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Doubling SA sugar tax would be ‘disastrous’

The embattled SA sugar industry has criticised calls for the government to increase the sugar tax, saying doing so would prove disastrous for a sector that is already bleeding jobs.

Andrew Russell, chair of the SA Canegrowers Association, said recently that the calls showed “zero regard” for the impact the proposed tax hike would have on the one-million people who rely on the sugar industry for their income.

He said a report commissioned by the National Economic Development and Labour Council (Nedlac), a policy formulating platform for government, business, labour and community constituencies, showed the sugar levy had a significant effect on job levels. 

The report showed that in the first year of the sugar tax coming into force, “there were 16,621 job losses across the industry and 9,000 job losses in the cane-growing sector alone”, said Russell, adding that most of these job losses had been in communities living in rural areas.

The sugar industry directly employs about 85,000 workers, while supporting 350,000 jobs across the value chain.

“The report also highlighted that the sugar farming sector’s output had declined by a cumulative R414.2m by 2019 as a result of the sugar tax (2018: R214.7m and 2019: R199.5m), while the sugar processing sector’s output had declined by a cumulative R772.1m by 2019.” 

The sugar tax also resulted in a R653m decline in investment into the economy, said Russell.

The levy has translated to higher costs for an industry that lost R84.5m during the violent unrest in KwaZulu-Natal and Gauteng in July as sugar cane plantations and other crops were razed, while mills had to cease operations, said Trix Trikam, executive director of industry organisation SA Sugar Association (Sasa).

Coca-Cola Beverages Africa also blamed the levy for job cuts after it was accused of breaching a merger condition not to cut jobs at two bottling plants it bought in 2016. The company was later cleared of wrongdoing.

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.

Academics call for higher tax

Academics from institutions such as the University of Cape Town, Wits University, Oxford in the UK and Harvard and Duke in the US said in a newspaper advertisement this week that the levy should be doubled, noting that obesity-related diseases are among the top 10 causes of death in the country.

The scholars said doubling the tax, officially known as the health promotion levy (HPL), would have “enormous” health and economic benefits for the country. The tax, which has remained at 11% since its introduction in 2018, has generated R5.8bn in revenue over the first two fiscal years. 

“The initial Treasury proposal gave very strong reasons for the HPL, including [that] the sugar and excess calorie consumption from beverages has been linked to overweight and obesity, as well as diet-related diseases such as type 2 diabetes, hypertension, which are the leading causes of death and disability … in SA,” the scholars said.

They said obesity-related diseases such as diabetes, stroke and heart disease, among others, are among the top 10 causes of death in SA. “There is a need to increase the HPL rate to the original proposed level by Treasury to further promote health.”

The scholars stated that obesity rates in SA are the highest in Sub-Saharan Africa and are continuing to “increase rapidly, with almost 40% of women and 11% of men obese, and 69% of women and 39% of men being overweight or obese”.

Non-government organisation the Healthy Living Alliance (Heala) has said a 20% tax on sugary drinks could, among other things, result in 220,000 fewer obese adults, avert about 72,000 deaths and save the government more than R5bn in healthcare costs over 20 years.

However, Trikam said the scientific evidence had shown a decrease in sugar intake, but not a reduction in obesity and diabetes prevalence rates, for which the sugar tax was originally intended and implemented to achieve.

Trikam called for an “independent study” to look into what South Africans are eating to determine which foods contribute to the high calorie intake in obese people.

Prof Karen Hofman, from the SA Medical Research Council and Wits Centre for Health Economics and Decision Science, who also signed the advertisement, has said that a national study conducted a year after the levy was introduced found that “households in urban areas halved the volume of sugary beverages they bought, cutting their sugar intake by nearly a third”.

The National Treasury said it does not comment on tax proposals before the annual budget in February.