Beverage industry calls for a more considered approach to sugar tax

At the 2022 budget speech, the National Treasury announced its intention to increase the health promotion levy (HPL) or sugar tax from 2.21c to 2.31c per gram of sugar, after three years of no changes.

This announcement was made against the backdrop of efforts by the department of trade & industry and department of agriculture, land reform & rural development to stabilise an already ailing industry. 

Challenges in the sugar industry were compounded by the Covid-19 pandemic and the July 2021 unrest, which interrupted sugar supply, and persists more than a year later. Increasing the sugar tax will result in even more challenges.  

Despite all efforts, there are no signs of stabilisation in the sugar industry. According to the latest figures, 25,000 jobs have been lost since the introduction of the HPL, which is a significant jump from the initial 16,900 lost in the first year of the implementation of HPL, as mentioned in the Nedlac Impact Assessment Report.

At this point, there is no clarity as to whether the HPL has achieved its health objectives because the government  has, to date, not conducted an impact assessment.  

Should the proposals put forward by the Treasury go ahead, such as the extension of HPL to fruit juices and lowering the 4g threshold, the livelihoods of many in the industry will hang in the balance. The Beverages Association of SA (BevSA) would caution against any fiscal measures or policy changes on the HPL that do not fully take into account public health interests and the socioeconomic effects as set out in the Socio-Economic Impact Assessment System (SEIAS) Guidelines of May 20151. 

While the newly released department of health’s National Strategic Plan for the Prevention and Control of Non-communicable Diseases 2020-2027 notes that sugar can play a part in poor diet, it also acknowledges that the causes of obesity and associated non-communicable diseases (NCDs) are complex. They require a comprehensive mandate for multisectoral co-ordinating mechanisms, actions and accountability frameworks to develop and implement the policies. The department’s plan puts less emphasis on fiscal interventions and tax policies on sugar-sweetened beverages (SSBs) as the only effective lever to fight NCDs.

Instead, it outlines the national goals and strategic objectives that will guide all stakeholders in fighting NCDs in the country and these include: 

• Prioritising the prevention and control of NCDs;
• Promoting and enabling health and wellness across the life course through targeted health promotion and disease prevention activities. 
• Ensuring people living with NCDs receive integrated, people-centred health activities to prevent and control NCDs; and 
• Promoting and supporting national capacity for high-quality research & development for the prevention and control of NCDs.

It has always been BevSA's position that the sugar tax in its current form erroneously identifies SSBs as the primary source of added sugars in the diet of South Africans. The conclusion that SSBs are the only contributor to the diet of South Africans is not substantiated or supported by any study that analyses the relationship between what is consumed and its contribution to the prevalence of NCDs such as diabetes and conditions such as obesity.

Perhaps this oversight might be addressed by the health department, which has commissioned the University of the Western Cape and other universities to conduct a national survey to examine the dietary intake of South Africans, among other things. BevSA hopes this important undertaking can also be used to shape policy and contribute to the debate.  

As an industry, BevSA believes that proposals made by the Treasury should be informed by the findings of the department’s study to understand the food consumption patterns of South Africans. Any proposal or intervention that introduces an extra financial burden on business and consumers in a form of additional taxes or levies should be subjected to government’s SEIAS to fully understand the net sum impact of such proposals on SA’s economic recovery agenda and on jobs.

The decision to increase the HPL was taken in absence of any evidence to show that the tax has had a positive impact on health outcomes or obesity levels in SA. 

This article was paid for by The Beverage Association of SA.

_{1. The SEIAS system is a Cabinet-approved process that subjects all government policy initiatives, legislation (draft bills) and regulations for further assessment on their potential impact on the economy as a whole and sector in question.}