Sugary cold drinks are likely to get an extra tax in tomorrow’s Budget, joining cigarettes and alcohol in the sin bin.
It is possible that 100% fruit juice will also get taxed, although Finance Minister Pravin Gordhan will clarify this in his speech.
Treasury announced its plan to impose the tax in last year’s Budget speech in an attempt to address the country’s shocking obesity figures. Obesity is an epidemic of non-communicable diseases (NCDs) including diabetes, hypertension, strokes, heart attacks and certain cancers.
NCDs are leading cause of death in SA
More South Africans are now dying from NCDs than HIV, according to the SA Medical Research Council’s National Burden of Disease Study.
“NCDs have now become the leading cause of death in South Africa, accounting for almost 40% of total deaths and one in three deaths before the age of 60,” said Professor Debbie Bradshaw, director of the SAMRC Burden of Disease Unit.
Treasury’s policy paper on the tax released last July proposed a tax of 2,29 cents per gram of sugar. This works out to be around a 20 percent tax on a Coca Cola, which contains eight teaspoons of sugar in a 350ml can.
Since the policy paper was published, Treasury has received 144 comments and held a workshop with all stakeholders in November 2016. Parliament’s finance and health committees have also held two public hearings over the past two weeks.
Support for sugar tax
Health academics have unanimously supported the tax, painting an alarming picture of a sick nation in which even young children are developing type 2 diabetes because of their poor diets.
Sugary drinks pose a particular health risk as the sugar is absorbed directly into the bloodstream. The drinks are loaded with calories but have no nutritional value and do not make those drinking them feel full, so they tend to eat and drink more – thus becoming obese.
Between 2001 and 2015, the sales of sugary drinks in South Africa grew by more than 65%. This is equal to every South African drinking 262ml of soda a day.
Between 1998 and 2012, obesity grew from 30% to almost 40% in women, and from 7.5% to almost 11% in men.
Wits University health economist Professor Karen Hofman is a strong supporter of the tax.
“Between 1995 and 2015, there was a 50% increase in the cost of treating obesity in South Africans aged 54 to 69,” said Hofman.
Tax can save lives
“When we introduced increased taxes on tobacco, smoking decreased from 40% to 20% of the adult population. This tax will save lives, increase life expectancy, avoid impoverishment and avert huge costs to the economy.”
Professor Tolu Oni from the University of Cape Town’s School of Public Health, said that “poor diet generates more diseases than lack of exercise, alcohol and smoking combined”.
“Obesity is linked to lower cognitive function in kids,” added Oni, reporting that South African nine- to 10-year-olds are the second highest consumers of sugary drinks in the world, beaten only by kids in the USA.
Meanwhile, the World Health Organization (WHO) estimates that the tax could prevent almost half-a-million deaths over the next 40 years.
“A child eating burger and chips, washed down with a sugary drink and followed by crisps and a chocolate bar, would have to run a half-marathon to get rid of the effects. You cannot out-exercise a bad diet,” said WHO’s Dr Temo Waqanivalu.
However, the Beverage Association of SA (BevSA) and the Consumer Goods Council of SA (CGCSA), have spoken against the tax, with BevSA-commissioned research claiming the tax could result in up to 71 000 job losses.
But Treasury has accused industry of scare-mongering, and pointed out that there were no job losses in Mexico, which introduced a sugary drinks tax in 2014.
Loss of jobs
BevSA, which represents all major sweetened drinks including Coca Cola, concedes that South Africa has an obesity problem but would prefer voluntary “reformulation” of products to reduce sugar content.
BevSA CEO Mapula Ncanywa told Parliament that her members were committed to reducing the sugar content of their drinks: “We want to be part of the solution, we contribute R62-billion to the GDP, we contribute to 300 000 jobs. The introduction of this tax is against the good work of our industry.”
Although pure fruit juice was excluded from the tax in the policy paper, Treasury Deputy Director General Ismail Momoniat has since said he believes that it should be included.
Treasury’s Mpho Legote said that the Finance Minister’s decision will “take into account all 144 submissions” that they had received on the tax.
“It is important to change the environment to encourage the consumption of healthier products. If the price level of sugary beverages is still cheap enough to undermine healthy options then this is a problem,” said Legote.
He chastised industry stakeholders who “have not helped us to find balance between job losses and the impact [of sugary drinks] on health. Industry wants to protect its purse and profit, and that is not fair.”
Meanwhile, the Department of Health’s Lynn Moeng described the sugar tax as “one part of a multi-pronged approach to combat obesity”.
She said that the Beverage Industry of SA (BevSA) had warned of job losses but “they have not factored in the increase in sales of healthier products". For example, when Woolworths removed sweets from its aisles, it saw an increase in the sales of healthier products.