South African Canegrowers (SA Canegrowers) is sounding the alarm, urging Finance Minister Enoch Godongwana to reverse the decision to table an increase in the Health Promotion Levy, commonly known as the "sugar tax."
The organisation asserts that the tax hike, set to take effect in April 2025 without any prior consultation with the sugar industry and other affected stakeholders, poses a severe threat to rural communities, already grappling with record levels of unemployment and poverty.
Minister Godongwana is due to deliver his Medium Term Budget Policy Statement (MTBPS) on Wednesday.
The MTBPS, also referred to as the “mini-budget”, allows government departments to apply for adjustments to their budgets, apply for roll-overs, and request additional funds for unforeseeable and unavoidable expenditures. It indicates how the government intends to allocate the upcoming national budget.
In February 2023, Godongwana had announced a two-year postponement in implementing the sugar tax increase, citing the need for further consultation.
However, Andrew Russell, chairperson of SA Canegrowers said that no such consultation has occurred to date, leaving the industry and rural communities in limbo.
Adding to the industry's woes is the ongoing milling crisis, with major players like Tongaat Hulett and Gledhow still under business rescue.
“SA Canegrowers remains deeply concerned about the future of these mills in the long-term, as well as their ability in the short-term to conduct the off-crop maintenance necessary to operate effectively next season,” Russell said.
“These material concerns must be considered by National Treasury before any decision to increase the sugar tax is taken. As things stand, the sugar industry supports an estimated one million livelihoods, predominantly in the country’s most rural communities in KwaZulu-Natal and Mpumalanga. The loss of vital jobs in the industry would leave thousands of South Africans reliant on social grants at a time when National Treasury can least afford it,” he added.
SA Canegrowers said the impact of the sugar tax on employment is not hypothetical. An independent study by Nedlac revealed that more than 16,000 jobs and R2 billion were lost in the tax's first year alone.
Further modelling by the Bureau for Food and Agricultural Policy suggests that maintaining the sugar tax could result in the loss of thousands of hectares of cane over the next decade, leading to even more job losses.
“With the national fiscus in a perilous state, and the economy battered by inflation and joblessness, South Africa cannot afford this ill-timed intervention. This is even more troubling as there remains no evidence to date that the sugar tax has in fact achieved its objective of reducing obesity. While the sugar tax is viewed by some as a revenue source for the fiscus, this is a short-sighted view that will have calamitous long-term costs, especially in our rural communities,” Russell added.
According to a Bloomberg report, Godongwana is in a bind as he reworks the country’s budget in the face of lower-than-expected tax revenue.
The report said that while a commodity boom previously gave Godongwana some breathing space, recent metal price declines and rail constraints have curtailed the mining industry’s income and contribution to state coffers.
The government is likely to collect R52 billion less tax than projected in February, according to the median estimate of economists surveyed by Bloomberg. They also expect the consolidated budget shortfall to be 5.3% of gross domestic product in the current fiscal year, wider than the National Treasury’s projection of 4%.