The National Treasury plans to expand and increase its ‘sugar tax’ on drinks in South Africa from next month.
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.
Treasury has confirmed that the health promotion levy for beverages with more than 4g of sugar content per 100ml will be 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.
The Consumer Goods Council of South Africa (CGCSA) has criticised the decision to increase and expand the levy, warning it will result in unintended consequences of job losses and further contribute to many sustainable farmers losing their livelihoods.
The CGCSA said there was no consultation prior to the decision to increase the levy, neither was there sufficient consultation when the government first introduced the Health Promotion Levy (HPL) on sugary beverages.
“The CGCSA is concerned that the government clearly refuses to accept previous requests to allocate or ring-fence money raised from the levy to health promotion as originally planned. This is not the first time government has broken its promises.
“Promises were made that monies raised from the plastic bag tax would go towards environmental projects, and yet we have not seen evidence of this happening. It would appear the same has happened with commitments to use the money raised from the sugar tax to fund health promotion programmes in our national effort to fight obesity and reduce the high incidence of non-communicable diseases.”
The group said it is particularly worrying that the tax has been increased at a time when the government is implementing the Sugar Master Plan to grow the sector and protect it from the imported competition.
“With the sugar tax expected to result in higher sugar prices, consumption will decline, and this will affect sugar farmers, who are already facing viability problems, mainly due to competition from imported sugar and rising input costs.
“The decline in sugar consumption will have increased pressure on the small producers. It appears as if the government has not considered nor looked at the policy implications across the various government departments,”677 the CGCSA said.