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Sugar industry fears more rural job losses amid calls for a ‘sugar tax’ hike

Sector says output declined by a cumulative amount of over R400m by 2019 alone as a result of the levy.
A worker cuts sugarcane plants during the harvest on farmland operated by Illovo Sugar in Sezela, KwaZulu-Natal. Image: Dean Hutton/Bloomberg

Calls by the Healthy Living Alliance (HEALA) for national government to double the Health Promotion Levy or ‘sugar tax’ will result in more job losses in communities living in rural areas, the South African Canegrowers Association says.

In the first year the sugar tax was implemented (2018), the industry is reported to have lost more than 16 000 jobs overall, with 9 000 job losses in the cane growing sector alone, according to a report commissioned by the National Economic Development and Labour Council (Nedlac) titled Economic Impact of the Health Promotion Levy on the Sugar Market Industry.

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Read: Sugar tax may be first of several ‘health promotion’ measures

The report also highlights that the sugar farming sector’s output had declined by a cumulative R414.2 million by 2019 due to the sugar tax. It declined by R214.7 million in 2018 and by R199.5 million in 2019, while the sugar processing sector’s output had declined by a cumulative R772.1 million by 2019.

Additionally, the report says the sugar tax resulted in a R653 million decline in investment into the economy.

SA Canegrowers chairman, Andrew Russell, says that the doubling in sugar tax shows zero regard for the impact it will have on the one million people who rely on the sugar industry for their income.

He also questions the impact the levy has on reducing obesity levels in South Africa.

“Most of these job losses have been in communities living in rural areas, where poverty levels are the highest,” notes Russell.

Read:

KZN riots: sugar industry losses over R84m

KwaZulu-Natal cannot afford this, nor can the rest of SA

“Perhaps the reason for the group of scholars downplaying the devastating economic impact of the sugar tax to date is because the majority of them are based at overseas universities and therefore do not understand the dire economic situation our country finds itself in, with unemployment standing at 44.4%, or the hardships that so many rural people face,” he adds.

HEALA however claims that the sugar tax has had little impact on employment levels in the sugar industry.

The group has presented two studies that tracked young adults’ intake of taxable sugar sweetened beverages in Langa, Western Cape and Soweto in Gauteng as evidence that the sugar tax has had a positive impact, essentially a drop in sugar consumption.

There is however still little or no publicly available evidence that the tax has had a positive impact on obesity levels in the country.

SA Canegrowers says that this is despite the industry’s numerous requests to government to commission a study that will measure whether the sugar levy has achieved its objective of improving health.

“The fact is that without jobs, people struggle to provide their families with the health and nutrition they need. It is therefore in everybody’s interest that rural jobs are protected,” Russell reiterates.

Read: RCL Foods bruised by tariffs and taxes

Meanwhile, SA Canegrowers has declared that it remains committed to working with government to achieve the commitments of the South African Sugar Cane Value Chain Masterplan to ensure a more diversified and sustainable sugar industry.

“In order to achieve this, it is critical that we safeguard the livelihoods of both commercial and small-scale growers, emergent farmers and thousands of workers living in rural communities,” the association says.

Palesa Mofokeng is a Moneyweb intern.

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Lets look at the numbers and the argument at hand:

The government decides to impose a sugar tax so as to make products which sugar goes into more expensive and less desirable because of all the health issues related this product, whilst hopefully benefiting human quality of life and taking some pressure off the health industry.

This is pretty good stuff and makes a lot of sense, however when we look at the economics of it there is a counter weight, companies can either increase the price of their product and or reduce the quantity and or quality and use an alternative ingredient which does not get taxed upon.

16,000 jobs x 620,000 investment per job = R9,92bil loss of investment

This article fails to research if the government has intervened by promoting the use of alternative products / substitute ingredients which are healthier and or less taxed, making this article one-sided or just lacking proper research.

This simple google request, found that the sugar substitute market has grown by 6.3% annually and will a global market value of $20.5bil by 2025, this means that companies in the sugar producing industry need to either develop a substitute or reduce the current production costs.

https://www.marketresearchfuture.com/reports/sugar-substitutes-market-3224

Maddest of all is that the SA taxpayer / consumer effectively subsidises the SA sugar “industry” by means of tariff protection against cheaper imports. Then taxing it makes zero sense, to me anyway.

End of comments.

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