Tax on soft drinks seen as threat to jobs and economy

2016-08-24 06:00

COCA-COLA Beverages Africa Chairperson, Phil Gutsche, at a press conference, recently called on the Nelson Mandela Bay Municipality and the Eastern Cape Government to assist the beverage industry in opposing National Treasury’s proposed tax on sugar-sweetened beverages (SSBs).

According to Gutsche, the tax threatens thousands of livelihoods and economic growth in the province and the city.

South African Treasury on July 8 published a policy paper on a proposed 20% tax on sugar-sweetened beverages (SSBs) to take effect April 2017.

Gutsche was supported in this call by Steven Dondolo, Coca-Cola Beverages South Africa shareholder; The Beverages Association of South Africa (BevSA); Little Green Beverages of Buffalo City; and Twizza Softdrinks from Queenstown.

“Our industry supports the livelihoods of 14 000 people in this city and many more in the province. Nationally we support more than 200 000 jobs. If this tax proceeds, we stand to lose 60 000 jobs in our industry. More than 5 000 livelihoods will be affected in Nelson Mandela Bay alone,” Gutsche said.

The beverage industry’s contribution to the economy has increased much faster in real terms since 2008 (258% increase), than overall GDP (which grew by only 43% over the same period).

The poor will also carry a disproportionate burden, but will receive little benefit. For example, Mexico’s tax on SSBs resulted in a reduction of only 17kj of a daily intake of more than 12000kj.

“The poor will therefore literally become poorer and not thinner as a result of this proposed tax,” Gutsche said.

Gutsche was supported in this view by BevSA Executive Director Mapule Ncanywa, who emphasised that 97% of South Africa’s obesity problems had nothing to do with sugar-sweetened beverages, as they accounted for only 3% of daily kilojoule intake.

“There are better ways to achieve the government’s goals,” Ncanywa said.

Voluntary reformulation, packaging, labeling and other targeted commitments, already adopted in South Africa, will result in a greater impact on tackling obesity than the anticipated reduction of only 37 kilojoules a day because of a tax.

Randall Dayce, plant manager at Coca-Cola Beverages South Africa in Nelson Mandela Bay, indicated that already, taxes on average accounted for 25% of the purchase price of soft drinks.

He and smaller bottlers Twizza and Little Green Beverages also reported that the tax would have significant implications for employment and growth prospects in the communities where they operated and in the province.

On behalf of its Refreshhh brand Little Green Beverages Director Glenn Sheppard stated that they would have to reconsider a significant investment in the extension of their Buffalo City plant, which would have added an additional 70 direct jobs, and that they would have to cut back marketing spend nationally by approximately R50m.

Twizza Financial Director Nico de Jager said that even in a small town like Queenstown, the proposed tax could wreak havoc, making up to 815 people dependent on the state for their income and sustenance.

“Our Provincial and City governments should be very engaged on the matter through Cabinet, the so-called MinMec meetings and the South African Local Government Association (SALGA) to appeal to National Treasury to reconsider this harmful proposed tax,” Gutsche said. – REPORTER

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