Tag Archive | sugar

Sugar tax possibilities

Once again, a tax on sweet drinks and beverages arises….

sugar_caneProfessor Melvyn Freeman, head of non-communicable diseases, department of health (DoH), says the department is re-looking at the issue of introducing a sugar tax to encourage South Africans to consume less sugar.

His comment comes as a result of the publication of the World Health Organisation’s Global Cancer Report 2014, which reports that tobacco, alcohol and sweet drinks are driving a rapid growth in preventable cancers.

More than 30% of cancer deaths could be prevented by modifying or avoiding key risk factors, says the fact sheet, and these include tobacco use; being overweight or obese; unhealthy diet with low fruit and vegetable intake; lack of physical activity; alcohol use; sexually transmitted HIV-infection; urban air pollution and indoor smoke from household use of solid fuels.

Poor countries worst hit

More than 60% of world’s total new annual cases occur in Africa, Asia and Central and South America. These regions account for 70% of the world’s cancer deaths. It is expected that annual cancer cases, WHO says, will rise from 14 million in 2012 to 22 within the next two decades. Obesity, particularly with schoolchildren, is considered a problem by DoH locally, according to an earlier report to Parliament by minister of health, Dr Aaron Motsoaledi.

Analysts say, while it is important for governments to encourage people to take responsibility for their own health and make changes to their diet and lifestyle, regulators should consider controlling alcohol and sugar consumption in the same way as tobacco products.

“There is no final decision on a sugar tax as yet, but it is an option that is being considered and we are assessing all relevant factors around this,” says Prof. Freeman. The R12bn South African sugar industry is cost-competitive, consistently ranking in the top 15 out of approximately 120 sugar producing countries worldwide.

Also the sugar industry provides employment in job starved regions often in deep rural areas where there is little other economic activity or employment opportunity. Opportunities for this industry lie ahead and include biomass for renewable energy. In addition, the SA sugar industry has transferred 21% of freehold land under cane from white to black owners since 1994 off a base of 5%.

Sweet story

The South African sugar industry generates an annual estimated average direct income of over R12 billion. Sugar is manufactured by six milling companies with 14 sugar mills operating in the cane-growing regions.  The industry produces an average of 2,2 million tons of sugar per season.  About 75% of this sugar on average is marketed in the Southern African Customs Union (SACU). The remainder is exported to markets in Africa, Asia and the USA.

University of the Witwatersrand School of Public Health director Karen Hofman said it was not clear if a tax on beverages would be feasible, but even if it were, it should not be seen as a silver bullet. “Any regulatory effort will only ever be part of the solution. People should be free to eat and drink what they like, but they need to have a full understanding of what they are consuming,” says Hofman.

She adds that she is unaware of a specific tax on sugar anywhere in the world. “We do know that taxes have been successfully introduced in several countries, including France and Mexico,” says Hofman. Such taxes have been introduced on those who use sugar in some form of manufacturing or food and beverage supplies.

Obesity and SSBs

In the USA, the term sugar-sweetened beverages, or SSBs, is used – which are drinks sweetened with sugar, high-fructose corn syrup, or other caloric sweeteners. They are a significant source of nutrition-less or “empty” calories in the American diet, say some, and a significant contributor to the current obesity epidemic there. In the USA, researchers say that if the taxes are large enough they could reduce consumption and the revenue from these taxes to be used on obesity prevention.

Here in South Africa, Discovery health representatives has publicly cautioned against placing too much emphasis on the link between sugar consumption and preventable cancers.  Their Derek Yach says, “Tobacco remains by far the most powerful single determinant of cancer, accounting for 90% of the lung cancer cases and about a third of all cancer deaths.” He calls for all resources to focus on this area.

In a country like South Africa, with limited financial resources, he says, “a focus on taxes on sugar to reduce cancer is a misplaced policy which will have little impact on cancer incidences and distract people from the major diet issues – which are to increase healthy food intake.”
Previous articles in this category or as background
http://parlyreportsa.co.za//cabinetpresidential/sa-health-welfare-starts-in-small-way/

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DOE spells out biofuels and biomass

Biomass, biofuels and jobs……

On the subject of creating biofuels and biomass, the department of energy told parliamentarians that the main objective of any such exercise, if it was undertaken in the agriculture industry, would be to create jobs.       However, such a move towards the use of biomass would not take place if national food or water security was jeapordised in any way.

This answer was given to the portfolio committee on energy by Muzi Mkhize, chief director hydrocarbons, department of energy (DOE), when briefing parliamentarians on DOE’s current strategy towards biofuels.  He said that in the South African context, a specific requirement of the biofuels strategy was to create a link between first and second economies and the focus was not only on jobs but specifically on creating employment in under-developed areas.

Key incentives

Bio-fuels, he said, like most renewables, required incentives in order to be cost-competitive against conventional fuels, the upside of such a direction being the saving in balance of payments, energy supply security and economic growth factors that were more stable that the volatile traditional oil market.

