Photo for illustration. (Photo: iStock)
The South African Sugar Cane Growers’ Association breathed a sigh of relief when Enoch Godongwana, the finance minister, announced on Wednesday that sugar tax will not be increased this year.
Higgins Mdluli, the chairman of the association, says that although no further increase in the sugar tax has been introduced, the tax still puts considerable pressure on South Africa’s sugar cane producers.
A serious structural crisis is facing the South African sugar industry. This is driven by the potential liquidation of Tongaat Hulett and an unprecedented increase in imported sugar, caused by outdated tariff protections and unfair practices in the international sugar market.
The South African Sugar Cane Growers Association is making an urgent appeal to the government, from the Treasury to the Department of Trade, Industry and Competition, to join hands while the industry is at real risk of collapsing.
Business rescue practitioners submitted an application to the High Court in KwaZulu-Natal earlier this month for an order to provisionally liquidate the Tongaat Hulett sugar mill.
This step follows after business rescue practitioners said the business rescue plan was no longer workable due to the expiry of sales agreements with the Vision Group, led by Robert Gumede, a Zimbabwean businessman. If the court grants a provisional liquidation order this week, it will have a direct effect on employees, producers, suppliers, creditors, customers and numerous families and communities.
(Photo: Tongaat Hulett/Webtuiste)
This sugar giant’s production will also be stopped immediately, leaving nearly 18,000 of the country’s 28,000 sugar cane producers without functional sugar mills for the milling season that begins in April.
Mdluli says this uncertainty comes against the backdrop of rising sugar imports flooding the domestic market, undermining local producers and eroding prices and incomes, exacerbating financial pressure on producers and mills.
Between January and December last year, just under 200 000 tonnes of sugar imports from countries such as Brazil, India and Thailand entered South Africa.
In 2021, this figure was only 7,113 tonnes – an indication that South Africa’s sugar industry is more than capable of fully meeting the demands of consumers and food and beverage producers in South Africa.
Mdluli emphasizes that the combination of Tongaat Hulett’s operational instability and increased imports creates a risk that undermines rural economies, destabilizes the local sugar value chain and increases South Africa’s dependence on foreign sugar, with broad socio-economic consequences for employment opportunities and the sustainability of the industry.
(Foto: SA Canegrowers/X)
“In light of the crisis facing the sugar industry and specifically sugar cane producers, we appeal to the treasury to scrap the sugar tax,” says Mdluli.
According to him, the sugar tax had unintended consequences for the sugar industry, destroying 16 000 jobs in the industry and R2 billion in revenue in the first year of its introduction alone.
Yet since then there has been no credible evidence to show that the tax has had any impact on obesity or non-communicable diseases in the country.