Bigger sugar tax planned for South Africa – with billions of rands being brought in
The introduction of the Health Promotion Levy (HPL) has been largely successful in generating additional revenue for South Africa’s government, with Treasury now planning to extend and expand the tax from 2023.
In 2018, Treasury introduced the Health Promotion Levy (HPL) on sugary drinks with more than four grams of sugar per 100 ml. The rate is currently fixed at 2.1 cents per gram of the sugar content that exceeds four grams per 100ml, i.e. the first four grams per 100ml are levy-free.
The tax, colloquially known as the “sugar tax”, is charged on non-alcoholic sugary beverages, except fruit juices, and practically works out to about 10%-11% per litre of the sugary drink.
At the time, the government had reasoned that the policy would disincentivize the excessive consumption of sugar, which was seen as the driver of increasing non-communicable diseases such as obesity, diabetes, and high blood pressure.
The logic was that, over the long term, the sugar tax would reduce sugar consumption levels, thereby decreasing the prevalence of these diseases – which are currently also placing people at a higher risk of severe forms of Covid-19.
Responding in a recent parliamentary Q&A, finance minister Enoch Godongwana said the sugar tax brought in R2.2 billion in the revenue year 2021/22, with R77 million of this collected from imports. He added that this revenue reflects growth of 6.92% on the 2020/21 collections of R2.11 billion.
The government now plans to extend and expand this levy from the 2023 financial year. This change was initially announced in the 2022 national budget, but a last-minute announcement by Treasury in April indicated that the change has been deferred by a year.
The changes will see the health promotion levy for beverages with more than 4g of sugar content per 100ml increased from 2.21c/g to 2.31c/g from 1 April 2022. Consultations will also be initiated to consider lowering the 4g threshold and extending the levy to fruit juices, it said.
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