- The SA sugar association says the sugar industry will face catastrophic consequences if there are changes to the sugar tax threshold.
- It claims the move could jeopardize up to 6,000 jobs and the livelihoods of 3,000 small farmers.
- The lobby group advocates for a moratorium on tax increases and changes to its threshold.
- For more financial news, go to News24 Business cover.
The largest representative body for the sugar industry has warned of catastrophic consequences if the government lowers the threshold for collecting the controversial sugar tax or increases its rate above inflation, saying this would create up to 6,000 jobs and the livelihood of 3,000 small farmers at risk.
South African Sugar Association (SASA) CEO Trix Trikam told reporters at a presentation in Durban on Monday that his organization’s position was a “plea” to the government to suspend any changes to Sugar Tax thresholds. Health Promotion, or sugar. tax. The lobby group is seeking a break of at least three to five years to give the industry enough time to diversify sugar production into other products such as sustainable jet fuel and bioplastics.
“Give us time to get to the end of our research and feasibility studies and hopefully we’ll find some products that will transition from crystallized sugar to something else,” Trikam said.
Big job losses already
SASA says the health promotion tax, or sugar tax, as it is commonly known, has already cost the industry more than 9,000 direct jobs since it was introduced in 2018.
News24 previously reported that a possible inflationary sugar tax increase of 4.5% could be in the offing in April, with the government also telling the industry it could extend the levy to cover more products and lower the threshold at which sugar is taxed. .
At the moment, the threshold is 4 g of sugar, which means that the first four grams of sugar per 100 ml do not generate any tax. Thereafter, the tax is applied at a rate of 2.21 cents per gram.
Finance Minister Enoch Godongwana first mentioned the potential sugar tax increase in his budget speech in February 2022, but after submissions from the sugar industry and other value chain players, the government agreed to push it back a year to April 2023 so it could consult with the industry.
According to research conducted by the Bureau of Food and Agricultural Policy (BFAP) on behalf of SASA, if a change were made to the threshold at which the tax applied, to 2g or less, for example, it could result in companies of beverages, which are the largest consumers of sugar in SA, reformulating their beverages to avoid sugar.
This would result in sugar producers having to shift production that would have gone to beverage producers to export markets, which were not profitable because all sugar-producing countries had tariffs to protect their industries. As a consequence, all sugar for export was sold at prices below what it cost to produce the product.
Sandy Jackson, BFAP’s head of agrosocioeconomics, told the SASA presentation that if more sugar is exported at lower prices, “viability is increasingly threatened.” She estimated that the industry would lose almost 54,000 hectares of cane production in the next 10 years, with “most of the hectares going out of cane production between 2023 and 2025.”
He said that with this reduction in cane production, it would put a total of 6,000 jobs at risk, half of them permanent, while up to 3,000 small farmers could lose their livelihoods and be forced to leave the industry.
As it stands, Trikam says there are around 65,000 people directly employed by the sugar industry, which generates around R18bn in annual revenue. It is estimated that 270,000 people are indirectly employed.
READ | SA sugar farmers want to produce jet fuel and call for tax freeze
Lawsuit Concerns
Even an inflationary increase in the sugar tax could have implications for the sugar industry.
Jackson said beverage makers had indicated that if there were an inflationary spike it would not trigger a major reformulation of the ingredients they use any time soon, but would pass it on to consumers.
But Trikam said the consequences of this were also unknown, adding that this could also lead to a significant drop in consumer demand due to higher prices.
This is why, he said, the industry wanted a moratorium on any changes, both in terms of rate increases and threshold changes.
“If there’s an inflation-related increase, the beverage companies most likely won’t reformulate further, but then the consumer might not be able to afford the higher price. If it spreads, there would be less demand and therefore the sale of refined sugar. to drinks would fall. So our plea is to just leave it at that because no one knows what the impact is.”
Trikam said it is important that the government is also working on its National Dietary Intake Survey, which aims to establish what South Africans eat and what potentially contributes to obesity problems in SA.
He said that this study still needed to be completed to establish if there were other variables at play in obesity in SA.
“At this stage, everyone is working in the dark and choosing sugar as the intervention. It could be something else or a whole host of products.”
The results of this survey are expected by the end of February, Trikam said.
