No sugar tax increase for next two years

The 2023 budget statement pleased at least one component of South Africa’s agricultural sector – the embattled sugar industry which has been pummelled by weather and financial woes after years of fighting against dumped imports.

Recent setbacks include the disastrous floods which swept through the main sugar producing province, KwaZulu-Natal, social unrest and the financial collapse of one of the country’s largest producers, Tongaat Hulett, which has been placed in business rescue.

Throughout 2023 it has been hit by the daily power cuts, known as load shedding, imposed by the struggling national power utility, Eskom. The sugar industry has estimated it could lose more than R700 million if power cuts continue at high levels.

And, since 2018, it has suffered due to the imposition of a sugar tax, known as a health promotion levy, introduced to help reduce sugar intake and obesity. The industry has fought the tax since its inception. It says the levy, which increases the price of sugary drinks, has already cost thousands of jobs in the sugar industry and will cost thousands more if it continues and is increased.

The sugar tax was due to increase in 2022, but the rise was postponed to this year. In this year’s budget it was postponed for a further two years, so the increase will come into effect in 2025, unless there is another reprieve.

Finance Minister Enoch Godongwana said the increase had been postponed due to the sugar industry’s difficult operating environment and the two-year delay would enable the industry to “diversify or restructure”.

The fact that the tax on sugary drinks remains unchanged also means its range will not be expanded in the next two years. The government has said it intends including fruit juices in the sugar levy.