Last week, the sugar industry announced the successful conclusion of the five-year commitment to invest more than R1 billion in transformation funding to support small-scale, black and land reform sugar cane growers.
The commitment by the industry, both millers and growers working together through the South African Sugar Association, has demonstrated the commitment of growers and the broader industry to building a diverse and inclusive sugar industry that benefits all South Africans. But we can go only so far alone.
Ultimately, our efforts miay not be successful if the government does not support the sugar industry with policies that promote growth and the expansion of opportunities in the industry.
The transformation funding initiative was initiated at a time of significant stresses affecting the industry. Growers had withstood drought conditions and were having to contend with the job-killing impact of the Health Promotion levy, which came into effect in April 2018.
Recognising that new entrants as well as small-scale growers would bear the brunt of the challenges, the industry implemented this intervention to help those vulnerable growers and ensure that the industry could continue to sustain growers that might otherwise be commercially unviable.
The transformation funding also preceded the implementation of the Sugarcane Value Chain Masterplan. Reflecting the alignment of growers, industry stakeholders and government interest in reviving the industry, supporting small-scale growers and preserving vital jobs, the masterplan was signed by ministers Ebrahim Patel and Thoko Didiza in November 2020.
Throughout the three-year long first phase of the plan, there was a particular focus on the growth and sustainability of small-scale growers. This led to the implementation of additional funding in the form of a premium price – above the industry commitment – to further supplement emerging, small-scale growers and ensure that they can withstand the challenges facing the industry.
In addition to transformation interventions, further projects were implemented pursuant to the objectives of the masterplan. One objective was the restoration of local demand for locally produced sugar. This has been imperative in light of lower world sugar prices on account of an oversupply coming from large-scale sugar producing countries like Brazil.
To this end, SA Canegrowers launched its Home Sweet Home campaign, which continues to run, aimed at raising awareness of the threats to the jobs that the local sugar industry sustains and encouraging local consumers to be intentional about supporting locally produced sugar.
The industry – together and as separate associations – has also undertaken extensive research to explore diversification avenues that would protect growers from the uncertainty of the sugar market.
Through the masterplan, research was conducted demonstrating the viability of numerous alternative crops. Furthermore, SA Canegrowers partnered with the Roundtable for Sustainable Biofuels to investigate the feasibility of developing a Sustainable Aviation Fuels industry in South Africa. This demonstrated that South Africa could, in fact, benefit significantly from diversifying into this strategic industry of the future.
For its part, the government has also come to the party, notably providing vital tariff protection against the dumping of cheap sugar from deep-sea exporters. The support has been invaluable and must continue, but it is only the start of what is required to protect the industry for future generations of farmers and workers, and to ensure that the industry can make a significant contribution to the gross domestic product and employment in the coming years.
It is essential, financially and symbolically, that the government fulfil its commitment to prioritise the procurement of locally produced sugar in all departments and state-owned entities. This is a practical way that government can use its buying power to boost sales of local sugar and contribute to the support of small-scale growers, workers and rural economies.
Finally, we need the long-awaited review of tax policy as it relates to the industry. The single greatest threat here is the Health Promotion Levy or the sugar tax. An increase in the tax has long been on the cards. However, in recognition of the significant consequences it has for the industry, a review of the tax was part of the social compact signed by the industry and the government. That the first phase of the masterplan has come and gone without meaningful engagement on the tax is a great disappointment and a matter that must be addressed with some urgency.
As things stand, an increase in the Health Promotion Levy has been tabled in Parliament and, if passed, it will take effect in 2025. That this was tabled before any consultation has taken place, notwithstanding years of promises to engage the industry, bodes ill for any consultation that might take place in 2024.
To enable a robust, good faith dialogue to take place, Minister Enoch Godongwana must withdraw the tabled increase and consider the matter afresh after hearing the realities on the ground as a consequence of the tax. We cannot afford a perfunctory tick-box exercise engagement on this crucial matter for a million South Africans in the most rural parts of South Africa.
The fact is, while the sugar tax remains in place, all transformation funding amounts to a survival mechanism, mitigating the losses caused by the sugar tax. This is a lost opportunity. Without the Health Promotion Levy, the funds could have been used instead to expand operations, diversify crops and grow businesses that can employ more South Africans in communities with few other opportunities.
With the conclusion of the first transformation commitment, the industry has put its money where its mouth is, demonstrating beyond a shadow of a doubt its steadfast commitment to building a diverse and inclusive industry. However, none of this will result in long-term benefits unless the investment is made within a policy environment that is conducive to growth and job creation.
Whether the industry’s efforts succeed or fail will rest in large measure on the willingness of government to meet us halfway so we can protect the million livelihoods the industry supports and position the industry to create many more opportunities in the coming years and for future generations.
BUSINESS REPORT