sugar tax

Sugar Tax: An update – where are we at currently?

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ADSA spokesperson, Mari Pronk, updates us on the current standing of Sugar Tax.

The obesity epidemic

South Africa is facing a severe and growing obesity epidemic.According to the South African Demographic and Health Survey (2016), 68% of women, 31% of men and 13% of children are overweight or obese.1 This makes South Africa the country with the highest overweight and obesity rate in Sub-Saharan Africa.

Sugar and health

Added sugars (added sugars are any sugars added to foods or drinks by a manufacturer, cook or consumer), particularly in beverages, are a major cause of increased weight gain and tooth decay.

The World Health Organisation (WHO) recommends that: the daily consumption of added sugars should be less than 10% of an individual’s daily energy intake. This would be equivalent to about 12 teaspoons of granular sugar per day for adults. For additional health benefits, this amount can further be reduced to 5% of daily energy intake (about six teaspoons of sugar).2

Sugar-sweetened beverages

Sugar-sweetened beverages (SSB) are non-alcoholic beverages, sweetened with added sugars. There is convincing evidence to support a positive link between the intake of SSB and the risk of obesity, diabetes and other conditions, such as stroke and heart disease.3

SSB consumption rates among urban and rural communities in South Africa have increased considerably over the past 20 years. Reports show that the total SSB consumption has risen by 68,9% from 1999 to 2012. This increase is accompanied by an increase in the rate of overweight and obesity, leading to an increased risk of non-communicable diseases, such as diabetes.4

Regular, high-calorie carbonated soft drinks are considered the most frequently consumed of all SSB categories. Several studies indicated that the frequent consumption of these drinks is due to habit, addiction, advertising and the wide availability of inexpensive SSB, as opposed to more expensive fruits, vegetables and wholegrain products.3,4

What is sugar tax?

The Health Promotion Levy (HPL) on sugary beverages is a levy that was introduced, in support of the South African Department of Health’s Strategic Plan for Prevention and Control of Obesity and aims to reduce obesity by 10% by 20205.

South Africa was the first country in Africa to introduce the taxation of SSB, when the tax was introduced in April 2018, with the objective of reducing SSB consumption.

In 2018, sugar tax started at a rate of 2,1 cents per gram of sugar content, which exceeds 4 grams (about one teaspoon of granulated sugar) per 100ml. The first 4 grams per 100ml are levy free.6

The sugar tax results in an average price increase of 11% on SSB, whereas the WHO recommends an increase of 20% or more, to be effective.7

In 2019, sugar tax increased from 2,1 cents to 2, 21 cents, in line with the then inflation rate of 5,2%.8This amount is unchanged for the 2020/2021 financial year.

A can of 300ml (current can size) Original Taste Coke (contains 33g sugar) will not be taxed on the first 12g (4g for each 100ml) of sugar. The remaining 21g of sugar will be taxed at a rate of 2,21 cents per gram. Thus, a 300ml can of Original Taste Coke is taxed by 46,41 cents. A can of 300ml Less Sugar Coke (contains 24g sugar) is taxed by 26,52 cents.

 Locally manufactured SSB are taxed at source, meaning that the tax should be paid by the manufacturer.6

 Effect on consumption

In countries where sugar tax has been implemented, such as Mexico, Portugal, Ireland, Canada and in some states in the USA, the impact on consumption has been greater in poorer households.4 Unfortunately, the same impact is expected in South Africa.

Mexico has so far been the most successful with their sugar tax levy. There was a decrease in the consumption of taxed beverages by an average of 6%, after implementation in 2014.7

Manufacturers

Producers of SSB have started to reduce the sugar content of their products to reduce sugar tax. Coca-Cola has reduced the sugar content of its SSB by 26%.8

Another strategy by manufacturers of SSB, was to reduce the volume of the product by 10%.7A 330ml can of SSB now only contains 300ml and a 500ml bottle now contains 440ml.

The reduction in sugar content and container size may possibly contribute to a decrease in sugar intake by consumers.

