Sugar Tax: Will this affect consumption?

The so-called “sugar tax” that will come into effect in April 2017 has been subject to a lot of criticism regarding its purpose, which is to reduce obesity and sugar related diseases (such as diabetes) amongst South Africans.

With the World Health Organisation estimating in 2014 that one in four South Africans are obese, and diabetes being the second leading cause of death amongst South Africans between the ages of 15-49, there is a definite need to address the problem. However, it is the method chosen, taxing sugary beverages, that is causing all the commotion.

The three main arguments regarding the sugar tax are that it won’t affect the consumption of sugar, it will lead to job losses and it is discriminating against the poor.

The first argument is countered by the fact that Mexico had initiated a 10% tax on sugary beverages which saw a 10% drop in the consumption of sugary drinks and a 7% increase in the sale of bottled water in a year. There are some that argue that that is not enough to justify the tax, but with South Africa having the second highest death rate in the world relating to sugary beverages, it is a step in the right direction. An additional study that was done in 2014 by a team of researchers led by the Public Health Professor of Wits School, Mercy Manyema, indicated that a 20% increase in tax on sugary beverages will see a decline in obesity in men of 3.8% and a decline of 2.4% in women. It is thus plausible that the proposed Sugar Tax will have a positive effect on the obesity rate in South Africa, and thus reduce diseases related therewith.

The contention that there would be job losses in the sugar industry once the tax is implemented is an important aspect to investigate in a country with an unemployment rate of 26.7%. ABSA’s senior agricultural economist, Ernst Janovsky, said it will lead to a decline in sugar usage, which will decrease the prices of sugar and thus negatively impact the sugar industry. But a decline in glucose consumption will not necessarily affect employment, as the production of sugar ethanol is an area in which South Africa has already started research. It can further be argued that the control mechanisms in the industry can fix the prices of sugar, so as to prevent potential job losses.

The discrimination against the poor is possibly the most contentious point as some regard sugar beverages as a luxury, which thus excludes the poor, but others argue it is the only sugar the poor consume. Regardless of your point of view on the matter, any negative effect that the tax may have on the poor can be remedied if the revenue received from the tax on sugar beverages is utilised to subsidise healthier foods such as fruits and vegetables, to educate people through health campaigns and similar programs.

In conclusion, the sugar tax might actually have the intended effect of making South Africans healthier, or at least slimmer. The negative impact on the jobs and the poor that the critics expect can be offset by the revenues from the tax. Whether that will happen is however up to the government at the time.

Article by C2M Compliance Administrator, Alida Hendrikse (BCom LLB | Admitted Attorney)

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