Sugar tax has cost R1bn and should be shelved, industry says

Sugar-cane growers have called on finance minister Tito Mboweni to shelve the sugary beverages tax — which they say has cost the sugar industry nearly R1bn since it took effect on April 1 last year.

SA Cane Growers’ Association chair Graeme Stainbank urged that the health promotion levy be shelved pending a thorough assessment of its impact on the economy and jobs.

But Treasury deputy director-general Ismail Momoniat said the tax had just been introduced and would not be shelved, though it would be reviewed at some stage to assess its impact on the industry and on obesity.

The tax was introduced to dampen the consumption of sugary beverages which has adverse effects on health such as obesity.

By end-December the tax, which is fixed at 2.1c/g of sugar content exceeding 4g/100ml, had raised R2.3bn in revenue for the fiscus. 

Stainbank said the move by soft-drink manufacturers to reduce bottle sizes and the sugar content of their products, has led to a drop in the demand for sugar.

The Sunday Times reported on the weekend that Coca-Cola was reeling from the effect of the sugary beverages tax as well as “economic headwinds” which resulted in lower volumes.

Coca-Cola cut the sugar content in its beverages by 20% across all brands following the introduction of the tax.

Sugar producers say the industry is on the verge of collapse due to drop in sales volumes, falling prices and stiff competition from cheap imports, mainly from Brazil. The local sugar industry generates an income of about R14bn a year and is responsible for at least 350,000 jobs.

“According to our data, the sugar tax has so far cost the industry R925m in the 2018/19 season [which runs from April 1 to March 31], with 64% (R592m) incurred by sugar-cane growers,” Stainbank said in a statement.

“This translates into potential job losses of 6,500 in the cane-growing sector alone and does not include further job losses in the sugar milling and beverage industries.

“The sugar tax has dealt a huge blow to an industry struggling with the impact of drought, plunging sugar prices and weak protection against cheap imports. And it is particularly devastating to farmworkers, land-reform farmers and small-scale growers,” Stainbank said.

He noted that the sugar industry repeatedly warned the government about diminishing revenue and job losses should the sugary beverages tax be introduced. There is little evidence that the tax had any discernible impact on public health.

“We believe that the impact of the sugar tax on the obesity epidemic has been minimal. This is because obesity is a multifaceted problem with many causes, including increasingly sedentary lifestyles and a growing reliance on cheap and highly calorific junk food. 

“The sugar tax’s positive impact on obesity is questionable, but its negative impact on the economy and jobs is certain. And while it may bring in tax revenue, this comes at a huge cost to the industry and those employed by it,” Stainbank said.

ensorl@businesslive.co.za