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May 17, 2018

Sugar Tax
The latest public hearings by Parliament’s Standing Committee on Finance and Portfolio Committee on Health on the Health and Promotions Levy otherwise known as “Sugar Tax”, has brought back to sharp focus our health challenges particularly as they relate to obesity and non-communicable diseases. There is no doubt that the excessive intake of sugar can cause harm to human health. Equally so anything that is not consumed in moderation can be harmful, however the debates focused on the tax rather than how, as a nation, we can reduce the rate of obesity and non-communicable diseases.

Government to its credit plans to introduce the sugar tax, in recognition of the problem and as an instrument to reduce the unacceptably high levels of obesity and non-communicable diseases. BevSA agrees that the rate of obesity and non-communicable diseases is too high and needs attention and it is in response to this problem that in 2014 industry made commitments, which include the reduction of sugar content in our beverages by 15%.

The association acknowledges the contribution of sugar and its effect on the health of the nation, however, the Sugar Sweetened Beverages account for only 3% of total daily calorie intake as compared to other foodstuffs. While the introduction of the sugar tax may decrease consumption, there is no evidence that it will yield the desired effect on the reduction of obesity and NCD levels. BevSA believes that the general drivers in obesity rates in overall calories consumption, which has seen a recoded increase from 2816 in 1991 to 3022 calorie consumption per day in 2013 and continues to grow.

This increase can be attributed to the increase in consumption of a number of different food products including cereals, vegetable oil and poultry, which indicates dietary shift towards meat and processed foods and accompanying declining levels of physical activity. Industry also believes that there are many other alternatives, that if considered, can be more effective in reducing the sugar intake.

Working with governments, McKinsey Global Institute have identified a number of interventions to reduce obesity with varying levels of effectiveness. The industry proposals includes commitments that cover portion control, reformulation of contents, making available low calorie alternatives, labelling and price promotions as these have the most immediate impact on calorie intake.

The industry has implemented some of these, which admittedly have not been tested or implemented fully in South Africa, and should be considered with other measures. For example, South Africans now enjoy lower calories to zero added sugar option products, and some products are now available in smaller packaging. Interventions are all geared to encourage moderate consumption.

The beverage industry contributes significantly to the Gross Domestic Product and job creation in South Africa with R62.1 billion gross value and 260 – 306 thousand jobs. This amounts to R17.5 billion in tax revenue to the fiscus, and while it cannot be inferred that the economy takes prevalence over health, the social ills that may be introduced as a result of the tax cannot be ignored.

Furthermore, the Sugar Tax does not also take into consideration the socio economic impact it will have across the value chain. These include emerging farmers, distributors, informal traders and smaller producers. It is estimated that proposed SSB tax will reduce the GDP by R1.85billion and lead to unavoidable job losses.

We anticipate that the largest loss will be experienced in the informal sector where an anticipated 4000-6000 closures of informal outlets where Sugar Sweetened Beverages are estimated to contribute 17% of revenue and 30% of margin to Spaza stores. We also anticipate total job losses across the industry and value chain will be around 24 000 jobs, which will be detrimental to our economy in this economic climate with increasing unemployment.

BevSA proposes that cost efficient interventions that are more effective than a SSB tax in combating obesity without adverse economic impact must be investigated. Added to this, the sugar tax in its current form will undermine government intention to reduce obesity and non-communicable diseases as it intends on driving a 0.24%-0.32% calorie reduction. However the industry has committed to programmes, as already outlined, that we believe will drive a 15% calorie reduction by 2018, which is four times that of the envisioned proposed levy through methods like reformulation and introduction of extended lower or sugar free products.

BevSA believes that the Health and Promotions Levy should not be implemented in its current form and further time and investigation needs to be taken to allow for proper engagement and consultation among parties across the value chain and some critical departments like agriculture and trade and industry among others, to find alternative ways to building a healthier nation. We believe that the general discourse on the tax has created a false dichotomy, that to improve health you have to negatively impact the economy or to preserve the economy you have to do it at the expense of health. As BevSA we are not calling for a prioritisation of economy over health, nor do we support the call to prioritize health over economy. Our approach is that both are important and that our solution ensures that we pursue and achieve both health and economic outcomes.

Parties at Nedlac have also made the call for further consultations, and there is a general consensus that further consultation is required to minimise its impact on the economy and job creation. We hope the second round of hearings will holistically consider the inputs of all of industry and give more time for further engagements that can further allow all of us to collectively work together to address this problem. BevSA is ready to work with government and all stakeholders to find long lasting solutions that lead to a long and healthy life for all, while saving the economy and much needed jobs.