Sugar tax hike threatens 6,000 jobs

The South African Canegrowers Association has warned that a hike in the Health Promotion Levy (HPL) on sugary beverages – also known as the ‘sugar tax’ – could put thousands of jobs at risk.

The HPL on sugary beverages is a levy in support of the Department of Health’s deliverables to decrease diabetes, obesity, and related diseases in South Africa, according to the South African Revenue Service (SARS). 

South African Canegrowers Association CEO Thomas Funke told eNCA that the sugar tax, when implemented in 2018, had a massive impact on the sugar industry, especially in the cane-growing sector. 

“We saw a large number of jobs shed because of that. It was essentially an unaffordability issue; it was unaffordable for the farmers to continue with the number of staff they had employed on their farms because income was just cut so dramatically,” he said.

This is because the HPL led to beverage companies buying less sugar and either using less sugar in their drinks or reformulating their products with non-nutritive sweeteners.

This meant the local sugar industry had to export their products at a loss.

In the cane-growing sector alone, over 9,000 jobs were lost in rural areas in KwaZulu-Natal and Mpumalanga.

“The fact is that when less sugar gets used, that affects our livelihoods and those of our farm workers and our farmers out there in the rural areas,” he said.

Finance Minister Enoch Godongwana said in his 2023 Budget Speech that the HPL on sugary beverages would be extended to pure juice.

He also said he would look to hike the HPL on sugary beverages in two years.

If this were to happen, Funke said an estimated 150,000 tons of sugar would be taken out of the market as beverage companies and others would diversify and look for alternative sweeteners.

This could mean losing another 5,000 to 6,000 jobs in the cane-growing sector alone, Funke warned.

However, not everyone is against the Finance Minister raising the HPL on sugary beverages.

Health experts Professor Karen Hofman and Professor Susan Goldstein recently wrote on The Conversation that South Africa faces a steady rise in both death and disability caused by increases in non-communicable diseases such as diabetes and cancer.

They said the sugar tax will help to combat this trend and “pour additional, much-needed billions into public funds”.

They recommended that the government increase the rate of the HPL to 20% – a figure endorsed by the WHO. South Africa’s current levy sits at 11%.

“The fact that the Health Promotion Levy has already yielded more than R10 billion to the Treasury is a testament to its revenue potential. The win-win consequences of raising the levy seem indisputable,” they said.

“We believe Finance Minister Enoch Godongwana has an opportunity to improve both South Africa’s fiscal health and its public health in one swift, effective action: by increasing the Health Promotion Levy.”