The South African Sugar Association (Sasa) says it’s not holding its breath that finance minister Enoch Godongwana will scrap the sugar tax when he delivers his budget speech on Wednesday, but it has called on him to consider a five-year moratorium on increasing the health promotion levy (HPL).
Briefing journalists in Durban on Friday, Sasa CEO Sifiso Mhlaba said the levy — which the industry estimates costs it R1.2bn a year and threatens 300,000 jobs in the sector — would be likely to remain, as it provided the government with R10bn in revenue in 2023.
“We have to be realistic. We understand the [levy] ... is bringing in revenue for the government, and it would be difficult to take that revenue source away.
“But also, we need to be firm that increasing it would be extremely detrimental to the industry. Hence, our call as an industry for a moratorium for the next five years.
“If it were to be scrapped, we believe prospects would be better, but we understand and are trying to be practical and pragmatic in our approach.”
He said the association was calling for a moratorium on the sugar tax to allow the industry time to align with the government of national unity on the implementation of the sugar industry master plan, Vision 2030.
Since the implementation of phase one of the master plan, sales recovered slightly, and the industry stabilised. However, should Godongwana announce an increase in the health promotion levy this week, it would reintroduce instability to the market and result in losses in revenue and jobs, said Mhlaba.
Meanwhile, the demise of leading sugar producer Tongaat Hulett — which went into business rescue before its assets were acquired by Vision Consortium, led by businessman Robert Gumede — has not affected sugar levy payments due to Sasa.
Mhlaba told Business Times his organisation had taken the matter of outstanding levies to court and won the case, resulting in Tongaat paying R526m into an account. However, the business rescue practitioners appealed against the ruling and the matter was set to be heard in the Supreme Court of Appeal.
To remain relevant, the sugar industry has been looking to diversify into products such as biofuels, said Mahlaba. “We are not an industry that isn’t trying to reinvent itself. We are an industry that puts technology at its core.”
If it doesn’t rain, you get no [sugar] crop. If you have a flood, you’ve got no crop. So, [the industry] should be more supported.
— Business rescue practitioner Harry Spain
Independent researcher Brian Tait said work to diversify was at an advanced stage, and the industry was looking at products such as bioethanol for fuel, sustainable aviation fuel for aircraft, polylactic acid for sustainable plastics, and packaging biomass cogeneration.
“We have been working closely with Sasa and the sugar industry over the past ten years on quite a broad array of diversification projects ... Bioethanol is one of the low-hanging fruits.
“Ethanol worldwide is a product with consumption of over 120-billion litres a year, and most of it is blended into petrol.”
Business rescue practitioner Harry Spain said the sugar industry was a vibrant sector but vulnerable to seasonal and other headwinds. The remaining cane growers and milling companies required commitment from the government to provide assistance.
“The sugar industry is one of the biggest employers — direct and indirect — in the country. It’s like a farming industry. If it doesn’t rain, you get no crop. If you have a flood, you’ve got no crop. So, it should be more supported,” he said.
Godongwana gave the industry a reprieve in his 2023 budget, announcing that a tax of 2.1c per gram of the sugar content exceeding 4g per 100ml would not increase for two fiscal years.
The sugar industry employs 65,000 people permanently and another 217,000 indirectly, according to Sasa.
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