Gordhan announces sugar tax

Finance Minister Pravin Gordhan. (Kopano Tlape, GCIS)

Finance Minister Pravin Gordhan. (Kopano Tlape, GCIS)

Finance Minister Pravin Gordhan has revealed plans to introduce a tax on sugar-sweetened beverages, similar to the sin taxes on alcohol and tobacco.

Among the sins that the government taxes, you can now include sugar along with the likes of alcohol and tobacco.

In his 2016 budget speech released on Wednesday Finance Minister Pravin Gordhan announced plans to introduce a tax on sugar-sweetened beverages. 

The state intends to introduce the tax on 1 April 2017 in a bid to “help reduce excessive sugar intake”. 

The move is in line with growing action by other governments around the world, to reduce sugar consumption, which is linked to high instances of conditions such as obesity and diabetes. These non-communicable diseases strain the financial and human resources of health care systems.

Although government did not say how much it hopes this will raise, the Mail & Guardian recently reported that a  20% tax on sugary drinks, could bring in an estimated R7-billion in additional revenues each year.

These estimates come from Priceless-SA (Priority Cost Effective Lessons for Systems Strengthening South Africa), a research institute at the Wits School of Public Health. 

According to Priceless-SA, moderate obesity is associated with an 11% increases in healthcare costs, while severe obesity is associated with a 23% increase in healthcare. 

It has projected that by 2030, total healthcare expenditure related to adult diabetes will cost South Africa between $1-billion and $2-billion.

Late last year the department of health released its national strategy on the prevention and control of obesity. It found that fiscal measures were the most cost effective ways to combat rising obesity – being far cheaper, at 20c to each rand, than other measures such as food advertising regulation for example.

South Africa has the highest instances of obesity in sub-Saharan Africa. In a paper entitled the “Cost of inaction on sugar-sweetened beverage consumption: implications for obesity in South Africa” researchers estimated that the growth in consumption of sugary drinks by 2.4% – the rate at which sales of sugar-sweetened beverages are expected to rise – could lead to an additional 1.3-million obese adults by 2017. 

In the budget review the treasury said that “fiscal interventions such as taxes are increasingly recognised as complementary tools to help tackle this epidemic”. 

Other countries such as Denmark, Finland, France, Hungary, Ireland, Mexico and Norway, have levied taxes on sugar-sweetened beverages the treasury noted. 

But critics of such a tax believe it will unfairly penalise poor consumers. The association of drinks manufacturers Bev-SA told the Mail & Guardian recently that singling out one category of products for additional taxes was “discriminatory” and would do nothing to benefit consumer health.


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