Factors hampering SA's sugar industry

Thabile Nkunjana, an agricultural economist at the National Agricultural Marketing Council (NAMC), and Dr Sifiso Ntombela, chief economist at the NAMC, examine the decline in South Africa’s sugar production and the factors threatening future growth.

- Thabile Nkunjana

South Africa’s agriculture sector in general continues to display positive growth when measured in terms of output, exports and the creation of employment. In 2020, the sector grew 13,4% year-on-year, and the forecasts for 2021 also suggest growth. Primary agricultural employment has remained relatively steady since the start of the COVID- 19 pandemic, with 868 000 people employed in the fourth quarter of 2021, and export activity reaching a record level of US$12,4 billion (about R180 billion) in 2021.

Despite this positive overall picture, some industries within the sector, such as sugar, have experienced difficulties.

THE STRUGGLE

In terms of tariffs, the sugar industry is arguably one of the most protected in South Africa; it is also amongst the most heavily taxed, both domestically and globally. Taxes such as the Health Promotion Levy (‘sugar tax’) are aimed at reducing rising levels of diabetes and obesity. The World Health Organization’s ‘Global Action Plan for the Prevention and Control of Noncommunicable Diseases 2013-2020’, published in 2013, was readily adopted by developed countries.

In response to this, sugar producers became innovative in order to meet changing consumer demands and invested in product value addition and diversification of infrastructure. These efforts became a lifeline in some of the countries that adopted the principle of sugar taxes to reduce health issues such as obesity and diabetes.