Government's focus on structural reform offers relief to South Africa's sugar industry

Farming associations welcome the government's  focus on structural reform and to not raise sugar taxes at the Medium-Term Budget Policy Statement (MTBPS) which was presented by Finance Minister Enoch Gondongwana on Wednesday.

Wandile Sihlobo, the chief economist at the Agricultural Business Chamber of South Africa (Agbiz), said  the stronger emphasis and focus on structural reforms, mainly the network industries, is a welcome development, and it's key to unlocking South Africa’s long-term growth. “The agricultural sector’s long-term growth prospects are dependent on better-maintained roads, functioning rail, efficient water systems, efficient ports, and better-functioning municipalities, among other key areas.”

Sihlobo added that the Treasury’s focus on these and broader infrastructure is supportive of the sector. “The overall focus of the MTPBS is welcome, and the move to lower the inflation target to 3%.”

SA Canegrowers said that the fact that raising the sugar tax was not mentioned in the Medium-Term Budget PolicyStatement (MTBPS) will give South Africa’s 24 000 small-scale and 1 200 large-scale sugarcane growers some measure of relief in a time when the industry is in an unprecedented crisis. “Heavily subsidised foreign sugar is flooding into South Africa and displacing  local sugar, putting rural livelihoods at risk.”

Chairman of SA Canegrowers Higgins Mdluli said that when the sugar tax was first introduced  in April 2018, 16 000 jobs were lost in the first year alone. “But this year the landscape for South African sugar has changed dramatically. The sugar tax was first introduced before the Covid pandemic and in a year with relatively  low levels of foreign sugar coming into South Africa – which up to 2025 was the norm.”

Mdluli said that we have seen a 400% increase in imported sugar displacing locally grown sugar from retail  shelves and commercial food and drink producers. “The 149,000 tons and counting of imported sugar will undoubtedly have a dramatic effect on the industry’s ability to remain a stable employer in rural Mpumalanga and KwaZulu-Natal. Any increase in the sugar tax would worsen an already dire situation.”

Mdluli added that the industry is concerned that the influx of imported sugar will lead to job losses and  economic hardship. “That the government has not amplified the pressure comes as a relief, but the industry needs more proactive steps from the government.”

Andrew Russell, the vice-chair of SA Canegrowers, said they have always asked the Treasury to scrap the sugar tax, and have asked the Department of Trade, Industry, and Competition to enact and adjust the existing tariff policy framework speedily to keep up with global realities. “This call is now even more urgent. The added cost of the sugar tax beverage producers have made imported sugar more appealing to them, thereby punishing local growers even further.”

Mdluli said since the sugar tax has been in place, no data or studies have been provided that show it has had any impact on reducing obesity levels, lowering rates of diabetes or leading to a healthier population.

Mdluli added that the sugar industry supports a million livelihoods and is a large employer in rural provinces of Mpumalanga and KwaZulu-Natal. “ These areas have few opportunities for employment, and sugarcane growers are key anchors of economic stability in these areas.”

BUSINESS REPORT