By Lloyd Phillips
South Africa’s sugarcane value chain would prefer to see the controversial Health Promotion Levy, or sugar tax, scrapped entirely, but there is relief that the industry’s recent urgent appeals against an increase fell on reasonable ears.
Stakeholders in South Africa’s sugarcane value chain have individually welcomed the decision to keep the Health Promotion Levy unchanged in the proposed 2025/26 national budget. Explanatory documents accompanying Finance Minister Enoch Godongwana’s budget speech on Wednesday, 12 March, stated, “Government proposes to cancel this increase to allow the sugar industry more time to restructure in response to regional competition.”
One of the sugarcane value chain’s key lobbying efforts ahead of the budget speech has been securing the time and financial resources needed to reduce its reliance on primarily sugar-based income. The goal of this diversification is to help reverse significant job losses and declining profitability that have occurred over the past eight years – largely attributed to the impact of the sugar tax.
“We are relieved that the moratorium on increasing the sugar tax has been extended to allow us more time to robustly pursue identified product diversification opportunities such as bioethanol for fuel blending, sustainable aviation fuel, polylactic acid and cogeneration of electricity,” says advocate Fay Mukaddam, the South African Sugar Association’s independent chairperson.
Higgins Mdluli, chairperson of the South African Canegrowers Association, says while the decision to keep the sugar tax unchanged is welcomed, “there is no upside to this destructive tax,” which, according to independent research, has already cost the sugarcane value chain 16 000 jobs and billions of rands.
Doubts about the sugar tax
“Ultimately, we believe that the national treasury should scrap the sugar tax and that the government should commit to policies that drive job creation and economic growth. Since it was first introduced, there has been no directly correlated improvement in health outcomes for South Africans,” Mdluli continues.
“Agricultural jobs are critically important to the stability of South Africa and to making sure that we reduce rural poverty.”
Dr Siyabonga Madlala, chief executive officer of the South African Farmers Development Association (SAFDA), says the no increase to the sugar tax “comes as a relief to small-scale sugarcane farmers and the broader sugar industry that have been under immense economic strain in recent years”.
“We appreciate the government’s decision and look forward to continued engagements with government to ensure that the sugar sector remains a strong and viable contributor to South Africa’s economy.”
Mukaddam points out that the sugarcane value chain is also concerned about the prevalence of non-communicable diseases, like diabetes, in South Africa.
The sugar tax was motivated for by the Department of Health ostensibly to deter South Africans from consuming sugar-sweetened beverages.
Expert opinions remain divided as to whether the sugar tax is truly contributing towards reducing South Africa’s overweight and obesity problem. Questions are also still being asked regarding whether income from the sugar tax is actually being used for the originally stated goals of educating South Africans about healthy living and for funding school feeding schemes.
Mukaddam continues: “What is needed is a holistic and measured approach, not a punitive mechanism which demonises certain food substances, like sugar. The yet-to-be-released results of the total dietary intake study, which was conducted by government, are key in determining what is contributing to non-communicable diseases.”
“For now, there continue to be no credible studies showing that the sugar tax has led to the intended decrease on obesity and diabetes.”
