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Study finds sugar tax not quite hitting the sweet spot

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A quiet storm is brewing on the sustainability of the Health Levy, which encompasses the Sugar Tax, and the survival of the sugar industry following a report that indicates more might be lost by the sugar industry than is gained by the government shoring-up healthy living.

A quiet storm is brewing on the sustainability of the Health Levy, which encompasses the Sugar Tax, and the survival of the sugar industry following a report that indicates more might be lost by the sugar industry than is gained by the government shoring-up healthy living. Photo: File

A QUIET storm is brewing on the sustainability of the Health Levy, which encompasses the Sugar Tax, and the survival of the sugar industry following a report that indicates more might be lost by the sugar industry than is gained by the government shoring-up healthy living.

A National Economic Development and Labour Council (Nedlac) sponsored study commissioned at the request of the portfolio committee for trade and industry highlights the devastating impact the tax has had on the sugar industry, as well as the broader economy, and on jobs.

It indicates that the sugar industry is hemorrhaging more jobs, capital expenditure and opportunity cost than the state is benefitting from trying for a healthier nation.

According to extracts released by SA Cane Growers Association chairperson Rex Telmange yesterday, the sugar industry has since introduction of the sugar tax in 2018 seen an annual decline of at least R653 million in investment into the economy, along with an annual R1.9 billion decline in the sugar industry’s gross value added (GVA) contribution to the fiscus.

This, along with the loss of over 16 000 jobs in a Covid-19 pandemic-gripped economy, has cost the country an annual R2.05bn a year. (GVA is the measure of an industry’s net output. It is used to quantify the contribution of each industry to GDP).

“It is important to highlight that these findings only cover the first year of the implementation of the sugar tax and therefore these figures are no doubt far higher as a result of the tax still being in place three years later.”

And for all these catastrophic consequences, there is no evidence that the tax has achieved its stated objective to reduce national obesity levels. This has created the worst possible scenario with the sugar industry bearing the brunt of a health intervention that is not supported by any evidence,” Telmange said yesterday.

The report, to which Cane Growers and other aligned industry players hope to make presentations to Parliament soon, indicates that prior to the implementation of the tax, sugarcane growers supported 94 621 direct, indirect, and induced jobs in 2017 – which accounted for 11.2 percent of all South African agricultural workers.

However, by 2019, the sugar tax had cost the sector 9 154 jobs, almost 10 percent of its workforce.

It revealed that while sugarcane farming contributed R1.5bn to the national GDP in 2017, this figure fell by an estimated R214.7m a year after the sugar tax was introduced, and a cumulative R414.2m after the second year.

The release of the report coincides with the recent establishment of the Sugarcane Value Chain Masterplan Task Team on Product Tax Policy to review the impact of the sugar tax on rural communities and economies in sugarcane growing areas as well as the financial sustainability of the industry.

On the other hand, a study released in April by the SAMRC/Wits Centre for Health Economics and Decision Science (Priceless-SA) and its partners, found that South Africa’s sugar tax had led to fewer people buying sugar sweetened beverages (SSBs).

It outlined that taxation on locally produced sugary drinks comprises R3.2bn – R1.32bn more than the government expected to collect when the so-called sugar tax was introduced in April 2018.

The R3.2bn in sugar tax on locally produced goods was R1.5bn more than the anticipated income of R1.7bn that was predicted for February 2018, and was R799m more than what was predicted for February 2019.

It found there was a 51 percent reduction in sugar, a 52 percent reduction in calories, and a 29percent reduction in the volume of beverages purchased per person per day following implementation of the tax, a statement from Wits University revealed.

“These results back up the impact we’ve seen from similar policies in other countries – that beverage taxes based on sugar content can help reduce excessive sugar and energy intake,” said Professor Karen Hofman, director of Priceless-SA.

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