Industry is concerned that the increase in the Health Promotion Levy will negatively impact the progress already made in the implementation of the Sugarcane Value Chain Master Plan 2030 as well as the ongoing recovery of the local sugar industry, says South African Sugar Association (Sasa) executive director Trix Trikam.
Prior to the signing and implementation of the plan, the sugar industry was in dire straits owing to challenges such as the incursion of sugar imports, insufficient tariff and the imposition of the Health Promotion Levy, better known as the sugar tax.
The Master Plan’s Task Team 7 was set up to investigate and develop an industry proposal for a long-term policy framework and approach to taxation of sugar and sugar-derived products. The Master Plan sought to engage government on strategies and policies to provide certainty and predictability in support of investment and planning by industry and government.
The work of this task team is still ongoing.
Over the past 20 years, yearly sugar production has declined by nearly 25%, from 2.75-million to 2.1-million tons. The number of sugarcane farmers has declined by 60% during this period and industry-related jobs are estimated to have reduced by 45%.
The introduction of the Health Promotion Levy in April 2018 exacerbated the situation. The industry has lost about R1.2-billion a season, amounting to about R3.6-billion over the last three seasons. The impact of the levy, among other factors, has also led two milling companies, namely Illovo and Tongaat Hulett, to close two mills which has resulted in job losses.
President Cyril Ramaphosa has previously emphasised the critical importance of master plans for various industries and sectors with regards to assisting them with their economic recovery and sustainability. Therefore, it was surprising that while this matter is being attended to through the Master Plan processes, there was an increase in the sugar tax, explains Trikam.
“The increase is bound to have a negative impact on the recovery process, especially with regards to meeting certain targets as envisaged in the master plan,” he says.
He explains that it has become challenging for the industry to reach a full 300 000 t/y increase target because of the increase in the Health Promotion Levy. This target is essential in putting the industry in a strong position to implement restructuring and diversification plans.
Therefore, the announcement of the increase in the Health Promotion Levy, as well as the proposed consultations on the reduction in threshold level and expansion of scope to fruit juices, is concerning, and potentially damaging, to the industry.
Sasa is currently in the process of engaging government to find an appropriate solution.