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Cape Town – The proposed 20% increase in sugar tax that aims to target obesity in South Africa will be adjusted annually to take inflation into account, Treasury said in its policy paper this month.
Treasury is proposing a tax of R2.29 per litre of sugar-sweetened beverages (SSBs) as a measure to reduce obesity by 10% by 2020.
Finance Minister Pravin Gordhan in his February 2016 Budget announced a proposal to introduce a tax on SSBs with effect from April 1 2017 to help reduce excessive sugar intake in Africa’s most obese nation.
The tax policy forms part of the Department of Health’s strategic plan for the prevention and control of non-communicable diseases.
Obesity is a major risk factor for the growing burden of these diseases which include diabetes, heart diseases and some types of cancer.
In the policy paper, Treasury said that “if a specific tax rate (eg cents per gram) is implemented, the rate should be adjusted annually in order to take account of inflation”.
It said that empirical evidence confirms that health-related taxes do alter consumption behaviour and if introduced at sufficiently high levels, can positively impact health outcomes.
“Some studies suggests that a 10% to 20% price increase of SSBs may be required to have a significant impact on production and consumption patterns and levels and ultimately on obesity and population health.
“A South African study estimated the effects of a 20% tax on SSBs on the prevalence of obesity and found a reduction in obesity of 3.8% in adult males and 2.4% in females.”
Treasury said fiscal measures are recognised as a plausible intervention to tackle the obesity epidemic at a population level and as an integral part of comprehensive intervention to improve diets and prevent non-communicable diseases.
“Some researchers argue that most of the current nutritional policies relying only on information strategies for the consumers have had a weak impact on consumer choices,” it said.
Growth in the non-alcoholic beverage sector has increased significantly since the early 1990s. From 1998, the market for soft drinks in South Africa has more than doubled from 2 294 million litres to 4 746 million litres in 2012.
“The soft drink market has been able to expand through increasing the affordability, availability as well as acceptability of these products,” Treasury explained.
“Availability has been increased through strategic links with large supermarket outlets, convenience stores and the informal sector and small spaza stores in rural villages. There has also been an increase in the serving sizes of SSBs over the last several years.”
The Democratic Alliance is against the proposed bill, saying it will further increase food prices and hurt the poor who will not be able to afford alternative forms of sugar.
“Taxes will partially reduce unhealthy food consumption and it is also difficult to compel consumers to eat healthier foods by making unhealthy foods expensive,” said DA MP Wilmot James. “There are always cheaper, fizzier and sweeter alternatives on offer.”
Last week, Treasury published its policy paper and proposals for public comment on the taxation of SSBs. Written comments should be sent to the Treasury's Mpho Legote by the close of business on August 22 2016.
