SUGAR farmers have reacted with shock to Finance Minister Tito Mboweni’s decision to hike the sugar tax by 5.2 percent amidst an imminent industry collapse and extensive job losses.
“There is no way of sugar coating this tax hike. It is a bitter pill for every farmworker, land reform farmer and small-scale canegrower to swallow,” said Graeme Stainbank, Chairperson of the SA Canegrowers Association.
“Updated data shows the loss in revenue tops our previous calculations, amounting to a staggering R1.3bn in the 2018/19 season (which runs from 1 April to 31 March).”
He warned that the higher than estimated revenue loss would almost certainly translate into more job losses which could put up to 10 000 jobs at risk – in the canegrowing sector alone. “This does not even include further job losses in the sugar milling and beverage industries.”
The sugar tax, he said, had already dealt a huge blow to a sector struggling with the impact of drought, plunging sugar prices and weak protection against cheap imports. “The decision to increase the tax further could be the death knell for the sugar industry and all those people whose livelihoods depend on it.”
At the time of going to press, the association was due to meet with Parliament’s Trade and Industry Portfolio Committee to discuss the matter.
Stainbank said the association had sent a letter to the committee on 14 February outlining the dire situation that canegrowers – including small-scale growers, land reform farmers and farmworkers find themselves in.
“This detailed the impact of the severe drought in KwaZulu-Natal, plunging sugar prices, weak protection against cheap imports and the sugar tax implemented in April last year. All of these factors, taken together, are a clear and present danger to the sustainability of the sugar industry which provides employment to 350 000 people.
“We are glad that the Portfolio Committee has agreed to meet with us, and to hear our concerns. The crisis in the sugar industry was always too important to be left until after the elections,” Stainbank said.
Dismay
The sugar industry is not alone in expressing dismay at the budget, with South African Breweries (SAB) saying that the 7.4% hike in the rate of malt beer was contrary to expectations, based on an understanding of Treasury’s excise alcohol policy, that the increase would be no higher than the projected rate of inflation.
“This is indicative of a departure from Treasury’s policy on excise, which should be based on the market data for each alcohol category as submitted annually by the industry. We are concerned about this change in policy and believe that during challenging economic times more policy certainty and transparency is required as a means of aiding investment,” the brewer said in a statement.
“We do appreciate that during tough economic times, tough measures are required, but believe that the added financial pressure that excise increases bring to the industry is unsustainable.”
It added that the consistent increase in excise makes the country vulnerable to the increased trade of illicit alcohol resulting in further losses to the fiscus. “The South African economy suffered a fiscal loss of R6.4-billion in 2017 due to illicit alcohol activities. Illegal alcohol products pose a serious risk to the health and safety of individuals.
“SAB contributes significantly to South Africa’s economy through its value chain in several critical sectors of the economy, including agriculture, agro-processing, transportation and manufacturing, that benefit society through substantial job creation.”