A sugar tax of 2.29c/gram on sweet drinks would result in a net decline in volumes sold of between 13% and 15%.
This is the conclusion of a socioeconomic impact study conducted by the Treasury on the tax on sugary beverages.
The results of the study were presented on Tuesday by Treasury chief director Cecil Morden during public hearings on the proposed tax held jointly by Parliament’s health and finance committees.
The meeting was well attended by representatives of health organisations, cane growers and the sugary beverages industry, which has been lobbying hard against the proposed tax.
The Treasury received 144 written comments plus 113 one-page petitions on the proposal.
Finance Minister Pravin Gordhan announced the proposal to tax sugar-sweetened beverages in the 2016 budget, citing growing concern about obesity in the country. The tax would, among other things, increase the price of a litre of coke by 20%.
The minister is expected to make further announcements on the proposed tax in his budget announcement in February following which draft legislation will be tabled in Parliament.
The socioeconomic impact study also found that the overall effect on the economy was negative "but relatively small". Real GDP would be 0.02% lower without the tax.
Morden said the health outcomes associated with the tax had to be factored into the overall assessment of the tax proposal.
The Treasury presentation highlighted that higher prices would discourage the consumption of soft drinks, with lower income households being the most affected.
Over the past few years the volume of sugary beverages increased sharply while prices had fallen, Morden said.
If the industry modified its products and reduced the sugar content, the tax obligation would be lower and the effect on volumes would be reduced or even eradicated. The effect of the tax on jobs would be "way, way less" than the industry had forecast, Morden said.
Treasury deputy director-general Ismail Momoniat explained that the tax measure would not by itself result in a marked decrease in obesity and its associated health problems. It would have to be supported by the education of consumers.
He said that globally fiscal measures such as taxes "are increasingly recognised as effective complementary tools to help tackle the noncommunicable diseases and the obesity epidemic".
Similar taxes had been imposed in the UK, Mauritius, Mexico and France as well as several states in the US.
Momoniat said the proposed tax would be implemented through the Customs and Excise Act. Momoniat said Treasury was seriously thinking of extending the sugar tax to 100% fruit juice, which is currently excluded.
Treasury officials stressed that the proposed tax was not intended as a revenue raising tool but as an instrument to promote health.
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