But neither does the government appear to have any intention of abandoning the tax: it's simply stated there will be a hiatus to any increases, and says it is considering expanding the levy's reach to a wider range of beverages.
So the sugar industry needs to find its path for the future: which could include turning to other uses for sugar such as sustainable aviation biofuel (SAF), animal feeds, alcohol and co-generation of electricity.
One million livelihoods at stake
With the highest level of obesity in sub-Saharan Africa, the sugar tax was introduced in 2018 to try and reduce sugar intake. A 2021 study published in The Lancet suggested that South Africa has indeed seen large reductions in purchases of sugary beverage volumes since plans for the levy were announced in 2016.
But South Africa is a large sugar producer: with the R18bn ($1bn) industry ranking consistently in the top 15 of around 120 sugar producing countries worldwide (the October 2022 cane crush came in at around 17,963,900 tons).
Furthermore, it’s the lifeblood of many rural communities, and a significant contributor to the national economy, according to the South African Sugar Association: one million livelihoods depend on South African cane sugar.
Sugar growing challenges
The levy sugar tax was introduced at a time where sugarcane growers and millers were recovering from a prolonged drought: and since then the industry has continued to be plagued by a number of challenges, ranging from cheaper sugar imports and lower global sugar prices.
The South African government had intended to make a 4.5% increase in the levy from April 2022: which was pushed back to 2023 and now will not take place for at least another two years.
In its budget released on February 22, the finance minister confirmed that the levy will remain unchanged ‘to enable the sugar industry to diversify or restructure’.
That’s welcomed by industry organization SA Canegrowers, which says that – with cane sugar growers already plagued by several serious challenges – the levy increase ‘would have decimated the industry’.
The industry is already facing more than R700m in lost revenue due to loadshedding, a milling crisis, and the impact of recent floods alone, says SA Canegrowers. And it believes the HPL increase would have been another hit for sugar farms.
REVERSAL ON SUGAR TAX INCREASE A WELCOME REPRIEVE FOR SUGARCANE GROWERS
Modelling from The South African Sugar Association showed the planned increase in the Health Promotion Levy would have 'cost the sugar industry more than 6,000 jobs and jeopardised the businesses of nearly 3,000 small-scale growers.'
That adds to the 'total of more than 16,000 jobs and R2 billion lost because of the levy in the first year of its implementation alone', according to the industry organisations.
The SA Sugar Association says the HPL has been one of the factors in a ‘perfect storm’ of challenges for the industry: alongside distorted global prices and cheaper imports.
Meanwhile, the pandemic, civil unrest and the burning of sugarcane fields in June/July 2021, have added to the sugar cane industry’s woes.
"The HPL (sugar tax) has had a deleterious impact on the industry since its introduction in April 2018, leading to multi-billion-rand revenue loss, thousands of job losses and permanent closure of two sugar mills in KwaZulu-Natal," it says.
Can the sugar industry make a living from biojet fuels and animal feed?
The decision not to increase the levy, says SA Canegrowers, marks a critical reprieve for the growers, value chain partners, and the one million livelihoods they support.
“We are hopeful that this two-year reprieve will also be used to foster further engagement about the effectiveness of the Health Promotion Levy and the possibility of crafting alternative, less destructive and holistic health interventions," said Andrew Russell, Chairman of SA Canegrowers.
"At the same time, growers will use opportunity to revive the industry, and to position it for long-term profitability and sustainability.”
