Business, labour fight sugar reform

The tax on sugary drinks, now termed a health promotion levy, has unusually united business and trade unions.

Union federation Cosatu and Business Unity South Africa (Busa) recently made presentations to Parliament’s standing committee on finance to hit the pause button on the tax to allow more research into its economic effect.

The treasury said this week it did not anticipate there would be “major or new changes” from what was already in draft legislation. The parliamentary process is ongoing, it said, and the levy will only come into effect once this is complete.

The tax proposal is part of the draft Rates and Monetary Amounts and Amendment of Revenue Laws Bill.

The proposal is a levy of 2.1c a gram of sugar per 100ml but the tax will only kick in after a threshold of 4g per 100ml. It will increase the price of a 330ml can of Coca-Cola and similar soft drinks by about 46c.

Healthcare organisations, academics and medical experts are backing the proposal.

In a submission to Parliament the University of Cape Town’s school of public health and family medicine said a 10% rise in noncommunicable diseases such as diabetes is associated with a 0.5% lower rate of annual economic growth.

It recommended an stringent tax to reduce people’s consumption of sugary drinks.

“The economic consequences of obesity are serious and growing, including considerable economic burden on individuals, households, employers, the health system and the society at large,” it said.

Other estimates suggest the economic effects could be more dramatic.

The country’s gross domestic product in 2030 could be 7% as a result of the effects of noncommunicable diseases, including early retirement and reduced productivity, according to Nick Stacy, economist at Priceless SA (Priority Cost Effective Lessons for Systems Strengthening), a research unit at the University of the Witwatersrand’s school of public health.

The industry had “completely ignored the jobs that will be lost across the economy due to ill-health if the tax and its complementary interventions are not implemented” Stacy told the Mail & Guardian.

But Cosatu warned of potential job losses in sectors that may not have the ability to adapt swiftly to the tax, such as sugar cane farming, where an estimated 5 800 jobs could disappear, and emerging farmers being particularly vulnerable.

Cosatu is endeavouring, through ongoing talks at the National Economic Development and Labour Council, to ensure that there will be a transition plan in place to protect jobs and ensure that affected industries can cope, should the tax go ahead, said Matthew Parks, Cosatu’s parliamentary co-ordinator.

The federation agreed that South Africa was facing a health crisis, he said, but it was important that there was a comprehensive transition and jobs plan in place.

Cosatu had proposed a number of interventions aimed at preventing job losses.

They included tariffs on sugar and sugar-related imports, direct support for emerging and vulnerable sugar farms and mills and transition support for farms and mills seeking to change to alternative crops or diversify.

Parks said the long-term solution would be a move towards the production and use of biofuels, which had the potential to create more jobs.

Alf Lees, a Democratic Alliance spokesperson on finance, said although there is a rising obesity crisis and this problem had to be addressed, there were legitimate concerns about job losses.

The country could not sustain further increases in unemployment in the current economic climate.

Furthermore, Lees said, the revenues from the levy have not yet been factored into the budget. If it is not implemented now but waits until a proper socioeconomic impact assessment of the proposal is done, it would have no budgetary effect.

The economy could not sustain additional tax increases, argued Lees, and if the levy “does go ahead for good reason, we must look at reducing other taxes”.

The treasury’s original proposal for the tax was higher — at more than 2.9c per gram of sugar — and it did not include the tax-free threshold. It has also excluded 100% fruit juices and milk from the tax.

The treasury has previously stated that it estimated a maximum of 5 000 jobs would affected if the industry did not innovate and reformulate its drinks to contain less sugar.

Assuming it succeeded in doing this, the decline in jobs would be reduced. 

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Lynley Donnelly
Lynley Donnelly
Lynley is a senior business reporter at the Mail & Guardian. But she has covered everything from social justice to general news to parliament - with the occasional segue into fashion and arts. She keeps coming to work because she loves stories, especially the kind that help people make sense of their world.

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