Published in 2019
Introduction
I have read the disturbing news in the North Coast Courier this week of the impending retrenchment of many workers from the employ of a miller in the South African sugar industry. This is the last thing the Country needs – which begs the question; why has this become necessary?
The Problem
The tonnage of sugar supplied by South African millers to the domestic market has plummeted by a massive 25% in the space of a couple of years. This has had the impact of reducing the industry’s annual revenue by a massive R1 billion; or put another way it has reduced the margins of producers by at least 8 percentage points. I doubt very much whether in agriculture the remaining profit margins amount to much, if any at all.
So why has sugar offtake dropped by 25%.
• The introduction of the Health Promotion Levy (HPL) or sugar tax; and
• The influx of sugar from eSwatini.
It cannot be in the interests of South Africa for the foregoing to continue at a time when the public interest demands both the retention and creation of jobs.
In the case of the former, there is scant evidence that the sugar tax will have any impact whatsoever on obesity. Repeal it!!!!
In the latter case, the GDP of eSwatini is a fraction of that of South Africa. It draws substantially more of the SACU revenue pool than its GDP share. The argument that the terms of trade favour South Africa justifying eSwatini’s continued assault on the South African sugar market doesn’t wash. It seems that any shortfall in eSwatini’s fiscal revenues should be dealt with from the SACU revenue pool rather than have the South African sugar industry asked to shore up the economy. Send them packing!!!!
Distractions
There is also a cry for improved competitiveness in the South African sugar industry; which is a noble and necessary call. However, this is not going to turn the tide in terms of the industry’s ability to compete with the dumped world sugar market. The mantra of competitiveness at all costs as espoused by many economists of yesteryear is out of date. Going forward some investments will have to have a much greater empathy towards the public interest. I hope that the CEO’s, Institutional Shareholders and Government policy makers who hold in the palms of their hands the livelihoods of tens of thousands of South Africans can find space for socio-economic investments. Come on – we need to protect our jobs and demand fair play.
Common cause for sure.
Justice Hunt