South Africans are drinking less sugar, in a positive spin-off of the “sugar tax” imposed by the Treasury two years ago, Finance Minister Tito Mboweni said on Friday.
Revenue from the levy which was introduced in 2018 as a means to address the high levels of obesity in the country has dropped from R3bn in 2018/2020 to R2.6bn in 2019/2020 from locally manufactured sugary beverages, and from R54m to R53m from imported sugary beverages, over the past two years. The levy was initially set at a rate of 2.1c for each gram of sugar over an initial threshold of 4g/100ml and increased a year later to 2.21c.
The Treasury has always insisted that the tax was a health measure aimed to reduce obesity and did not have primarily a revenue raising function.
Mboweni’s comments in a written reply to a parliamentary question by DA MP Dennis Ryder comes ahead of his tabling of the eagerly awaited national budget on Wednesday, with opposing lobby groups appealing for an increase or a decrease in the levy.
Advocacy group Healthy Living Alliance last week called on Mboweni to double the levy.
The organisation's head, Lawrence Mbalati, said the tax had already led some beverage makers to reduce the amount of sugar in their drinks and referred to a study that found the levy also reduced sugary beverage consumption by 60% among people in Soweto.
“There is no evidence to date that the levy has led to job losses in the sugar or beverage industry, contrary to industry claims,” he said.
On the other hand, SA Canegrowers Association chair Rex Talmage pleaded in a weekend statement for a decrease in the sugar tax to underpin the recovery of the sugar industry and safeguard the 65,000 direct jobs provided by the sugar industry, as well as the 1-million livelihoods that depend upon it.
He noted that a survey conducted in the first year of the sugar tax found that the sugar industry had lost more than 9,000 jobs in the cane-growing sector alone. The association estimates that 250,000 tonnes of sugar were lost in local sales in the first year of implementation of the tax.
“Under the sugar industry master plan, signed in November 2020, SA Canegrowers and industry stakeholders, including government, agreed that the socioeconomic impact of the sugar tax would be reviewed. A socio-economic impact assessment has been commissioned but is not yet finalised,” Talmage said.
“The sugar industry is facing severe economic headwinds that threaten its survival including the sugar tax, cheap sugar imports and significant increases in costs of production. The minister should immediately decrease the sugar tax as part of government’s efforts to save jobs and grow our economy.”
SA Sugar Association executive director Trix Trikam also said any increase in the sugar tax would “plunge the sugar industry into a crisis from which it might never recover”.
He noted that since the introduction of the health promotion levy, the industry has lost revenue of about R1.2bn per season amounting to about R3.6bn over the past three seasons. Also, two mills have had to close.
Trikam noted that the preliminary findings of an independent study commissioned by the National Economic Development and Labour Council had corroborated the industry's assertion that jobs had been lost due to the introduction of the sugar tax.
“There is insufficient evidence to support the notion that sugar taxes lead to reduced calorie consumption, which is actually what is required to reduce SA’s obesity prevalence.
“While available evidence indicates that the tax has reduced consumption of sugar sweetened drinks, there is no evidence that the reduced beverage consumption has actually resulted in the desired outcome of reduced obesity,” Trikam said.
Mboweni said in response to Ryder’s question that no assessment had yet been conducted to ascertain the impact of the levy on the volumes of sugar beverages being consumed.
“However, the decline in the revenue collection as reflected in the second year of the levy is a good proxy indication that either the amount of sugar in the beverages and/or consumption has come down,” he said.
Mboweni noted that since the introduction of the levy manufacturers had started reformulating their products by reducing the sugar content; increased their product portfolio with less or no sugar products; reduced the package sizes of normal products together with increased pricing, and increased the package sizes of new low or no sugar products, together with reduced pricing of these products, to encourage consumers to switch to lower sugar alternatives.
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