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‘Ill-conceived sugar tax risks thousands of jobs and the livelihoods of small-scale farmers’


Andrew Russell is the Chairperson of the South African Canegrowers’ Association.

The sugar tax cost South Africa more than 16,000 jobs and R2.05bn in 2019 alone — a year after its implementation. Maintaining the sugar tax at the current level will cost the industry a further 15,984 seasonal and permanent jobs and will contribute to a decline of 46,600ha of area under cane over the next 10 years.

In his Budget speech in February, Finance Minister Enoch Godongwana announced the decision to increase the Health Promotion Levy (sugar tax). This increase came four years after the sugar tax was first implemented in 2018, causing massive damage to the sugar industry and in the absence of any evidence to show that the tax has had a positive impact on health outcomes or obesity levels in South Africa.

The National Treasury made the subsequent decision to delay the 4.5% increase by a year to conduct further consultations on lowering the 4g/100ml threshold and extending the levy to fruit juices. The intervening period has provided yet another opportunity to highlight the magnitude of this ill-conceived tax on the industry, with no discernible health benefit. The tax must be scrapped or it will risk thousands of livelihoods.

While to many the tax, at 2.31 cents per gram of sugar, sounds immaterial, it is far from it. This is because when working on a tonne of sugar, which usually costs around R11,500, it pushes up the cost by an additional R23,100, which means the tax amounts to 200% of the cost of sugar. Considered alongside excise taxes on alcohol and tobacco, the levy attached to sugar is disproportionate and punitive for South Africa’s small-scale growers.

When one considers that all carbohydrates including bread, potatoes, rice and maize meal break down into a form of sugar, which means overindulging in these foods would have a similar health impact as eating too many sugary products, the disproportionate penalty on sugar becomes even more nonsensical. Lower-income consumers often rely on a number of carbohydrate-based staple foods for energy, so laying the blame on sugar-sweetened beverages alone is simplistic while also putting the one million livelihoods that rely on the sugar industry at risk for no good reason.

This is even more illogical in light of there being no research or data available that demonstrate that the tax has had a positive impact on obesity in the country. Like many other countries, South Africa needs to wake up to the fact that a sugar tax serves no purpose.

For example, Denmark, which had a sugar tax since the 1930s, eliminated it in 2013. Similarly, Norway has had a sugar tax since the 1920s. The country increased the tax dramatically in 2018 — the same year South Africa introduced its tax — but subsequently clawed this increase back in 2020 and then cut it again by more than 48% last year. More recently, the government in the UK is also expected to scrap the sugar tax to combat the rising cost of living.

With a poorer population than these European countries and an economy in decline, South Africa cannot justify maintaining — let alone increasing — this destructive tax. Indeed, earlier this month, Uganda’s Parliament recognised this fact and removed the excise duty on confectionaries to boost the economy. For the sake of the livelihoods at stake, South Africa must wake up to this reality too.

A socioeconomic assessment commissioned by Nedlac revealed that the sugar tax cost South Africa more than 16,000 jobs and R2.05-billion in 2019 alone — a year after its implementation. Modelling commissioned by SA Canegrowers also showed that maintaining the sugar tax at the current level will cost the industry a further 15,984 seasonal and permanent jobs and will be a major contributing factor towards a decline of 46,600ha of area under cane over the next 10 years.

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The fact that the government plans to increase the tax next year means that there could be even more job losses than the projection of 15,984 and a further reduction in the hectares under cane.

The tax has also had real implications for the country’s milling crisis, with millers also being hard-hit by the sugar tax. This is due to manufacturers of sugar-sweetened beverages reformulating their beverages to contain less sugar, leading to a significant decline in revenue for the sector. With milling capacity and performance continuing to decline and underperform, it is critical that greater investment is secured to recapitalise their operations. However, this becomes increasingly difficult due to the financial situation of the industry.

This becomes a vicious cycle where growers have no incentive to increase their production of cane due to the mills being unable to crush what they receive. As it stands today, most growers face a dire situation where between 20% and 32% of their crop is at risk of not being crushed. This situation is both undesirable and unsustainable.

Should the tax increase be enforced next year, it will undermine the work done to date during the first phase of the Sugarcane Value Chain Masterplan. Since the signing of the plan in November 2020, the industry has remained true to its commitments and has worked diligently to ensure its success. We have seen remarkable collaborations to bolster initiatives, like SA Canegrowers’ Home Sweet Home “buy local” campaign.

Yet the sugar tax and its continued existence stand out as one of the failures of the plan. Whereas the masterplan includes an undertaking to review tax policy, there is no evidence that any effort has been made to take an evidence-based approach to the tax, and SA Canegrowers’ repeated calls for a comprehensive dietary intake study have gone unanswered.

The result is that the sugar tax remains a threat to the ultimate success of the masterplan to the detriment of growers and workers throughout the sugarcane value chain and to the national economy.

It is critical that the government weighs the gains the tax brings in the form of health benefits and tax revenue against the price we have paid and will continue to pay in terms of critical jobs and livelihoods in the nation’s rural communities.

The action we take — or fail to take — on the sugar tax may well determine the futures of one million South Africans whose livelihoods depend on the sugar industry. DM


Comments - Please in order to comment.

  • Barrie Lewis says:

    Looking at it from a jobs point of view Andrew Russell certainly makes a valid point. From a health viewpoint it’s incontrovertible that sugar and all refined carbohydrates for that matter are detrimental to our wellbeing. Simply because the government won’t grasp the prickly nettle that has made South Africans one of the most obese and diabetic nations in the world, and included both refined flour and mealiemeal, changes nothing.

    It’s high time both refined flour and mealiemeal also had a sin tax added to them, not remove sugar from the list.

    The combined negative effect of all these refined carbs on the wellness of South Africans runs into billions, far greater than the loss of employment in the sugar industry.

    It’s time the sugar industry looked to alternative ways to use sugar. Power generation? Ethanol for fuel? There must be others.

    As a healthcare provider I utterly disagree with Andrew Russell; he and the industry need to do some lateral thinking.

    • Peter Atkins says:

      Well said Mr Lewis! I was going to attempt a reply to Mr Russell, but luckily noticed yours – much better. I think it’s time that the jobs arguments are not allowed to be wheeled in whenever it’s convenient – usually to defend some other damaging industry (e.g. fossil fuel, motor, …). Rather let’s apply our minds, as Mr Russell suggests, and look for better solutions.

    • Paul Fanner says:

      Andrew says there aren’t any stats proving that sugar taxes improve overall healthiness. Is he correct?

      • Barrie Lewis says:

        He may be right, but it makes no difference. Cigarettes, booze and sugar all detract from our health. They should attract sin taxes. Enjoy them if you want, but you will pay.

  • mike muller says:

    The sugar inbdustry has helped new entrants to get a foothold in agriculture on good land with reliable water. However, sugar is not a particularly valuable crop and generates far fewer jobs per hectare (and per kilolitre of water) than many alternatives. That’s aside from concerns about the health impacts of over-consumption of empty calories…

    The responsibility of the sugar industry now is to support the farmers that it has helped to establish to diversify and enter new markets for fruit and vegetables that can create more jobs, more wealth and at the same time provide better heath – by improving the diet of poor communities.

    Given the parlous state of the global sugar industry, low prices and subsidised over-production, that would also be a sensible long-term strategy for the industry.

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