SA Canegrowers: Urges South Africa Sugar Tax Repeal

• SA Canegrowers has urged Finance Minister Enoch Godongwana to scrap the Health Promotion Levy (HPL), or sugar tax, in the upcoming MTBPS.
• The industry claims the HPL threatens over one million livelihoods and has already led to 16,000 job losses by 2019 and a 250,000-ton sales drop in its first year.
• Current challenges include an 18% decline in sugarcane deliveries and a 17% fall in recoverable value this season, alongside displacement by foreign sugar.
• The organization questions the HPL's justification, noting its revenue is not ring-fenced for health but goes to the National Revenue Fund.
• Removing the levy is seen as crucial for policy certainty and encouraging long-term investment in the South Africa sugar industry.

SA Canegrowers asserts that the removal of this levy would not only alleviate immediate financial burdens but also foster greater policy certainty, thereby encouraging and supporting sustained investment across the entire sugar value chain.

SA Canegrowers has formally urged Finance Minister Enoch Godongwana to initiate the repeal of the Health Promotion Levy (HPL), widely recognized as the South Africa sugar tax. The organization advocates for the complete scrapping of this levy during the upcoming Medium-Term Budget Policy Statement (MTBPS), citing severe financial strain on the nation's sugar industry. They contend that the continued application of the HPL poses a significant threat to the economic viability of the entire sugar value chain, which is a critical support system for over one million livelihoods across the country.

The call to scrap the Health Promotion Levy comes amidst a period of intense pressure for the South African sugar industry. Introduced in April 2018, the HPL has been consistently linked by SA Canegrowers to substantial declines in both revenue and employment within the sector. This direct appeal to Minister Godongwana underscores the urgency felt by industry stakeholders regarding the current tax policy and its perceived detrimental effects on a vital agricultural sector.

The economic repercussions attributed to the Health Promotion Levy are significant, according to industry reports. A study commissioned by Nedlac revealed that by 2019, the sugarcane farming and milling industries had already experienced the loss of 16,000 jobs. Furthermore, the industry recorded a substantial reduction of 250,000 tons in sugar sales during the HPL's inaugural year alone. These figures highlight the immediate and profound impact following the implementation of the South Africa sugar tax.

Current data indicates that the sector continues to face considerable headwinds. Sugarcane deliveries to mills have seen an 18% decrease this season when compared to the previous one, while the recoverable value extracted from the processed cane has simultaneously fallen by 17%. Higgins Mdluli, chairman of SA Canegrowers, articulated the dire situation, stating that both small- and large-scale growers are experiencing pressure from multiple directions. He further noted a reduction in cane reaching mills and the displacement of locally processed sugar from retail shelves by foreign imports, exacerbated by weak tariff structures and enforcement that have allowed international sugar into the market for over two years. The ongoing business rescue of Tongaat Hulett further exemplifies the fragility within the industry.

Beyond the direct financial and employment impacts, the SA Canegrowers organization has raised fundamental questions regarding the ongoing justification for the Health Promotion Levy. They point out that the revenue generated by the HPL is not specifically earmarked or "ring-fenced" for health promotion initiatives, but instead flows directly into the National Revenue Fund. This lack of dedicated allocation challenges the very premise of the levy's existence as a health-focused tax.

The presence of the HPL also introduces significant uncertainty for future investment in diversification and growth within the South Africa sugar industry. According to Mdluli, as long as the levy remains in effect, growers, millers, and potential investors are unable to adequately plan for long-term strategies. SA Canegrowers asserts that the removal of this levy would not only alleviate immediate financial burdens but also foster greater policy certainty, thereby encouraging and supporting sustained investment across the entire sugar value chain. This move, they argue, is crucial for the sector's long-term stability and development.

Lawyers advising clients in the South African sugar or beverage industries should closely monitor the upcoming Medium-Term Budget Policy Statement for any proposed changes or repeal of the Health Promotion Levy, as this could significantly impact operational costs, investment planning, and supply chain strategies for affected businesses.

Source: Original reporting based on industry statements and financial analysis.