPL in April 2018, the industry has lost revenue of approximately R1.2 billion per season. The sugar industry has had to close two mills due to the HPL exacerbating the already dire financial state of the sector, which faced other several serious challenges over the years.”

“Prior to the signing and implementation of the master plan, the sugar industry was already in dire straits, even in ICU, due to serious challenges such as drought, incursion of sugar imports, insufficient tariff and sugar tax. Over the past 20 years, annual sugar production has declined by nearly 25 percent, from 2.75 million to 2.1 million tons per annum. The number of sugarcane farmers has declined by 60 percent during this period and industry related jobs are estimated to have been reduced by 45 percent,” Mabaso-Koyana said.

Sasa said an independent study had predicted the closure of some sugar mills as one of the ramifications of the levy. It said the socio-economic impact of the HPL was studied in 2017 by the Bureau of Food and Agricultural Policy, which had concluded that the levy would result in a 200 000 ton decrease in the demand for sugar, a 13 200-hectare loss in cane production accompanied by 3 129 job losses.

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In addition, the final report of the recent Nedlac-commissioned study used a model. Its results suggested that, due to the HPL, the industry comprising of both sugarcane farming and sugar milling sectors, had cut a cumulative 9 711 jobs by 2019 and its GVA (gross value add) contribution to gross domestic product had declined by R1.19 billion.

The industry was of the considered view that there was a need to conduct an independent study that would investigate what South Africans were eating to determine, which foods contribute to the high calorie intake in obese individuals/people.

From this informed state, the public could be educated regarding which foods to consume less of and advise accordingly what to do in order to follow a healthy lifestyle, which would lead to reduced obesity levels in the country.

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It said there was insufficient evidence to support the notion that sugar taxes led to reduced calorie consumption, which was what was required to reduce South Africa’s obesity prevalence. Scientifically speaking, the association said it was a well-known fact that one could only lose weight if a person ate fewer calories than they burned off.

Furthermore, it also pointed out that while available evidence indicated that the tax had reduced consumption of sugar-sweetened drinks, there was no evidence that the reduced beverage consumption had resulted in the desired outcome of reduced obesity.

Meanwhile, SA Canegrowers chairperson Andrew Russell said they were deeply disappointed by Godongwana’s announcement that the sugar tax would increase from 2.21 to 2.31 cents per gram of sugar despite no evidence being produced to date that the tax had successfully reduced obesity levels in the country.

“This hike will not only threaten thousands more rural jobs in our sector but will also continue to hamstring the efforts to successfully implement the Sugarcane Value Chain Master Plan. We will, therefore, be writing to Minister Godongwana to request a meeting with him to discuss the government’s reasons for increasing the HPL and the impact it will have on the industry,” Russell said.

Recent modelling commissioned by SA Canegrowers showed that maintaining the sugar tax at the current level would have cost the industry a further 15 984 seasonal and permanent jobs and would be a major contributing factor towards a decline of 46 600 hectares of area under cane over the next 10 years. The fact that the government has increased the tax means that there will be even more job losses, than the 15 984 projection, and will result in a further reduction in the hectares under cane.

Sasa and SA Canegrowers leadership said they would continue to engage the government on this crucial matter with a view to finding an appropriate solution.

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Enoch Godongwana

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