/ 21 February 2020

A spoonful of sugar makes taxes go up

A man leans on a stack of sugar softdrinks (Mujahid Safodien/AFP)
Sugar high: NGO Heala is lobbying for the sugar tax to be increased from 11% to 20%. (Mujahid Safodien/AFP)

When the sugar tax was introduced in 2018 it collected R3.2-billion. From April to December 2019 revenue was at R1.95-billion. But lobbyists for the tax want it to be increased for it to be more effective.

Last week, nongovernmental organisation Healthy Living Alliance (Heala) handed a petition to treasury, together with testimonies from people affected by noncommunicable diseases, requesting that the sugar tax increase from 11% to 20%. The group also asked for fruit juices to be included in the tax.

Heala says it had been calling for the levy to be implemented at 20%, before it was passed at 11%. The organisation says the World Health Organisation (WHO) recommends that it be passed at 20% to see results in terms of consumption.

“The WHO says that a 20% tax is where consumption decreases and more revenue increases are found,” said Heala’s Lawrence Mbalati.

He said the organisation’s main aim was for the industry to be held accountable for the products it produces that contribute to South Africa’s high rates of obesity and non-communicable diseases, such as diabetes, hypertension, heart disease and some cancers.

In its 2017 policy paper on taxation of sugar-sweetened beverages, the treasury explained that taxes can play a key role in correcting market failures and act as a price signal that could influence consumers’ purchasing decisions.

The tax, which is also referred to as the health-promotion levy, is fixed at 2.1 cents per gram of sugar content. But the first 4g per 100ml is not taxed. This is equal to almost a teaspoon of sugar per 100ml.

Heala said it wants fruit juices to be included because there is an average of six-and-a-half teaspoons of sugar in a 250ml glass, which is in the range of some cold drinks. Even if labelled as 100% pure fruit juice, these drinks can have the same negative effect as a can of cool drink, the organisation argued.

Karen Hofman, the director at Priceless SA, a health research unit at the University of the Witwatersrand, said South Africa is one of the top 10 countries globally for both obesity and consumption of sugary drinks.

Hofman said the diseases that are caused by sugar cost the South Africa government 7% of gross domestic product. She said this is the combined total of the people who go to private and public hospitals to be treated for these diseases.

“This is an economic problem for the country in a situation where there are scarce resources,” said Hofman. She believes taxation is a rational response to try to control people’s consumption of sugary drinks, which has been stimulated by years of marketing. “Starting from childhood and going through to adults, people were constantly told to ‘open happiness’. In fact, they were opening diabetes and cancer.”

“Open happiness” is a global marketing campaign by Coca-Cola that was rolled out in 2009. Coca-Cola is represented by the Beverage Association of South Africa (BevSA).

The association says the tax in its current form will not have the desired impact to address obesity and other non-communicable diseases.

“The industry is concerned that to date, there has not been any report published to indicate the impact of the health promotion levy,” said  Mapule Ncanywa executive director of BevSA.

However, the SA Canegrowers Association said the call to hike the tax is irresponsible and shows zero regard for the negative effect it has had on the industry. Andrew Russell, the vice-chairman of the association, said since the tax had been implemented, the sugar industry has lost about R1.5-billion in revenue and its research showed that the cane-growing sector lost about 9 000 jobs.

But Priceless SA’s policy brief on the levy and its effects on the South African labour market stated that employment in the sector is largely consistent with the trends before the policy’s implementation.

Russell said the association has been working with government and industry stakeholders to develop a masterplan that aims to create a more diverse and sustainable sugar industry. He says the plan cannot be achieved with the current sugar tax, or if it is increased or expanded.

Tshegofatso Mathe is an Adamela Trust business reporter at the Mail & Guardian