South Africa

Sugar tax threatens thousands of South African jobs


South Africa’s sugar industry risks losing as much as 16% of its cane-growing area and more than a 10th of farm-level jobs if the government raises a levy on sugar-sweetened drinks and expands the tax to other products, according to a new report.

As much as 53,800 hectares (133,000 acres) of cane-growing land and 9,151 jobs may be shed through 2031 due to higher and more broad-ranging taxes that sap local demand for refined sugar.

Tariff-free imports from neighboring Eswatini and increased production costs threaten the local industry as well, according to a paper by the Bureau for Food and Agricultural Policy (BFAP) published Monday.

The report was commissioned by the South African Sugar Association.

The industry is facing a crisis partly due to a flood of cheap imports, with annual production dropping by almost a quarter over the past two decades and the number of sugarcane farmers falling by 60%.

Sector representatives say the tax on sugar-sweetened beverages that came into effect in 2018 has led to losses of R8 billion in revenue, almost 10,000 jobs, and the shutdown of two sugar mills.

Representatives have petitioned lawmakers to halt increases in the duty for at least three years.

The government raised about R2.2 billion from the so-called health promotion levy on sugar-sweetened drinks in the fiscal year through March 2022.

Finance Minister Enoch Godongwana is expected to push through a 4.5% increase in the tax, which was postponed by a year to April 2023, and propose changes for the next three years in the budget on Feb. 22.

Demand for refined white sugar has dropped by about 13% since 2016 when the tax was first announced, as buyers consumed less and beverage producers reformulated recipes to include artificial sweeteners, BFAP said.

It will probably fall by an additional 160,000 tons, or 11% of the local refined sugar market, through 2025 and lead to “significant adverse consequences” for the milling sector, growers, and the rural economy,” it said.

The drop in demand will reduce the industry’s turnover by about R600 million per year from the current annual average of more than R18 billion, BFAP said.

Income losses in the eastern KwaZulu-Natal and Mpumalanga provinces, where most of the country’s sugarcane is grown, will also affect food affordability, food security, and poverty incidence in the regions, it said.