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There is no denying that South Africa faces a severe and growing obesity epidemic.
Being overweight or obese predisposes people to non-communicable diseases (NCDs), including heart disease, stroke, diabetes and some forms of cancer.
It is a fact that NCDs are the leading causes of mortality globally, resulting in more deaths than all other causes combined.
Since 2009, NCD-related deaths have outnumbered communicable disease-related deaths in South Africa.
The World Health Organisation (WHO) estimates that 43% of deaths in South Africa are attributable to NCDs, and that they cause many premature human losses and impose heavy costs on health systems.
The poor are often affected the most.
A US study shows that an increasing body mass index (overweight, moderate obesity, severe obesity and extreme obesity) is associated with higher healthcare costs and greater facility utilisation rates.
The study shows that in 2002, for men, there would be a difference of $4 102 (R60 337 at the current exchange rate) a year when treating an extremely obese individual versus an average-weight individual.
For women, the data were similar, with a figure of $4 449.
There are indications that the situation in South Africa is getting worse.
Increased healthcare costs, as well as increased utilisation rates as a result of higher levels of NCDs, place a burden on the public healthcare system.
According to research by Priceless SA, moderate obesity is associated with an 11% increase in healthcare, costs and severe obesity is associated with a 23% increase in healthcare costs.
It has been projected that by 2030, total healthcare expenditure related to adult-onset diabetes (an outcome of obesity) will cost South Africa between $1 billion and $2 billion.
It is therefore logical that additional government interventions are appropriate to help slow down the growth of this epidemic.
It is also important to note that South Africa is not alone in this endeavour; a number of countries, including developing countries such as Mauritius and Mexico, are using financial measures to help fight this silent epidemic.
There is much literature that shows strong evidence of a causal relationship between the excessive consumption of sugary beverages, obesity, type 2 diabetes, cardiovascular disease and dental decay.
Sugary beverages have high sugar content but little or no nutritional value. They don’t satisfy hunger and are generally easily available and inexpensive, and consumed in high volumes.
Since 1998, the market for sugary beverages in South Africa has more than doubled, from 2.294 billion litres to 4.746 billion litres in 2012.
Generally, people do not eat less when they consume calories from sugary beverages, as they might if they consumed the same calories from whole foods.
This means that the total number of calories consumed would increase when a meal is consumed with a sugary beverage, compared with the same meal consumed with water.
This distinction places sugary beverages in a peculiar position when compared with other foods that may contain the same levels of sugar.
The WHO’s guidelines for sugar intake for adults and children, issued in March last year, recommends that adults and children restrict their sugar intake to less than 10% of total energy intake per day, which is the equivalent of about 12.5 teaspoons of sugar for adults, and suggests a further reduction to less than 5% of total energy intake per day.
The use of financial measures to promote health to help limit or prevent disease is not a new idea.
It is risky to mainly rely on self-regulation and/or voluntary initiatives when the stakes are so high and the consequences mostly invisible for many, until it is probably too late.
Globally, taxes are increasingly recognised as effective complementary tools to help tackle the epidemic of NCDs and obesity at a population level.
Selected or targeted product taxes (by affecting final prices) is a mechanism that has a wide effect, and can help change both production and consumption patterns.
Several countries are already implementing such taxes – Barbados, Belgium, Chile, Dominica, Finland, France, French Polynesia, Hungary, Mauritius, Mexico, Samoa, St Helena and Tonga – and a few cities in the US.
These taxes were not implemented without opposition from the industry.
Some of the strategies used by the industry include misinformation and scare tactics.
The normal arguments put forward are that the tax is regressive and unfair, will result in massive job losses and erode economic value, and that it is ineffective.
Firstly, it is true that the tax will also affect low-income households. However, it should be noted that obesity and associated health problems disproportionately affect those in lower socioeconomic groups.
These individuals may therefore show the greatest amount of health gains when compared with higher socioeconomic groups due to low-income groups being generally more sensitive to price changes.
Although it is unwise to legislatively earmark tax revenues, revenues generated from this tax will help fund programmes, to be implemented by the department of health, to help alleviate the NCD epidemic in South Africa.
Secondly, the current narrative that there will be massive jobs losses takes a narrow and specific industry perspective, rather than an economy-wide perspective.
Whenever there is a reduction in demand for the taxed products, through substitution and changes in consumer preferences, there is always increased demand for other (untaxed) products, and other healthier foods and drinks such as milk products, and potential job creation in those industries.
When Mexico introduced the tax on sugary beverages, there was a reduction in consumption of about 6% in 2014 and 8% in 2015, but this was accompanied by increased consumption of bottled water (about 4%) in 2014.
Treasury will robustly engage the industry on the estimated effects of the tax using various modelling results that are been floated.
Thirdly, the industry may want to downplay the effective role of excise type taxes, as a broad measure at a population level, over industry-driven, voluntary initiatives.
It is important to note that price matters and it affects consumer purchase behaviour.
The extent of this is dependent on the price elasticity of demand, the degree to which manufacturers and retailers pass through the tax to consumers, and the potential substitution effects, among other things.
Governments have to balance the various arguments and should always attempt to pursue evidence-based policies.
It is to be expected that vested narrow interest will tend to underplay certain consequences (benefits) and overplay others (losses).
The abuse of scientific evidence by certain sectors has been well documented.
Treasury and the department of health would like to engage in an open, transparent and frank debate to help ensure that the interests of broader society are considered, and not only those of a small group.
Sustainable economic growth and job creation should take into account the long-term interest of the public at large.
Morden is chief director of economic tax analysis at Treasury.
