As Finance Minister Enoch Godongwana presents his 2024 Budget speech to Parliament this week, SA Canegrowers is calling on the National Treasury to prioritise measures to aid economic recovery and job retention and asked for the sugar tax not to be raised.
Andrew Russell, the chairperson of SA Canegrowers, said in a statement yesterday that an increase in the Health Promotion Levy would be destructive and unjustifiable.
SA Canegrowers urged the National Treasury to carefully consider this economic context when making decisions regarding taxes such as the Health Promotion Levy.
Too many livelihoods depended on the industry in an exceedingly difficult economic climate, it said.
Russell said the sugar industry was suffering under the combined effects of load shedding, high input cost inflation, natural disasters and deteriorating logistics infrastructure, much like other sectors of the economy.
“It also continues to face the challenge posed by the ongoing business rescue proceedings at Tongaat Hulett and Gledhow sugar mills.”
Over the past six years, SA Canegrowers has been monitoring the impact of the Health Promotion Levy (or sugar tax) closely.
Independent research and modelling by the Bureau for Food and Agricultural Policy (BFAP) showed that an increase or expansion of the Health Promotion Levy would cost the sugar industry thousands of jobs and jeopardise businesses of nearly 3,000 small-scale growers.
This would be over and above the thousands of jobs and billions of rand in lost revenue already caused by the sugar tax since 2018.
SA Canegrowers said fewer sugar cane growers could keep absorbing such extra costs and still stay in business. This was in addition to the rocketing costs ordinarily involved in cane growing, including the input costs such as fuel and fertiliser as well as increases in the national minimum wage.
”The brunt of these pressures is felt by small-scale local growers who are the first to close up shop as costs spiral out of control. But the implications also extend to the one million South Africans who rely on the industry as millers, large-scale growers and other industry stakeholders struggle with the same issues,” he added.
Meanwhile, the South African Sugar Association (Sasa) said South Africa’s medium-term economic growth outlook remained constrained by the inadequate electricity supply and freight rail capacity, as well as a weaker global outlook.
In an interview with “Business Report”, Trix Trikam, the executive director of Sasa, which promotes the sustainability of the South African sugar industry, said several challenges faced the economy, particularly the widening budget deficit, and the concomitant impact of increasing debt service costs.
The sugar sector is a major source of livelihood for some 2% of the South African population.
“Global sugar prices have remained elevated, thus reducing the losses made in the export market. However, the local manufacturing sector and consumers remain under pressure as a result of the weak economy. Sugar demand is expected to be flat year-on-year,” Trikam said.
Sasa, which employs about 1,000 people in a wide range of specialist areas, said it expected that this year would be a fairly good year.
“However, factors such as climate change (for example, erratic rainfall patterns) and the severity of load shedding will have an impact on the industry. At this stage, and depending on the aforementioned factors, it is anticipated that total cane production will range between 17.5 million tons to 18.6 million tons. Sugar production is estimated to be around two million tons.”
The cane-growing sector comprises 23,000 registered sugar cane growers farming in KwaZulu-Natal and Mpumalanga. Sugar is manufactured by six milling companies with 12 sugar mills operating in these cane-growing regions. The industry produces an estimated average of 2.2 million tons of sugar per season. About 60% of this sugar is marketed in the Southern African Customs Union (Sacu). The remainder is exported to markets in Africa, Asia and the Middle East.
Asked how the persistent rolling blackouts were impacting this sector, Trikam said as with all other industries, load shedding had a negative impact on the sugar industry.
“The matter is the subject of ongoing engagement with relevant government structures to come up with solutions or find ways to ameliorate the situation,” he said.
“Our plea to government is that the master plan process must be granted adequate time to resolve critical issues pertaining to the very continued existence and sustainability of the industry, which remains very important in terms of our immense contribution to rural economies of the provinces of KwaZulu-Natal and Mpumalanga where our operations, in deeply rural places, are based,” Trikam said.
Sasa said Phase 1 of the all-important Sugarcane Value Chain Master Plan to 2030 expired at the end of March last year.
“The main objectives of Phase 1 were the optimisation of the local market (Sacu) and coming up with clearly defined diversified solutions. The advent and implementation of the master plan, which was signed in November 2020, helped to put the sugar industry on a right trajectory to recovery.
“Flowing from Phase 1, three areas of diversification are currently being investigated, namely: biofuels which includes bioethanol for fuel blending and sustainable aviation fuel, bioplastics and renewable energy.”
According to Sasa, the industry is currently engaging the government regarding the nature and character that the master plan must take going forward in order to ensure the sustainability of the industry.
Trikam said the industry had been given two years to diversify (and restructure).
“Studies currently under way on the various diversification opportunities are progressing under the umbrella of the master plan, but it is highly unlikely (that) we would have reached the commercialisation stage when the two-year period expires. Also importantly, we are grateful to government for the two-year moratorium on the sugar tax,” he said.
BUSINESS REPORT