Five years into its implementation, experts and industry representatives argue that the tax, while beneficial for public health, creates significant economic challenges, especially in rural areas where sugar production provides essential livelihoods.
Speaking to Farmer’s Weekly, Bhekani Zondo, economist at the Trade Research Unit and Agriculture and Agro-processing Master Plan research coordinator for the National Agricultural Marketing Council, said:
“Obesity rates in South Africa soared, with an estimated 40% of the population affected, particularly among women, who represented 68% of that figure. Government, following Word Health Organization recommendations, saw a tax on sugary products as a direct way to address this crisis.”
He added that the levy, which was originally charged at 2,1c per gram of sugar content that exceeded 4g per 100ml of beverages, was slightly raised in 2019.
While the tax was meant to encourage healthier consumption, it took a significant toll on South Africa’s sugar industry’s production and earnings, which supported around 85 000 jobs and contributed approximately R18 billion to the economy.
Zondo said the sugar industry’s decline impacted rural communities where alternative employment was scarce, leading to substantial economic losses. Zondo estimated that, along with other challenges, the tax might result in a further 16 621 job losses, with 9 000 affecting farm-level employment.
He said the combined impact of the tax and cheaper sugar imports from Eswatini, Zambia, and Brazil had eroded the industry’s competitiveness. In response, the South African Sugar Association (SASA) had taken steps to adapt, reformulating products and reducing packaging sizes.
“According to SASA, by reducing sugar content in products by about 15%, the sugar industry saw a 4% decline in local sugar demand,” Zondo said.
The industry’s adjustments came with an added financial burden, especially given rising production costs and a recent 9,6% minimum wage increase.
SASA CEO Sifiso Mhlaba said the sugar tax’s financial impact was a “blow to an already struggling industry”. He said that in the first year of the implementation of the tax, the industry lost 250 000t of sugar sales, resulting in an annual revenue loss of R1,2 billion since 2018.
Thousands of jobs were lost, and two mills closed permanently in KwaZulu-Natal. Mhlaba futher mentioned that both large-scale growers and millers, along with small-scale farmers, struggled to remain financially viable under the tax’s economic pressure.
In an effort to address these challenges, SASA explored revenue diversification, such as using sugar cane for electricity co-generation. Mhlaba said that SASA pursued several options under the Sugar Industry Master Plan, although most were still in prefeasibility stages.
He added that for these plans to succeed, government support was essential. SASA requested an extension of the sugar tax moratorium to 2030 to give the industry time to achieve its diversification and sustainability goals.
SASA also engaged government in seeking policy adjustments to balance public health goals with industry stability. Mhlaba said the association called for greater policy alignment between the Department of Health and those involved in economic development.
He stressed that evidence-based policy was essential, and SASA was awaiting the results of a dietary intake study that would provide critical data on which foods most contributed to excess calorie intake in South Africa.
Zondo agreed that a balanced approach was crucial. “The health benefits of reduced sugar intake are undeniable, but we also cannot overlook the economic fallout for an industry that supports over a million people. Collaboration between government and the sugar industry could achieve health objectives without devastating rural communities,” he said.
