Canegrowers bitter about ‘incorrect and disingenuous’ sugar tax report

By: Lloyd Phillips

The association (SA Canegrowers), representing the interests of the country’s 22 000 sugarcane growers, about 21 000 of whom are small-scale, is determined to have the six-year-old sugar tax scrapped.

This is according to the association’s new chairperson, Higgins Mdluli, who derided a report which says the Health Promotion Levy (HPL) has not been associated with job losses in sugar-related industries.

This preprint report which has not yet been peer-reviewed, was researched and written by researchers from the SA Medical Research Council/Wits Centre for Health Economics and Decision Science (PRICELESS SA).

It urges policymakers to increase the sugar tax from about 8% of the retail price of sugar-sweetened beverages to 20%, and says it should be extended to fruit juices. 

The government implemented the tax from 1 April 2018 as a tool to encourage consumers to reduce their intake of sugar-sweetened beverages and thereby contribute to a reduction in national obesity levels and associated health problems.

“In South Africa, the prevalence of overweight and obesity is […] among the highest in Sub-Saharan Africa,” says the report. “In 2016, 31% of adult males, 67% of adult females and 13% of children under five years old were either overweight or obese, posing a significant challenge to the healthcare system.

“This impacts heavily and negatively on income due to decreased productivity. The economic impact of obesity and its comorbidities on the South African economy is estimated at R30 billion in 2020.”

Mdluli poked holes in the report’s findings, labelling its assertion that “our results show that the HPL has not been associated with job losses or generation in the sugar-related industries in South Africa” as “incorrect and disingenuous”.

He says: “[This] research fundamentally misrepresents the negative impact of the so-called sugar tax on job losses in the South African sugar industry.”

Mdluli says “an independent” study by the National Economic Development and Labour Council, published in 2020, said that in its first year the sugar tax caused more than 16 000 jobs to be lost in the national sugar and beverage industries. About 60% of these jobs were on sugarcane farms.

Mdluli adds that the sugar tax has resulted in a 250 000 ton annual decline in national demand for locally produced sugar. 

“Studies done by the Bureau for Food and Agricultural Policy have shown that under a continuing sugar tax regime, the canegrowers can expect a further loss of 10% of direct jobs by 2031,” he says.

“Even a small increase in the sugar tax will lead to decreasing areas of land under sugarcane cultivation due to decreasing demand for sugar. The biggest job losses are expected among small-scale growers in rural areas of KwaZulu-Natal and Mpumalanga.”

Addressing SA Canegrowers’ annual meeting recently, Mdluli said the sugar tax is a barrier to transformation in the national sugarcane value chain. This is especially concerning given that the value chain is trying to diversify its income streams as laid out in the South Africa Sugar Value Chain Master Plan 2030 developed with the government.

Mdluli told the meeting that SA Canegrowers has called on the government to fast-track and provide support for the masterplan’s second phase, which focuses on diversifying products from sugarcane, such as manufacturing and marketing sustainable aviation fuels.

“We need the industry to do more than survive. We need it to thrive. We need to eliminate the health promotion levy,” he said.