Calls to hike cigarette, alcohol and sugar taxes in South Africa

 ·27 Oct 2024

The newly formed Health Tax Alliance (HTA) is urging the South African government to increase taxes on tobacco, alcohol and cool drinks “in an attempt to save the public health system the cost of the burden of [related] diseases. “

“South Africa spends a significant amount of public health resources treating diseases [diabetes, cancer and cardiovascular diseases] caused by smoking and drinking alcoholic beverages and cool drinks,” said the Rural Health Advocacy Project (RHAP).

For example, the direct cost of diabetes to South Africa’s health system is R2.7 billion and that is only for those patients who are diagnosed. This is estimated to increase to R35 billion by 2030.

According to Statistics South Africa, there was an increase of 58% in deaths from non-communicable diseases from 1997 to 2018, and diabetes is the second leading cause of death in the country after tuberculosis.

As a result, the RHAP said that if the government significantly raised the taxes on tobacco, alcoholic and sugar products, it “would increase their price, making them more expensive [which] in turn will result in a drop in its consumption and an increase in the revenue collected from these products.”

They added that it would also ultimately result in a drop in the disease burden that the health system needs to treat.

Globally, health taxes on harmful products like tobacco, alcohol, and sugar are said to aim to reduce demand, prevent disease, and generate revenue.

In South Africa, however, the health taxes have been below recommendations by global health bodies like the World Health Organisation.

“Until now, though, the government has not increased the taxes on these products significantly and only marginally in line with inflation,” said the RHAP.

However, it should be noted that the National Treasury announced above-inflationary ‘sin tax’ increases in the 2024 Budget Speech.

Currently, the guideline excise tax burdens for wine, beer and spirits are 11%, 23% and 36%.

The current excise tax on the most popular tobacco products is 40% of the retail price, with an increase in excise duties by 4.7% for cigarettes and cigarette tobacco, and by 8.2% for pipe tobacco and cigars in 2024/25.

For sugar drinks, the rate is fixed at 2.1 cents per gram of sugar content that exceeds 4 grams per 100ml. 

The RHAP believe that this could all change with the launch of the HTA – a group of public health advocates working in these sectors that are combining their efforts to exert pressure on the government for increases in sin taxes.

Recently launched in Cape Town, the HTA will include the likes of the RHAP, Southern African Alcohol Policy Alliance, the Treatment Action Campaign, Priceless SA, the Campaign For Tobacco-Free Kids, the National Council Against Smoking, the Public Health Association of South Africa, the South African Medical Association, the South African National Aids Council and the TB Accountability Consortium.

Speaking at the launch, former deputy director general of the National Department of Health, Dr Yogan Pillay, said that there were inadequate responses to the commercial determinants of health, which are strategies, practices and pathways that commercial actions undermine health and create inequities.

He said that there is the need to reorientate societies and build trust and solidarity, but noted that raising taxes was just part of the solution to a healthier society.

Dr Chengetai Dare from Priceless SA said that he believes it is however a step in the right direction as for example, some studies estimate that extending the health promotion levy on sugar sweetened beverages to include juices could cut more than 150,000 cases of diabetes.  

Speaking at the launch, RHAP executive director Russell Rensburg said: “Tobacco, sugar, and alcohol cost the South African health system a significant amount of money.”

“The direct and indirect costs cannot be denied. Something must be done to navigate these costs and save the ailing public healthcare system,” he added.

Some sectors say no

Looking at the sugar industry in South Africa as an example, BusinessTech recently reported that stakeholders are divided over the impact of the sugar tax.

Industry representatives like the South African Sugar Association (Sasa), SA Canegrowers and the South African Farmers Development Association (Safda) argue that the tax threatens jobs, while health advocates stress its importance in addressing rising obesity and diabetes rates.

The sugar sector, primarily in KwaZulu-Natal and Mpumalanga, supports approximately 65,000 direct jobs and 271,000 indirect jobs, impacting about one million livelihoods.

However, the industry has seen a nearly 25% decline in production over the past 20 years, exacerbated by drought and rising electricity costs.

The Health Promotion Levy (HPL), introduced in April 2018, imposes a tax of 2.1 cents per gram of sugar above a 4-gram threshold per 100 millilitres.

While the levy generated R7.9 billion from its inception to March 2021, industry leaders like Trix Trikam from the Sasa claim it has led to significant revenue losses and job cuts, including closing two mills.

Finance Minister Enoch Godongwana acknowledged the sector’s struggles in his February 2023 budget, pausing any increase in the HPL until the next review in 2025.

However, industry representatives are concerned that any tax increase could devastate the sector.

Conversely, health researchers argue that the sugar tax should be increased.

With diabetes now affecting 12% of South Africa’s adult population, they believe the tax has already reduced sugary beverage consumption, and they advocate for an increase in the HPL to 20%, as recommended by the WHO.


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