Why Gordhan should announce a sugar tax for South Africa

 ·24 Feb 2016

Finance Minister Pravin Gordhan is set to deliver one of the country’s toughest budgets yet and as he tries to trim the fat, a sugar tax could possibly be on the cards.

There have long been calls by a growing number of consumer bodies and health experts for the introduction of a sugar tax on sweetened sugar beverages (SSBs) to help curb the tide of obesity in South Africa, which is one of the most overweight nations in the world.

SSBs include the following: still and carbonated soft drinks, fruit juices, sports drinks, energy drinks and vitamin waters, sweetened iced tea, lemonade, cordials and squashes.

“We are not aware of any discussions about a sugar tax, but there has been speculation about it possibly being mentioned in this budget speech,” said health sociologist Aviva Tugendhaft, deputy director of research programme Priceless SA at the Wits School of Public Health.

Adding R7bn to state coffers

Preliminary estimates show a 20% tax on SSBs can generate about R7 billion a year for the state, said Tugendhaft.

“We have done a preliminary estimate – it is really not an in-depth analysis, but it shows that a sugar tax can generate an additional R7bn a year.”

These estimates were based on price, making assumptions on consumption.

“We know that when we increase prices then the consumption decreases, but it will obviously not disappear. We still do have some people consuming, but paying much more for that consumption and based on that, we were able to do a quick analysis on how much revenue it will generate.”

Read: 20% sugar tax on the cards for South Africa

Tugendhaft pointed out that while a sugar tax would generate much-needed government revenue, its health benefits would be even more valuable.

“In the next few years the country really will not able to support this growing obesity with its related diseases, because the health system is just going to be more overburdened. The costs that will be saved, given the strain on the healthcare system, are big.”

Tugendhaft noted that research by the University of Witwatersrand has found that a suggested 20% tax on SSBs may reduce obesity in 220 000 adults.

“The implications for this on lives and disability is huge, so the reason for the government to introduce a sugar tax would be the health impact. The costs of diabetes to the country are huge and in terms of death and disability, we have amputations and blindness because of diabetes so a sugar tax would help.”

Not a moneyspinner

Piet Nel, head of the School of Applied Taxation at the SA Institute of Tax Professionals, indicated that there had been talk over two years ago that a sugar tax was being considered.

“It was on the cards that there may be a sugar tax. It was raised about a year or two ago that there is research. But we have not seen any legislation to that effect; it may be announced if they want to proceed with that.”

Nel said while a sugar tax would raise government income, he suspected it would not be by a significant amount, adding that the rationale behind a sugar tax would be to influence lifestyle.

“I don’t see it as a money-spinner, but it will be an additional source of income similar to the sin tax.”

Influencing fiscal policies

The Department of Health released a document in December entitled a Strategy for Prevention and Control of Obesity in SA, which highlighted that the most effective way to help reduce the growing obesity problem would be to introduce a sugar tax. The document also mentions “influencing fiscal policies related to sugar-sweetened beverages”.

Minister of Health Aaron Motsoaledi has not made any pronouncements on a sugar tax, said his spokesperson Joe Maila, although he added that it is something the department has looked into.

“The department has been asked to consider a sugar tax by various groups and organisations to help prevent non-communicable diseases, but we have never discussed that with Treasury. We have not come to any determination about a sugar tax as the department of health, but it is something that we have just looked into.”

Treasury was not able to comment on any tax policies, noting that any pronouncements would be made by the minister in his much-anticipated budget speech address on Wednesday.

“When it comes to tax policy, it is not something that we comment on outside the budget,” said a Treasury spokesperson.

Other counties that have introduced a sugar tax include France, Mexico and several states in the US.

It remains to be seen what Gordhan will reveal in his address, but it is likely that consumers will not pay up for a sugar tax anytime soon as the finer details would still need to be ironed out.


More on a sugar tax in SA

Why South Africa needs a sugar tax

South Africa’s sugary drinks shock

SA drinks tax could promote health: Wits

Soft drinks and juices lead the way to obesity in SA

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