MANAGING FOR PROFIT
Sugar has become
a pariah product,
sin-taxed like cigarettes
and alcohol. How long
will it be before other
products become subject
to this absurd tax?
Beware! Food taxes
are coming
S
welling of the lips, tongue or throat.
Nasal congestion. Diarrhoea, nausea or
vomiting. Breathing problems. These
are typical allergic reactions to food. Many
foods, especially gluten-containing grains
such as wheat, and a variety of animal and
vegetable products such as peanuts, tree
nuts, seafood, milk, eggs, honey and even
chocolate and cinnamon can be risky.
Allergic reaction to foods is not rare.
US studies indicate that 6% of children
have a milk allergy, more than 2%
are allergic to eggs, 1% are allergic to
peanuts and just under 1% of children
and adults have a tree nut allergy.
Now just imagine if, due to the risks of
eating some of these foods, government
decided to discourage their consumption.
So it decided to tax bread, pasta, pizza
and grain because of the gluten risk.
And what about the other ‘risky’
products? Could not all of the allergy
problems and associated medical costs
caused by these foods be minimised
by taxing them? And as a bonus, by
reducing their consumption, you would
contribute to reducing obesity levels.
So, like growers of sugar cane, quite
suddenly you could find that the
product which has been the lifeblood
of your farming business and life for
generations is targeted for tax, causing
consumption levels to fall precipitously,
as has happened with sugar.EASY PICKINGS FOR GOVERNMENTS
Sugar around the world has become a
target for an absurd form of tax. But
beware; as governments realise this is
an easy way to fill state coffers, it will
spread, and farmers around the world
need to resist it with all the collective
power they can bring to bear. Once
food tax starts flowing into state coffers,
it’s going to be well-nigh impossible to
turn the clock back. So be prepared.
As an example, and as they have been
tax-target number one, let’s look at what
sugar cane farmers might do to protect their
livelihoods. This will apply to many farmers:- Diversify
The most obvious first move. Other crops
need to be introduced. Cane-growing
areas, for example, are ideally suited to
bananas and some other subtropicals.
Another crop doing brilliantly in
KwaZulu-Natal’s coastal areas is
macadamias. There are others, too.
Use Michael Porter’s Five Forces Model
(FW, 26 July 2019) to think through
the options and select the best.- Reposition
Just as wheat farms don’t grow bread,
so cane farmers don’t grow sugar.
Their marketable product is cane,
and apart from sugar, there are many
other final product options.
Saccharum officinarum is a magnificent
crop. It produces more biomass per
hectare than any other crop by far,
and the renewable biofuels option is
a major alternative for the crop.
This, however, needs legislative
backing, so it’s back to government, but
in the meantime there are dozens of
other alternatives, ranging from bagasse-
based products to plastic bottles. - Restructure
In other words, restructure your interests
with processors. The only off-take
point for cane is the sugar mill. Sugar
millers have billions of rand invested
in factories to produce sugar, and
any product diversification requires
significant investment by them.
Growers, as providers of raw
material, expect to share in profits
from product diversification, and the
conflict of interest between the two
parties is often a killer of innovation.
A similar situation exists whenever
growers of a raw material, such as
maize, have no alternative outlet or
share in the processor, the maize mill.
These divisive relationships need to be
remodelled to develop a common vision
and fair share of the spoils. (^) ▪FW
LUCKILY, SUGAR CANE
FARMERS HAVE SEVERAL
WAYS IN WHICH THEY
CAN PROTECT THEIR
LIVELIHOODS
BY PETER HUGHES
Peter Hughes is a business and
management consultant with 30 years’
farming experience. Email him
at [email protected].
Subject line: Managing for profit.
26 farmer’sweekly 9 AUGUST 2019