Revenue gained from the health-promotion levy shows that South Africans are paying the cost to keep on drinking their favourite sugary drinks, although worldwide trends indicate that, over time, they are likely to move towards lower-sugar options.
The idea of a sugar tax was first raised in the 2016 budget speech by then finance minister Pravin Gordhan. But the tax, which specifically targets sugar-sweetened beverages, was delayed by the industry, which pushed back and debated its potential pros and cons.
The treasury touted it as a way of tackling obesity; in 2016, the World Health Organisation estimated that 28.3% of South African adults were obese, which is the highest incidence of obesity in sub-Saharan Africa, outstripping Botswana, which is second, by almost 10%.
But the Beverage Association of South Africa (BevSA), which represents the drinks producers that are affected by the tax, argued vociferously against it, estimating that it would reduce the gross domestic product by R1.85-billion and lead to job losses.
The association also argued that, although the tax might decrease consumption, “there is no evidence that it will yield the desired effect on the reduction of obesity and noncommunicable disease levels”.
Eventually, a tax of 2.1c per gram of sugar per 100ml was introduced for drinks that contain more than four grams of sugar per 100ml. The first four grams per 100 ml are levy-free. “Sugar” refers to intrinsic and added sugars and other sweetening matter. Fruit juice is exempt.
South Africa joins countries such as Norway, Mexico and the United Kingdom in taking a policy and tax-driven approach to the sugar issue.
When the law came into force, BevSA stated it was “disappointed” but nevertheless “is determined to comply with the health promotions levy and Sars [South African Revenue Service] regulations”.
By the end of September 2018, the health promotion levy had raised R1.308-million, according to the treasury. “Indications are that the revenue will be slightly more than the projections made in the February 2018 budget.”
This shows South Africans are continuing to drink beverages with a high level of sugar, though worldwide there’s a movement towards lower-sugar, lower-calorie drinks.
In the UK, low- and no-calorie drinks now make up 43% of carbonated beverages, according to the British Soft Drinks Association. Consumers’ sugar intake from carbonated drinks fell 19% between 2013 and 2017.
Surveys conducted by the US-based Information Resources Incorporation show that 58% of American consumers are avoiding sugar; 50% are not adding sugar to their food and beverages, and 30% avoided consuming products that listed sugar as an ingredient. Of those avoiding sugar, 85% are doing so for health reasons and 58% because of weight concerns.
According to Coca-Cola Africa, which has about 50% market share of the soft drinks market in South Africa (as recorded by Statista.com), businesses are reacting to this trend.
“We’re evolving our business to become even more responsive to people’s changing tastes and needs,” says Asiya Sheik, the head of public affairs for Southern Africa at Coca-Cola Africa.
“Times change and people want us to grow and change with them. So we’re embracing the future and accelerating our efforts to rethink our drinks around the world. This requires a multifaceted response, including addressing added sugar.”
The company is providing single-serve packs and reducing package sizes “to help consumers manage their calorie intake”. South African Coke drinkers may have noticed that the 500ml buddy bottle has now been decreased to 440ml, the 330ml bottle has shrunk to 300ml and the 2.5 litre Coke bottle has been discontinued.
Over the past three years in South Africa, Coca-Cola has reduced the average sugar content of its drinks by 16% to 18%, says Sheik. “Continuing reduction efforts will reach a total of 22% to 24% by the end of 2018, ahead of industry sugar reduction commitments.”
The company cites a McKinsey Global Institute report on obesity, which found that portion control (smaller bottles and packages) followed by reformulation (less sugar in each bottle) are the most effective tools in reducing obesity.
But one industry commentator pointed out that Coca-Cola did not decrease its prices when it decreased its packaging sizes, which makes it difficult for the consumer to see the move as being magnanimous and with the health of the public as its sole interest.
Sheik says: “We always try to keep a balance between the pricing of our products and input costs so that we can provide our beverages to consumers at a fair price. These decisions are made after careful consideration of current costs pressures within our supply chain.”
“While Coca-Cola provides a recommended price for products, prices are determined by the retailer.”
The treasury says the levy “has raised awareness about obesity and related health problems in the country”, although it is too soon to see whether the levy has had an effect on obesity.
BevSA says it plans to commission a 12-month sector study under the auspices of the National Economic Development and Labour Council to ascertain the impact of the levy on the industry.
“The industry appreciates that the levy was only introduced this year and will only be in a position to formulate an informed view after collection of data, which will inform a way forward,” says Mpho Thothela, the BevSA general manager for corporate services.
The industry has made efforts to promote health, Thothela says. “Not only did we reformulate products but [also] embarked on a number of different initiatives in partnership with the department of sports and recreation, such as the national recreation day and big walk, to drive increased education to all South Africans.”
“BevSA also ran an education campaign to encourage healthy consumption of beverages, proper nutrition and exercise as part of a healthy lifestyle with the aim of reducing obesity and noncommunicable diseases in South Africa,” he says.
The World Economic Forum says a multifaceted approach is probably necessary to target obesity. “Eating less sugar is one way to consume fewer calories but so is eating less saturated fat or increasing the amount of exercise taken.
“There are many other actions that governments can take, including warning signs on food labels, stricter regulation of advertising and mass media campaigns to increase awareness of healthy food choices.”
But, the forum says, given the scale of the obesity epidemic, “a combination of various approaches will probably be needed if significant progress is to be made”.