SA Canegrowers said the sugar tax, implemented in April 2018, cost 16,000 jobs in the first year.
Image: Karen Sandison, Independent Newspapers.
The sugar industry in KwaZulu-Natal is facing a serious crisis, with the provincial government warning that the sector is teetering on the verge of collapse.
The alarm bells were sounded by the Department of Economic Development, Tourism and Environmental Affairs (Edtea) during a briefing before the Edtea Portfolio Committee about the serious challenges the industry faces. The industry has been battling for several years due to imports and the sugar tax.
Head of Department Nhlakanipho Nkontwana said: “The challenges that we have in the province indicate that the sugar industry is on the verge of collapse. We had a discussion with the industry not long ago. Most areas where there was sugar cane have been taken over by the property industry. If you go towards the north, that is where they are building houses, and they buy that piece of land from Tongaat.
“I am happy to indicate that they (industry) have a plan to diversify to also produce oil and fuel. This is part of what we have been working on together with the Department of Trade and Industry to support, but it is important for us to report that it is declining.”
Stakeholders in the industry have confirmed that the sugar industry is in crisis, with thousands of small farmers going out of business and thousands of jobs lost.
Dr Siyabonga Madlala, executive chairperson of the South African Farmers Development Association (Safda), said the industry is faced with threats, one of which is the Health Promotion Levy (HPL), also known as the sugar tax. Job losses due to the HPL are estimated at around 16 000 along the value chain.
“Since the early 2000s, the industry has shed about 30 000 small-scale farmers from a peak number of 55 000.
Currently, there are about 24 000 small-scale farmers, whose numbers have marginally increased in the past five years due to support from various stakeholders, including the innovative approach to farmer development by Safda, support from the industry, and investment by government departments, including the KwaZulu-Natal Department of Agriculture and Rural Development,” he said.
He added that the industry is indeed looking to diversify. “There are strong prospects for using about 500 000 tons of sugar that the industry exports at a loss of about R4 000 per ton to produce innovative and carbon-neutral products like sustainable aviation fuel (jet fuel made from sugar cane), polylactic acid (plastic materials made from sugar cane processing by-products), and other concepts currently being researched.”
He said Safda is planning to set up two sugar mills on the South Coast and in Makhathini Flats, with feasibility studies either concluded or currently being implemented by government partners.
Sifiso Mhlaba, executive director of the South African Sugar Association (Sasa), said the industry continues to face serious challenges, especially the sugar tax, which has wreaked havoc in the sector since its introduction in April 2018.
“We have incurred a multi-billion-rand revenue loss, substantial job losses, and the permanent closure of two mills in KwaZulu-Natal due to the deleterious sugar tax.
"In the past 23 years, there has been a substantial decrease in the number of all small-scale growers, who have always been in the majority in terms of numbers, he said.
He noted that a Nedlac-commissioned study on the impact of the sugar tax showed that the sugar industry lost over 10 000 jobs since the introduction of the levy.
“As part of the master plan processes, the industry has identified product diversification opportunities such as sustainable aviation fuel, bioethanol for fuel blending, polylactic acid, and cogeneration. These diversification opportunities are currently in the scoping and pre-feasibility stages of investigation,” he said.
Dr Thomas Funke, CEO of SA Canegrowers, said that while the industry is facing challenges, it is critical to employment and livelihoods, with at least a million people depending on it because it provides stable jobs in areas where there are few opportunities.
He said that since 2020, the sugar industry has also been working on plans for the long-term sustainability of the industry, including finding alternative uses for sugar and sugar cane and developing mechanisms to support small-scale growers.
“Such initiatives hold immense promise for sugar cane growers. With the right government support and enabling policies, these initiatives can drive further economic growth and job creation in South Africa and keep sugar cane growers economically viable.”
Edtea committee member Hannah Shameema Lidgett said that the challenges in the industry have led to job losses, revenue decline, and uncertainty across the industry.
Edtea committee chairperson Mafika Mndebele said: “Research shows that the agricultural industry is one that has the potential to create many jobs, and we need to support it. The government needs to put together a package to ensure we support it when they export finished goods.”