The proposed sugar tax on sweetened beverages could push the country down into recession if implemented, says Beverages Association of South Africa (BevSA).
The association issued this warning following treasury’s decision to push forward with its plan on sugar tax.
Finance minister Pravin Gordhan had in his 2016 budget speech earlier this year, announced government’s plan to introduce a tax on sugar-sweetened beverages, expected to kick-start in April 2017 in a bid to “help reduce excessive sugar intake.”
On this, BevSA warned government not to push on with its plan saying the local economy will be severely affected by the plan as it would lose R14 billion. It also said that such decision by government could also push the country into recession.
BevSA joins bottlers and 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 tax would 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.
To them also, the proposed sugar-sweetened beverage (SSB) tax could cause between 62,000 to 72,000 job losses in the country and even worsen the broader fiscal and societal costs associated with unemployment.
SA government took to this move in following decisions by government around the world, to reduce sugar consumption, which is linked to high instances of conditions such as obesity and diabetes.
The move is in line with growing action by other governments around the world, to reduce sugar consumption, which is linked to high instances of conditions such as obesity and diabetes. These non-communicable diseases strain the financial and human resources of health care systems.
The tax on sugary drinks is seen by majority, as a step towards making South Africans healthier, according to well-being experts. Sugar is blamed for obesity and an increased risk for lifestyle diseases, and can also boost state funds.
Treasury has estimated that the tax will add R11 billion to the fiscus.
BevSA and players such as Coca-Cola however argue that the tax plan will fail on both accounts.
“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,” .
“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.”
The group claim that while average daily energy consumption in South Africa increased by 191 daily calories per capita (799 kilojoules (kJ) per capita) – resulting in adult obesity rates growing from 22% to 27.7%, 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 ended by saying that all the sugar tax would ultimately accomplish is a reduction in employment and production, which would in turn lead to revenues dropping by R3.1 billion a year, destroying small businesses, and causing a fall in UIF payments of R700 million due to the loss of work.