The South African sugar industry has welcomed finance minister Enoch Godongwana’s decision to extend the moratorium on sugar tax increases despite strong opposition from prominent health organisations.
The sugar tax, officially known as the health promotion levy (HPL), was introduced in 2018 to reduce the consumption of sugar-sweetened beverages, except fruit juices, to curb the prevalence of noncommunicable diseases.
The levy applies to beverages containing more than 4g of sugary content per 100ml where each gram that exceeds that threshold is liable to a levy of 2.21c.
Role players within the sugar industry raised their opposition to hikes, claiming it had contributed to the loss of 16,000 jobs, cost the sector more than R2bn and resulted in the permanent shutdown of Darnall and Umzimkulu sugar mills in KwaZulu-Natal.
In his 2023 budget speech, Godongwana announced a moratorium on the levy increase for two years after the devastating floods and the industry’s complaints about the detrimental effects of the additional levy to the sector.
That moratorium was meant to come to an end in April, which raised fresh fears the levy might be increased.
The South African Sugar Association (SASA) argued there was no evidence that the levy was addressing its intended objective of reducing obesity and diabetes and that any further increase in the tax would cause economic devastation in the sector.
They had, instead, called on the National Treasury to extend the moratorium by five years to give them time to finalise the product diversification plan, which is crucial to the industry’s recovery and sustainability efforts.
That wish was partly granted when Godongwana announced there would be no increases to the levy during his revised 2025 budget speech on Wednesday, much to the sector's relief.
“We are relieved the sugar tax moratorium has been extended to allow us more time to robustly pursue identified product diversification opportunities such as bioethanol for fuel blending, sustainable aviation fuel, polylactic acid and cogeneration,” said SASA chairperson Adv Fay Mukaddam.
Mukaddam said the industry had conducted scoping and pre-feasibility studies around product diversification opportunities they have identified as part of their 2030 master plan that they are working on with the government.
“We are truly grateful to the minister for listening to our cries, for the rural livelihoods depended on his decision. We are now going to move with speed to ensure that diversification is one of the key pillars of Phase Two of the all-important Sugarcane Value Chain Master Plan to 2030.
“We are moving from a sugar-based to a sugarcane-based industry. The Reimagined Cane Industry Strategy is the game-changer. Even more importantly, is the complete support of government to make product diversification a reality.”
The South African Cane Growers Association called on the Treasury to go a step further and scrap the levy altogether and focus on ensuring the 2030 master plan works.
“This compact between industry and government has the potential to create new markets for sugarcane growers and kick-start new industrialisation projects in Mpumalanga and KZN,” said Higgins Mdluli, SA Canegrowers chairperson.
Godongwana had faced growing calls for a sugar tax hike in rthe lead up to the budget speech, with 12 prominent health organisations and more than 100 practitioners petitioning him to increase it to 20%, in line with World Health Organization’s recommendation and to also impose tax on fruit juices.
They insisted that this was a necessary exercise in a country that is battling a financial crisis while dealing with the cuts to the USAID funding, an obesity and NCDs epidemic.
SASA said they were not oblivious to the prevalence of NCDs in the country but argued that it was a complex matter that cannot be resolved with a “simplistic approach”.
“What is needed is a holistic and measured approach, not a punitive mechanism which demonises certain food substances such as the case with sugar. As such, the yet-to-be-released results of the total dietary intake study which was conducted by government are key in determining what is contributing to NCDs. A science-based approach is critical in seeking effective and lasting solutions.”
Susan Goldstein, who heads up PRICELESS SA, one of the signatories to the petition, said their study had shown no significant correlation between the tax and employment levels in sugar-related industries.
“It showed the levy had not been associated with job creation or job losses in sugar-related industries. These include agriculture, beverage manufacturing and commercial enterprises that sell food and beverages.”
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