March 13, 2019 / 8:48 PM / 5 months ago

UPDATE 1-South Africa sugar tax to cut industry revenues, prompt reform -USDA

 (Adds details from report, background)
    By Ayenat Mersie
    NEW YORK, March 13 (Reuters) - South Africa's sugar tax
could slash industry revenues and prompt restructuring of the
country's sugar sector, the U.S. Department of Agriculture
(USDA) said in a report published on Wednesday. 
    The tax, introduced last April, has slashed the beverage
sector's use of sugar by 30 percent, the USDA attache in
Pretoria said, marking a major win for health advocates who have
sought to curb sugar consumption in an effort to fight health
epidemics of obesity and diabetes. 
    The initial law imposed a tax of 2.1 cents on beverages for
every gram of sugar in excess of 4 grams per 100 milliliters.
Last month, the government raised the tax to 2.21 cents per
gram, a 5 percent increase. 
    The sugar tax could reduce the sugar industry's revenues by
up to $129 million in the 2018-19 marketing year and in turn
reduce prices paid to sugarcane growers, the USDA report said,
citing industry. 
    Even without the tax, South Africa's sugar sector had been
beleaguered by low futures prices       , competition from
imports and droughts. 
    "The current crisis in the sugar sector may be an
opportunity for the industry to restructure and for government
to reconsider the support measures it should be providing to the
industry," the USDA report said. 
    The tax could also present an opportunity for some U.S.
exporters of alternative sweeteners as well as to beverage
manufacturers capable of reformulating their products to contain
less than the 4-gram threshold, the USDA said.
    On Monday, shares in South African sugar producer Tongaat
Hulett Ltd          fell more than 14 percent to trade at their
lowest level since 1993. Shares of the struggling company fell
after its chief executive said last week that a review of past
accounting practices at the company could affect previously
reported financial information.             
    In October, raw sugar from South Africa made a rare
appearance in the cash delivery against an ICE Futures U.S.
contract, often seen as a buyer of last resort.             

 (Reporting by Ayenat Mersie; editing by Jonathan Oatis)
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