We are never too far from the easy path. It tempts us at every juncture, and it seems that with what is now termed the health promotion levy (previously the tax on sugary beverages), we will choose the path of least resistance there too.
The government is determined to implement a tax it hopes will reduce the consumption of sugar-sweetened beverages. But more than just taking the easy road, this kind of policy making reinforces the notion of a nanny state, which we should always guard against.
In his budget speech in February, former finance minister Pravin Gordhan insisted that "further consultations are currently taking place on the tax on sugary beverages.
"Arising from these discussions, and working closely with the Department of Health, the proposed design has been revised to include both intrinsic and added sugars. The tax will be implemented later this year once details are finalised and the legislation is passed."
Delivering his budget vote three months later, his successor, Malusi Gigaba, told the finance portfolio committee that "tax legislation currently before or soon to come to Parliament will facilitate the implementation of the 2017 tax proposals, including the tax on sugary beverages".
The medium-term budget policy statement tabled by Gigaba last week has this to say about the tax: "The health promotion levy, which discourages the consumption of sugary beverages, is under consideration in Parliament, with a proposed start date of 1 April 2018."
Thus the minister has indicated the intention of the government, through Parliament, to move to police people’s choices and use the stick of taxes to do so.
In parliamentary hearings on the proposed tax, the industry proposed that the National Economic Development and Labour Council (Nedlac) was the appropriate forum for consensus to be reached on the tax. However, while the chairman of the standing committee on finance, Yunus Carrim, agreed that Nedlac "has the capacity to find a significant degree of consensus", he also asserted that the final decision on the tax resided with Parliament.
In this vein, during the Nedlac consultation process, the Treasury agreed to exempt 100% fruit juice from being taxed, because while it contains high levels of sugar, this is intrinsic rather than added and it also contains vitamins and nutrients, which regular fizzy drinks don’t.
To make this an alternative, the government must put in place measures that promote cheaper production and distribution of fruit juice. These measures would include the acceleration of programmes to increase fruit production and fruit juice manufacturing, especially by black economic players. This would be in line with the country’s plans to facilitate the emergence of black farmers and beverage manufacturers, as well as competition in the market.
Gigaba spoke in the budget of measures to support the agricultural sector, stating that it is one of the priority sectors the government is looking at. If he does, along with measures of support for food manufacturing – the minister also highlighted the importance and need to support the manufacturing sector — we should expect to see employment grow and prices fall in the fruit juice market, leading to the desired outcomes of creating healthier alternatives. But this would be the harder route, given that we can simply implement a tax. But we also know that taxes to incentivise or disincentivise certain types of behaviour have been shown to be rather blunt objects and often lead to unintended consequences.
The beverage industry and sugar farmers have warned of significant job losses should the tax be implemented. Labour federation Cosatu, while acknowledging the unhealthy effects of sugary drinks, has also raised concerns about job losses.
"We are especially concerned with sugar cane farmers and we call on government and industry to raise the percentage of locally sourced sugar from 85% to 100%," it said.
The World Health Organisation (WHO) has been clear in its position on sugar intake, expressing concern that the increasing intake of free sugars, particularly in the form of sugar-sweetened beverages, "increases overall energy intake and may reduce the intake of foods containing more nutritionally adequate calories, leading to an unhealthy diet, weight gain and increased risk of noncommunicable diseases".
This is well understood, and may even be simple logic. In this regard, in its 2013 WHO Global Action Plan, the organisation encouraged member states to, "as appropriate within the national context, consider the implementation of such measures as taxes and subsidies that create incentives to encourage behaviours associated with improved health outcomes, improve the affordability and encourage consumption of healthier food products, discourage the consumption of less healthy options".
The first important idea from the WHO relates to implementation of measures "appropriate within the national context". This speaks directly to how we employ instruments that will be effective given our environment and not the notion of "global experience". For example, SA is a low-skill country, so agriculture is an important industry to nurture. As Cosatu has argued, the tax under discussion has the potential to destroy this industry. The weak labour environment may suffer disproportionately more damage than peer countries.
The second critical consideration is about encouraging behaviour associated with better outcomes. In other words, focusing on carrots, which are nutritious, rather than sticks, which are blunt and often unhelpful.
This means a stronger focus on educating the public rather than punishing them. This has been done in the case of tobacco, with marked success. But more importantly, the WHO encourages measures that improve affordability and thus the consumption of healthier food products. This takes us back to developing the beverages industry so that healthier alternatives are more easily available.
There is also this: we are a free society.
The insistence by the government on creating a nanny state rather than an informed population that is better able, under the right circumstances, to make good choices for itself should be concerning. Why should the government not promote good decision-making rather than insisting on leading every choice?
When they consider the tax or levy as proposed by the Treasury, we should hope that MPs treat those they represent as informed decision makers rather than children to be nannied and whose behaviour can be changed by the threat of a stick. Further, that they will insist the government avoids the easy route and takes the path that has the potential to create jobs rather than destroy them. The government could also make more tax rand that way.
Parliament should insist that a broader and potentially much more effective path be taken.
• Payi is an economist and head of research at Nascence Advisory and Research.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.