He referred to 2006 estimates, where a targeted 2% biofuels scenario was estimated to create about 25,000 jobs.

With the IPP third round completed, Mkhize said biofuels would contribute to the national renewable energy policy, the director general, DOE, having already advised that 93 independent power producers (IPPs) had applied for licences in the third round of requests for submissions. Thus biomass, he said, together with IPPs were contributing greatly towards targets that South Africa had in the journey to reduce greenhouse gas emissions.

As far as biofuels manufacturing facilities were concerned, Mkhize listed eight locations where bioethanol or biodiesel had or were being licensed. He said that biodiesel would fall within the fuel tax net and manufacturers would receive a rebate of 50%. Bioethanol would not, however.

Incentives upgrade

As was the case with all renewable energy projects, a 50:30:20 depreciation allowance on capital investment over three years would apply but DOE had started discussions which were underway to improve incentives as this was not sufficient to attract investors, it was felt.

“Infant industry” incentives over a twenty-year benchmark period were being looked at, he said, with an initial incentive of 3.5c per litre to 4c, to be recovered through a levy to be included in the national monthly price determinations.

Overproduction threat

It was pointed out by parliamentarians that about 229 million litres of fuel were sold annually for about R9,2bn and if all players in the fuel industry joined the process as required, there would be an excess with about 4-6% of biofuels produced over the national call for 2%. Who would take up the excess, they asked.

Mkhize was also asked what agro studies had been done and how were farmers responding to a possible call for biomass crops. Also, they asked, if there was drought or some similar disaster, what would happen to the fuel industry in the reverse case of a shortage of biomass.

Mkhize said there was a general agreement in place only on agricultural biomass and this was “only in the form of mindset until pricing and subsidy issues were finalised, so accordingly the question of national quantities in relation to fuel company needs did not arise”.  However, he confirmed that the fuel industry would not be allowed to suffer from a shortage of biomass delivered.

Treasury and subsidies

In answer to more questions, Mkhize said a licence to produce biomass would not disallow a farmer from switching crops, say from soya to maize.  But, he added, all this was total speculation until “national treasury came up with the answers on subsidies”.

When MPs complained that the picture given by DOE “was no more than a snapshot of where we were on biofuels exactly one year ago”, Mkhize said he was trying to show the milestones that had been reached in the enormously difficult stage that the fuels industry had reached with regard to the entry of biofuels, which was a strategic issue.

Gas the issue

He said there were issues such as LPG remaining the forerunner of natural gas to be investigated as this household market had to expand and added, “We are looking at the system used commercially of bringing gas from Mozambique to Durban and whether this is the basis for further development.”

Mkhize promised his department would deliver shortly on promises to deliver DOE’s plan for gas expansion but this was not part of the biofuels or biomass study. All such matters were intertwined in terms of the integrated resources plan with the eventual integrated energy plan for the whole country.

Making a profit

On new entrants to biomass to fuel production, Mkhize responded to questions that it had been shown that the breakeven point for any biomass plant was a constantly changing factor over a long period and it was difficult to establish at what point a subsidy of, say, 2% would assist.

He said breakeven studies showed from a 2% profit, moving down to 5% loss for a long while, and then eventually moving up to 10% profit had been the standard established and banks did not like that kind of venture. Models he said were difficult to establish that were both profitable in either the short or long term.

There had been great disappointment when oilcake made from soya had proven too costly for biodiesel and it had been found that better recoveries could made through the food industry. This had proved a setback, Mkhize said.

Sugar cane

In answer to queries on sugar cane possibilities for biomass, as practised in Brazil and possible land shortages in South Africa, Mkhize said that the SA Sugar Assoc had said that land was available but that sugar cane was more likely to be linked to co-generation of electricity energy. Brazil, he said, had a vast subsidized lower income biomass agricultural industry but was producing on a large scale for biodiesel, not bioethanol as would be required in SA.

Mkhize concluded that the DOE biofuels task team was studying very carefully the forward national food security and water situation, “because”, he said, “we cannot afford to subsidize an industry in the form of small scale farmers if we are at the same time threatening food security and water availability at the same time.”

Back to jobs

However, he said that the country at the moment could not ignore the huge potential for job creation that could be brought about by such a new industry and the present lack of agricultural knowledge on the subject would eventually be substituted by experience gained by the new entrants as they established themselves.

In answer to questions on where blending would take place and “whether this was upstream or downstream in the fuel industry”, meaning at refineries or at depots it was assumed, Mkhize said a lot would depend on where the crop was grown; the wish to support crops grown in rural areas; sustainable projects that had been developed; and water availability.

previous articles on this subject
http://parlyreportsa.co.za//cabinetpresidential/biofuels-development-stays-in-limbo/
http://parlyreportsa.co.za//energy/south-africa-at-energy-crossroadsdoe-speaks-out/
http://parlyreportsa.co.za//energy/ipp-3-delayed-until-mid-august-says-doe/

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