While there has been renewed activism from health organisations for Finance Minister Enoch Godongwana to increase the Health Promotion Levy (HPL), or sugar tax, in this year’s Budget, industry body South African Cane Growers Association (SA Canegrowers) maintains that these calls are misguided and can cause further loss of rural livelihoods.

SA Canegrowers says in a statement issued on February 4 that health activists calling for a doubling of the sugar tax and to expand it to fruit juices will result in economic devastation within the sugar industry, including job losses.

When the HPL was initially instituted in 2018, it led to more than 16 000 job losses and R2-billion in lost revenue in the first year alone, following the closure of two mills in KwaZulu-Natal, the association notes.

The sector was subsequently afforded a two-year reprieve on any sugar tax increases in February 2023 to accord it space to diversify the industry and restructure.

SA Canegrowers believes this period is inadequate for the realisation of product diversification and should be extended to at least 2030.

Health activists are also making the “misleading claim that increasing the sugar tax will allow the government to fund more feeding schemes for children”, SA Canegrowers states, explaining that these two government policies are unrelated, and that the tax income from the sugar tax is not ringfenced for health outcomes.

For one, activist group Heala laments how hard it is for unemployed, rural families to feed their children. Yet they are advocating for a policy that will destroy rural jobs and put more families in this dire situation, the association says.

According to Heala, the sugar tax has led to only a “modest” decrease in consumption of sugary beverages. However, according to SA Canegrowers, Heala fails to mention the tax has not translated in any way to the tax’s stated objective – to address obesity and diabetes in South Africa.

“That is because these are multifactorial diseases, as per the World Health Organisation, and the causes range from food intake and a lack of exercise to underlying genetic conditions.

“The government income collected from the sugar tax also comes at a cost. Because this tax destroys jobs and suppresses the income-levels of the sugar industry, this eventually negatively impacts the personal and corporate income tax paid in South Africa,” SA Canegrowers states.

SA Canegrowers represents 24 000 small-scale and 1 200 large-scale growers in KwaZulu-Natal and Mpumalanga. These growers are vital employers and economic drivers in their rural communities, that offer fewer alternative employment options.

“Pushing more rural South Africans into poverty by increasing a destructive tax will not be to the benefit of anybody,” the organisation points out.

SA Canegrowers once again calls on Godongwana to scrap the tax and rather deliver the promised broad calorie intake study that measures everything people eat and drink to inform health policies with real evidence. The study must also examine the socioeconomic impact of the HPL.  

A study by the National Economic Development and Labour Council on the socioeconomic impact of the HPL found that the industry, including sugarcane farming and sugar milling, had lost a cumulative 13 536 jobs, including 12 860 jobs, by 2019.

A separate study by agricultural consultancy the Bureau for Food and Agricultural Policy found that a decrease in the threshold of the sugar tax levy would reduce demand for locally refined sugar by 125 000 t in 2023/24, followed by an additional 35 000 t reduction in 2024/25.

This study also estimated that 1 975 permanent jobs and 2 076 seasonal jobs would be lost, while 1 630 small-scale growers would be at risk of going out of business as a direct result of decreasing the HLP threshold.

HEALA RESPONSE

Contrary to the sugar-related industry claims of employment losses owing to the HPL, local researchers found statistically insignificant association between the levy and employment levels. 

It is important to note that sugar sweetened drinks often have no nutritional value but can have a host of negative health impacts. Drinking liquid sugar in beverages and the extra calories a person takes in this way have been linked to diabetes, hypertension, overweight and obesity. These are leading causes of death and disability in later life in South Africa.

Heala deems the HPL a vital intervention to help reduce the over consumption of sugar sweetened beverages.

In the short term, South African studies have found changes in consumer behavior since the inception of the HPL, with decreases in consumption of sugar sweetened beverages. Although no research has been conducted to determine the HPL's longer-term impacts on measures of body mass index or obesity in South Africa yet; positive health results are seen from countries such as the US, UK and Mexico that have similar taxation on sugar sweetened beverages, especially in lower-income groups, often more vulnerable to noncommunicable diseases. 

Moreover, a modelling study from 2016 found that a 20% tax could also offer significant healthcare costs savings for the government and South African families by averting an estimated 72 000 premature deaths and more than R5-billion in healthcare costs over 20 years.

"We cannot sacrifice the health of our people to protect industry profits. Heala is urging Godongwana to prioritise South Africans and increase the levy to 20% and expand it to include 100% fruit juices.  Such strategies are important in encouraging people to reduce the intake of sugar sweetened drinks, while enabling the government to raise additional revenue for the fiscus," the organisation states.