What you need to know about SA’s sugar tax

On 24 February 2016, Finance Minister Pravin Gordhan announced plans to introduce a tax on sugar-sweetened beverages on 1 April 2017, in his national budget speech.  Since his announcement there have been mixed responses and feelings towards this. Moneybags writer, Alina Hardcastle explores this matter further.

Reasoning for sugar tax

Xolisa Dodo, head of the communication unit at the National Treasury, stated: “There is a growing concern regarding the increasing obesity stemming from over-consumption of sugar and fiscal interventions such as taxes are increasingly utilised as a complementary tool to help tackle this problem.”

The National Treasury 2016 budget review included that the overconsumption of sugar has grown over the last 30 years in South Africa and has the worst obesity ranking in Sub-Saharan Africa.

Some have wondered why it has taken so long to implement this tax. Dodo explains: “It has taken this long to consider because it is a relatively new area of focus globally.”

Benefits of sugar-sweetened beverage tax

“There are massive benefits to your body – weight management becomes easier, decreased risk of many of your chronic diseases such as diabetes and heart disease, decreased inflammation in the body, decreased risk of tooth decay, improved regulation of blood sugar levels meaning increased overall energy levels, increased ability to concentrate, better sleep…. The list is endless,” says Kari Jonker, a registered dietician who qualified from Stellenbosch University in 2012, and has collaborated with the Department of Education on their School Nutrition Program.

Dr Jan Nel, a general practitioner adds: “Sugar in children’s diets lead to growth deficiencies, oral pathology, hyperactivity and obese children, which leads to the risk of being, bullied which can result in emotional problems.”

The World Health Organization (WHO) Statistics for 2016 show that one in four South Africans are obese. Thus, the aim of sugar-sweetened beverage tax is to decrease South Africa’s excessive sugar consumption, which in turn will benefit consumers’ health.

Countries that have benefited from sugar-tax

Mexico has adopted a sugar tax, which cut sales by 12% within the first year it had been introduced, according to research in the British Medical Journal. This large redution has occurred among the poor who cannot afford health care. There has also been a four percent rise in sales of untaxed drinks which is due to purchases of bottled plain water.

Other Countries that plan to introduce this tax

The British Government has recently announced plans to introduce the sugar levy in 2018. This has encouraged brands such as Coca-Cola Great Britain to launch a “new and improved sugar-free Coca-Cola,’’ which is promised to taste like the original Coca-Cola Classic, but without sugar.

Countries that intend to remove sugar-tax

Finland’s government has decided to remove their tax on sugary foods from 2017 as the Europe commission feel that this tax unfairly discriminates foreign companies which must also pay import taxes along with sugar tax.

Countries against sugar-tax

Food and Drink Industry Ireland have said they feel it would be more effective to reformualte and reduce portion sizes of sugar-sweetened beverages.

Why are producers of sweet snacks, chocolate or sugary cereals not facing higher tax?

So, why is our government specifically targeting sugar-sweetened beverages and not all products that contain sugar?

Dodo reassures us that “the proposal does not necessary mean that other products will not be considered in the future. It’s important to consider what is administratively feasible in the near term.”

How does the beverage industry in South Africa feel about this?

When asking Coca Cola South Africa about their feelings towards sugar-sweetened beverage tax, the response was: “All soft and non-alcoholic beverage manufacturers and bottlers have agreed to speak in one industry voice which is that of BevSA.”

Mapule Ncanywa, the spokesman for the industry body the Beverage Association of SA (BevSA) had not responded to requests for comment at the time of publication.

Ncanywa told The Business Day: “The industry is a valuable contributor to the growth of our economy and we are willing to pay our fair share of taxes. What we are against is a ‘discriminatory tax’ and that is why we welcome engagement with Treasury.”

Possible reasoning for targeting sugar-sweetened beverages specifically

Jonker explains: “Our bodies were not designed to have to process so much sugar at one time. Drinking 40 teaspoons of sugar is much easier than eating the same amount, and therefore we have to do what we can to limit the intake of these. So, the effects in the long-term of these drinks are so much more than just a weight problem. Sugar affects so many different organs in our body.”

Will sugar-sweetened beverage tax help solve obesity or is there a more effective alternative?

“I think that this is a start. There are countries that tax sugary food as well, but the consumption of large amounts of sugary drinks actually is a big problem in our country,” says Jonker.

The key points

Karen Hofman noted in a report that” liquid sugar was the biggest risk factor for diabetes as soda was quickly absorbed and spiked the body’s blood sugar rapidly, overworking the pancreas and liver.”

As stated above, the aim of sugar-sweetened tax is to reduce growing obesity within our country.  The overconsumption of sugar can lead not only to threatening illnesses and physical problems but can also have an emotional impact on our youth. Sugar-sweetened beverage tax is the first step to overcome and counteract our nation’s growing obesity issues.

Dodo says: “The tax alone will not solve the problem of obesity; however, it will make a contribution as part of a package of measures to address the problem.”

At this point no tax rate has yet been mentioned.