In what could deliver yet another blow to SA’s sugar industry and beverage companies, the world’s leading scholars on economics, public health and medicine have called for SA to double its sugar tax.
In a newspaper advert signed by professors from institutions such as the University of Cape Town, Wits University, Oxford in the UK and Harvard and Duke in the US, they said the levy should be doubled, noting that obesity-related diseases are among the top 10 causes of death.
In addition to raising more revenue, an increased tax would be a key instrument in fighting “rapidly increasing” cases of diet-related diseases such as type 2 diabetes.
While the levy has generated R5.8bn in revenue over the first two fiscal years, it has translated to higher costs for an industry that is now also trying to recover from the violent unrest that engulfed KwaZulu-Natal and Gauteng in July.
Before its near collapse amid an accounting scandal, Tongaat Hulett was among the biggest employers in KwaZulu-Natal and CEO Gavin Hudson has been leading a turnaround strategy since taking over in 2019.
Coca-Cola Beverages Africa blamed the levy for job cuts at two bottling plants it bought in 2016.
The tax, officially called the health promotion levy (HPL), is charged on nonalcoholic sugary beverages except fruit juices and works out to about 10%-11% per litre drink.
“Doubling the HPL rate to the original rate proposed by National Treasury in June 2016 will enhance the impact of the HPL on sugar consumption,” the scholars stated, referring to an initial proposal to set it at 20%. “Doubling the rate to the original proposal will increase revenue significantly and increase the health benefits.”
The industry said it lost more than R84.5m during the mayhem in July as sugar cane plantations and other crops were razed, while mills had to cease operations. Other major players that can be expected to lobby against any tax increase include Illovo Sugar and RCL Foods.
The sector generates an income of about R14bn a year and directly employs about 85,000 workers, while supporting 350,000 jobs across the value chain. Coca-Cola said it lost R300m in profit in the 2018 financial year when the tax was introduced. The industry has also faced headwinds from falling prices and cheap imports.
The academics disputed industry arguments on job losses, saying that data had shown “no statistically significant change in employment and followed preimplementation trends”.
Vuka Chonco, deputy general secretary of the Food and Allied Workers’ Union (Fawu), which represents more than 120,000 workers, said it opposed an increase in sugar tax, which would “be inviting businesses to reduce costs that will ultimately lead to job losses”.
Over 10,000 Fawu members are employed in the industry, Chonco said.
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