South Africa's sugar tax threatens nearly 9,000 jobs

According to a recent analysis, South Africa’s sugar sector might lose up to 16% of its cane-growing acreage and more than a tenth of farm-level employment if the government hikes the tax on sugar-sweetened beverages and spreads it to other items.

According to a paper published Monday by the Bureau for Food and Agricultural Policy, higher and more broad-ranging taxes that sap local demand for refined sugar, tariff-free imports from neighbouring Eswatini, and increased production costs could result in the loss of up to 53,800 hectares (133,000 acres) of cane-growing land and 9,151 jobs through 2031.

The South African Sugar Association commissioned the report.

The sector is in trouble, owing in part to a flood of cheap imports, with yearly production decreasing by about a quarter over the last two decades and the number of sugarcane growers plunging by 60%.

Sector representatives claim that the tax on sugar-sweetened beverages, which went into effect in 2018, has resulted in R8 billion in revenue losses, the closure of nearly 10,000 jobs, and the closure of two sugar mills, and they have petitioned lawmakers to halt duty increases for at least three years.

During the fiscal year ending March 2022, the government raised almost R2.2 billion through the so-called health promotion fee on sugar-sweetened beverages.

Finance Minister Enoch Godongwana is anticipated to push through a 4.5% tax rise, which has been delayed until April 2023, and to propose modifications for the following three years in the budget on Feb. 22.

According to BFAP, demand for refined white sugar has declined by around 13% since the levy was initially announced in 2016, as purchasers drank less and beverage companies altered recipes to incorporate artificial sweeteners.

It is expected to shrink by 160,000 tonnes, or 11% of the local refined sugar market, through 2025, with “significant adverse consequences” for the milling sector, growers, and the rural economy.

According to BFAP, the decline in demand will cut the industry’s turnover by around R600 million per year, down from the present annual average of more than R18 billion. Income losses in the eastern KwaZulu-Natal and Mpumalanga provinces, which produce the majority of the country’s sugarcane, would have an impact on food affordability, food security, and poverty incidence in the areas, according to the report.