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Sugar industry calls for scrapping of sugar tax, again

Sugar industry body, SA Canegrowers is calling on National Treasury to not only suspend an increase in the sugar tax, but to scrap it entirely to protect the already struggling industry.

The association made its submission to the Finance Minister Enoch Godongwana’s office following its calls for comment on the 2023 Budget Review, in November

SA Canegrowers chairperson Andrew Russell says, in a statement, that with the sugar producing giant Tongaat Hullett facing serious financial troubles – which have led to the company entering a business rescue process – the sector finds itself facing more hardships now than ever and upping the tax will only make things worse.

“Tongaat Hulett alone serves more than 12 000 growers who employ more than 14 000 farm workers in KwaZulu-Natal’s rural communities. This season, Tongaat Hulett operations are estimated to crush over 4.78m tons sugarcane, which is valued at about R3.23 billion. This is vital revenue that neither the industry, province, nor national economy can afford to lose,” Russel says.

“The sugar industry is structured such that there is one revenue pot from which growers and millers all receive a share. It is therefore impossible to isolate the consequences of any hardship to one section of the industry; when millers suffer, growers suffer and vice versa.”

Read: Tongaat Hulett forced into business rescue

Not the first time

This is not the first time that the industry has called on Treasury to cut it some slack. Earlier this year calls were made for the Finance Minister to scrap the health promotion levy – otherwise known as the sugar tax – saying that not doing so will “decimate the industry”. However, the industry’s calls seemed to have fallen on deaf ears.

Tabling his first budget as Finance Minister in February, Godongwana announced he would be increasing the sugar tax for drinks with more than 4g of sugar to 2.31c/g, up from 2.21c/g effective from April. At the time, government also revealed plans to possibly lower the threshold and extend the tax to fruit juices.

Government has always argued that the sugar tax is designed to discourage the excessive consumption of sugar, which is said to be the driver of diseases such as obesity, diabetes and high blood pressure.

However, SA Canegrowers believes there is no real evidence to back government’s argument. Russell adds, “to date, there is no evidence that the tax has had a positive impact on obesity levels in the country.”

Read:

Several tax policy changes in the pipeline

Financial blow

SA Canegrowers is of the belief that with Tongaat facing troubles, the rising operating cost on producers and the inability for the industry to raise its prices much to keep up – keeping the sugar tax around could put thousands in the industry out of work.

“SA Canegrowers has long pointed to the financial pressure the sugar tax places on the entire industry. The industry is therefore rightly concerned that the continued implementation of the tax may yet cause further casualties in the milling sector.”

“Two sugar mills have already closed, with devastating consequences for the entire sugar value chain and the one million mostly rural livelihoods it sustains,” Russell says.

“Moreover, under the terms of the Sugarcane Value Chain Masterplan, the industry is constrained in the price increases it can effect on its product. This has been an enormous burden on the industry in an inflationary environment, to the detriment of growers and millers alike.”

”To increase the sugar tax under these circumstances would further cripple the industry and lead to thousands of further job losses in addition to the more than 16 000 jobs already lost because of the sugar tax,” he adds.

Read:

Could KZN cane growers’ plan to save the industry work?

Consortium of cane growers wants to buy a chunk of Tongaat’s assets


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