A recent study found that, since the introduction of sugar tax, there has been a significant price increase in carbonated soft drinks. It was found, however, that the price increase was similar for no sugar and high-sugar beverages, despite the underlying difference in tax liability.9

Effect on the sugar industry

According to the SA Cane Growers Association, the price of sugar cane is at a record low. This is due to the impact of a devastating drought; cheap sugar being imported from other countries; and a substantial drop in the demand for sugar since the implementation of the sugar tax.10

Tax income

During the first year after its introduction, sugar tax has raised almost R3 billion.8 Many public health experts called for this money to be specifically allocated for obesity prevention initiatives. Money generated from the HPL goes into the National Revenue Fund, to be used for general government expenditure, including health expenditure, which also include health promotion interventions.8

The future

Non-profit organisation, the Healthy Living Alliance (Heala), has asked Treasury to increase (to 20%) and expand (to include fruit juices which have high sugar content) South Africa’s sugar tax, as the country deals with growing health issues.11

Conclusion

Studies are currently underway to determine the impact of sugar tax on the consumption of SSB, to determine its reduction of obesity.5

In the meantime, it is important to note that South Africa probably needs to complement sugar tax, with lifestyle and dietary change strategies. These strategies might include increasing physical activity and improving the availability and cost of healthy food choices, such as fruit, vegetables and whole grain products.

References

  1. South African National Department of Health (2017) ‘South Africa Demographic and Health Survey 2016 – Key Indicators Report’ Available at: https://www.statssa.gov.za/publications/Report%2003-00-09/Report%2003-00-092016.pdf (Accessed: 6 March 2020). 
  2. World Health Organisation (2017) ‘Sugar tax, why do it?’ Available at: https://apps.who.int/iris/bitstream/handle/10665/260253/WHO-NMH-PND-16.5Rev.1-eng.pdf?sequence=1(Accessed: 6 March 2020).
  3. Bosire, E.D., Stacey, N., Mukoma, G., Tugendhaft, A., Hofman, K. and Norris, S.A. (2019) ‘Attitudes and perceptions among urban South Africans towards sugar-sweetened beverages and taxation’, Public Health Nutrition, 23(2), pp. 374-383.
  4. Okop, K.J., Lambert, E.V., Alaba, O. Levitt, N.S., Luke, A., Dugas, L., Dover, R.V.H., Kroff, J., Micklesfield, L.K., Kolbe-Alexander, T.L., Smit Warren, Dugmore, H., Bobrow, K., Odunitan-Wayas, F.A. and Puoane, T. (2019) ‘Sugar-sweetened beverage intake and relative weight gain among South African adults living in resource-poor communities: longitudinal data from the STOP-SA study’, International Journal of Obesity, vol. 43, pp. 603–614. Available at: https://doi.org/10.1038/s41366-018-0216-9 (Accessed: 6 March 2020).
  5. Schneider, F. (2019)‘Health Levy or Sugar Tax: Is the Pain Worth the Gain?’, Taxtalk Magazine. Available at: https://www.thesait.org.za/news/450529/Sugar-Tax.htm (Accessed: 6 March 2020).
  6. South African Revenue Services (2019) ‘Health Promotion Levy on Sugary Beverages’ Available at: https://www.sars.gov.za/ClientSegments/Customs-Excise/Excise/Pages/Health%20Promotion%20Levy%20on%20Sugary%20Beverages.aspx(Accessed: 6 March 2020).
  7. ‘Is sugar tax really a health measure or a tax income stream?’, https://www.bizcommunity.com,18 Feb 2019 [Online] (Accessed: 6 March 2020).
  8. Pilane, P. and Green, A. (2019) ‘Sugary drinks tax turns one — amid opposition’, Health-e news, 1 April [Online]. Available at: https://health-e.org.za/2019/04/01/sugary-drinks-tax-turns-one-amid-opposition/(Accessed: 6 March 2020).
  9. StaceyN., Mudara, C.,WenNg, S., Van Walbeek, C., Hofman, K. and Edoka, I. (2019)‘Sugar-based beverage taxes and beverage prices: Evidence from South Africa’s Health Promotion Levy’, Social Science and Medicine, vol. 238. Available at: https://doi.org/10.1016/j.socscimed.2019.112465 (Accessed: 12 March 2020).
  10. Stainbank, G. (2019) ‘Sugar Tax: Devastating to an Industry Already on its Knees’,Taxtalk Magazine.Available at: https://www.thesait.org.za/news/450529/Sugar-Tax.htm(Accessed: 6 March 2020).
  11. ‘Push to increase South Africa’s sugar tax’, Businesstech, 12 February 2020 [Online]. Available at: https://businesstech.co.za/news/finance/373280/push-to-increase-south-africas-sugar-tax/(Accessed: 6 March 2020).

MEET THE EXPERT

Mari Pronk is a registered dietitian and a spokesperson for the Association for Dietetics in South Africa (ADSA). She is currently in private practice in Pretoria. She holds a post-graduate diploma in Diabetes and has a special interest in diabetes, cholesterol, renal disease and IBS.

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