For the sake of the one million livelihoods that depend on the sugar industry, finance minister Enoch Godongwana must use the opportunity of the mid-term budget policy statement to finally signal the elimination of the “calamitous and ineffective sugar tax”.
This is what Mzansi’s sugar industry is pinning their hopes on ahead of Godongwana’s much anticipated budget today.
In a time where high input costs have already hampered the agricultural sector, the Health Promotion Levy (HPL) on the sugar industry has been further weighing the industry down.
According to the South Africa Canegrowers Association, the sugar tax, if not reduced, poses an existential threat to South Africa’s 21 000 small-scale growers and therefore must be eliminated.
“South Africa is not in a position to imperil desperately needed jobs. This is especially true for the rural communities in KwaZulu-Natal and Mpumalanga,” the association wrote in a media statement.
The SA Canegrowers Association said there is no credible evidence to support government and health experts’ view that that the tax has reduced obesity levels in the country. However, the economic impact of the tax has been consistently demonstrated by credible research, the organisation warned.
In June 2021, a study commissioned by the National Economic Development and Labour Council showed that the tax had cost the country 16 621 jobs losses.
This equated to a R653 million decline in investment into the economy, and a R1,19 billion decline in the first year of its implementation.
“Further research conducted by the Bureau for Food and Agricultural Policy has also showed that maintaining the sugar tax at the current level will cost the industry a further 15 984 jobs, and contribute towards a decline of 46 600 hectares under cane over the next ten years.
“The effect of an increase would therefore be devastating, threatening the survival of the industry’s 21 000 small-scale growers as well as the jobs created by commercial growers.”
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Prolonged enforcement is hurting farmers
The tax, introduced in 2018, seeks to reduce the obesity levels in South Africa so as to reduce the burden of disease on the country’s healthcare system.
At his budget speech in February 2022, Godongwana announced an increase in the tax, which was later postponed to April 2023. This was to allow for further consultation on lowering the 4g threshold and extending the levy to fruit juices.
The threshold was set at 4g/100ml, which means that every gram above 4g/100ml will be taxable at 2.1c/gram.
“This postponement provided some relief for growers, [but] the prolonged enforcement of the HPL has continued to hamstring the industry.”
“[This] has also been faced with other cost pressures, including a spike in fertiliser and energy prices along with ongoing bouts of load shedding,” SA Canegrowers Association wrote.
Meanwhile, despite an industry request to discuss the HPL with Godongwana, the SA Canegrowers Association said they are yet to hear from him. They have also made requests to President Cyril Ramaphosa to intervene in this long-running problem and provide desperately needed relief for the industry.
SA Canegrowers Association however said it remained committed to working with government to come up with a holistic plan to tackle obesity levels in the country. A plan that does not unfairly target one industry and the livelihoods that depend on it.
Other interventions by Godongwana
Agri SA is also hopeful that the budget will outline critical measures to support the agricultural sector amid a number of crises that threaten the sector’s continued growth.
“Amongst the interventions within minister Godongwana’s control is the provision of tax relief for hard-hit agricultural industries. Tobacco, grape and cane farmers are among those hit hard by high fertiliser and fuel prices. These industries therefore need relief from ‘sin taxes’ that only further reduce their ability to withstand current price pressures,” Agri SA said in a media statement.
Agri SA also believes treasury should review the diesel rebate announced by the South African Revenue Service on 18 March 2022. The unilateral changes announced by SARS fell short of meeting farmers’ needs on critical points.
“Rather, they lowered the refund percentage of the General Fuel and Road Accident Fund levies and failed to provide certainty of key issues such as logbook formats.”
The proposed changes to the Financial Intelligence Centre Act, 2001(FICA) must also be reviewed by minister Godongwana. As this would see suppliers of high-value goods become subject to FICA requirements in respect of transactions exceeding R100 000. Were this proposal adopted, it would impose significant administrative costs on already embattled farmers. It is therefore essential that this proposal is withdrawn, Agri SA said.
“Finally, Treasury must reconsider the proposed limitation on the assessed losses that businesses can write off against their taxable income. For cyclical sectors like agriculture, this allowance is often a lifeline and a key contributor to making continued agricultural production financially viable. A disadvantageous amendment, especially in the midst of an ongoing cost crisis, would be a calamitous and costly mistake.”
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