Sugar tax will cost South Africa economy R14 billion – and push the country into recession

The Beverages Association of South Africa has warned that the proposed sugar tax on sweetened beverages will cost the local economy R14 billion, and could push the country into recession.

BevSA has joined bottlers and other players in the local beverage industry in speaking out against the proposed tax, which would see as much as 20% being levied on sugar sweetened drinks.

According to the group, the proposed sugar-sweetened beverage (SSB) tax could trigger between 62,000 to 72,000 job losses, and exacerbate the broader fiscal and societal costs associated with unemployment.

The tax would also further increase the burden on consumers with 25% price increases (up to 80% in some cases), and damage the competitiveness of the non-alcoholic beverage industry, it said.

The aim of the tax is two-fold: to combat obesity by hiking prices of unhealthy beverages (encouraging consumers to choose healthier options), and to boost state funds. Treasury has estimated that the tax will add R11 billion to the fiscus.

However, BevSA and players such as Coca-Cola have argued that the tax plan will fail on both accounts.

Tax won’t solve SA’s obesity problem

On fighting obesity, the group noted that the average daily energy consumption in South Africa has increased by 191 daily calories per capita (799 kilojoules (kJ) per capita) from 1991 to 2011. As a result, adult obesity rates have grown from 22% to 27.7% over the period.

However, during this same time, consumption of added sugars has declined in both absolute terms (by 46 calories or 192 kJ per capita per day), and relative terms (from 12% to 10% of total calories), the group said.

SSBs account for just 3% of daily calories in South Africa, with the largest contributors to the rise in energy intake are calorie rich foods such as vegetable oils (up 105 calories or 440 kJ per day).

All the tax would ultimately accomplish is a reduction in employment and production, which, in turn, would lead to revenues dropping by R3.1 billion a year, killing small businesses, and a fall in UIF payments of R700 million due to the loss of work.

Push into recession

If pushed ahead, the SSB tax could reduce South Africa’s GDP by R14 billion – representing 0.4 percentage points in 2016 – in a market where projected growth is already projected to be zero percent.

“The punitive SSB tax would create significant uncertainty for the industry, and foster a climate in which investments may be unviable. This will prevent or reverse further growth and innovation,” BevSA said.

“We are committed to working with the Government to find workable solutions which address obesity while protecting jobs and our economy, particularly at this critical juncture for the country’s future.”

More on sugar tax

SA sugar tax: You’ll pay 20% more to cut out half a teaspoon of sugar

South Africa sugar tax could have its first casualty: Coca-Cola

South Africa sugar tax will cost 60,000 jobs

Why a sugar tax on beverages won’t tackle obesity in South Africa

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Sugar tax will cost South Africa economy R14 billion – and push the country into recession