A fight is brewing between the SA Farmers Development Association (Safda) and National Treasury following its decision to increase the sugar tax. The organisation says the hike is a slap in the face for small-scale sugarcane growers and will ruin an already-crippled sector. Safda chairman Dr. Siyabonga Madlala warned that the increase undermined the Sugarcane Value Chain Masterplan in which the government undertook to put a moratorium on product tax policy changes.
“The Health Promotion Levy (HPL) on sugary drinks was introduced in 2018 at a fixed rate of R2.1 per gram of the sugar content that exceeds four grams per 100ml,” he said. “The introduction of the HPL has had a devastating impact on sugar demand. It shrunk local market demand for sugar by about 20%, which contributed to a marked reduction in industry-related jobs, with many small-scale farmers exiting the industry due to the significant reduction in revenue.”
Madlala said industry revenue for the 2019/2020 season declined by R2.2 billion. He further noted that the increase to R2.31 by the Treasury was in breach of the social compact by all participants in the master plan. “Government is reneging on their end of the deal,” he said. “The manufacturers will decrease the quantity of sugar in their products, which will lead to the decline of local demand of sugar and result in the increase in export sugar, which is a loss of revenue for the industry.”
Madlala expressed concern on whether the objectives of the plan would be achieved if this social compact was broken. “Government’s response to the crisis facing the sugar industry was the formulation of the Sugar Industry Value Chain Masterplan 2030, which seeks to ensure stability, growth and long-term sustainability for the sugar industry,” he said.
“Short-term objectives of the master plan aim to restore local market demand for sugar in the first year of implementation by at least 150,000 tons and by 300,000 tons by year three. Industrial users and retailers have committed to a ‘buy-local campaign’, which requires users to source at least 80% of their requirements from local sugar production.”
Madlala lamented the struggles of sugarcane farmers. “Our farmers are still reeling from the devastation of the July 2021 civil unrest, where farms were burned and harvested sugarcane was rejected by sugar mills, farming equipment and machinery were destroyed, and employment was disrupted, including seasonal employment,” he said. Growers lost millions as a result of the unrest and exorbitant fuel price hikes had also had a negative impact.
Finance Minister Enoch Godongwana announced the hike in his Budget speech last month, saying that there had been no increase in the tax in three years. It has also been criticised by the Consumer Goods Council of SA, which says it was not consulted. Approached for comment, Treasury told Vutivi News it would only be able to do so at a later stage.
