The South African Canegrowers Association has called upon minister of finance Enoch Godongwana to help the sugar industry “suspend” an increase in tax sugar and “eliminate” the tax. This comes as the South African economy is facing a crisis that has added strain to the embattled sugar sector.
SA Canegrowers argue that there is no evidence to support that the increase has had any positive impact on the levels of obesity in the country, which was part of the reasons for the tax increase initially.
“The submission was made pursuant to a call for comments on the Budget Review 2023 issued by the National Treasury in November 2022. SA Canegrowers made a similar submission to the National Council of Province’s Select Committee on Finance in response to a call for comments on the 2022 Rates and Monetary Amounts and Amendment of Revenue Laws Bill in the same month,” said SA Canegrowers chairperson Andrew Russel.
Domino effect on millers
What makes this even more difficult is the domino effect of the tax increase, as there is one revenue pot because growers and millers all receive the same shares. Therefore the ripple effect of growers suffering results in millers suffering too, he added.
“There is currently a grower-led consortium seeking to save Tongaat Hulett operations. This will be difficult enough to accomplish with the sugar tax handicapping the industry; it will be virtually impossible if the sugar tax is increased. And Tongaat Hulett is not the only milling company under pressure.
“SA Canegrowers has long pointed to the financial pressure the sugar tax places on the entire industry. The industry is therefore rightly concerned that the continued implementation of the sugar tax may yet cause further casualties in the milling sector. Two sugar mills have already closed, with devastating consequences for the entire sugar value chain and the one million mostly rural livelihoods it sustains,” said Russel.
What makes matters even worse is that Tongaat Hulett’s board made a decision to put the sugarcane industry under business rescue. Tongaat Hulett works with 12 000 growers and has more than 14 000 employees in the KwaZulu-Natal rural community.
Far-reaching impact
If there is no response from the government to suspend or eliminate the sugar tax, Tongaat Hulett operations are estimated to crush over 4.78m tons of sugarcane, valued at R3.23 billion.
“This is vital revenue that neither the industry, province, nor national economy can afford to lose. Moreover, under the terms of the Sugarcane Value Chain Masterplan, the industry is constrained in the price increases it can affect its product. This has been an enormous burden on the industry in an inflationary environment to the detriment of growers and millers alike. Increasing the sugar tax under these circumstances would further cripple the industry and lead to thousands of further job losses in addition to the more than 16,000 jobs already lost because of the sugar tax,” said Russel.
At the moment sugar tax is causing major financial harm to the growers, workers, and communities. Not just that, the Bureau for Food and Agricultural Policy estimates that at the current level the impact of the tax will affect 15 986 seasonal and permanent workers. It is resulting in a decline of 46 600 hectares of area under cane over the next ten years.
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