Milking the Honeypot, an inconvenient truth about South Africa’s Sugar Tax – Rui Lopes

 

South African’s are too obese. That is unfortnately one of the very inconvenient truths plaguing the country at the moment, with South Africa possessing one of the highest death rates associated to sugary beverages in the world. This has promted the South African legislature together with the Finance Minister, Pravin Gordhan, to swiftly respond to such a growing obesity rate through the introduction of a sugar tax on all such beverages in an attempt to curb their usage wihtin the country. It is reasoned that the increasing of the price of such sugary beverages, will lower its demand within the country which in effect would reduce the obesity rate, thereby lessening the strain on South Africa’s health system.

 

The sugar tax aims to target still and carbonated soft drinks, fruit juices, sports and energy drinks, vitamin waters, sweetened ice tea, lemonade, cordials and squashes and is said to come into effect on 1 April 2017.

 

South Africa now follows suit with countries such as Mexico, France and the Netherlands, who in recent years have too introduced a sugar tax in an attempt to rein in on obesity. However with the imposition of a 20% tax rate on such beverages, South Africa is the undisputed leader of pack with Mexico being the next highest at a rate of 10%. The effect of such is that South African’s will therefore have to pay an additional 20% for their beloved sugary beverages.

 

Through thorough research at the University of the Witwatersrand, it has been stated that the imposition of a 20% sugar tax on such sugary beverages could lower obesity by around 220 000 adults in South Africa. However on the opposite end of the coin lies the fact that through the levying of this tax, such will generate an estimated R7 Billion in revenue year on year.

 

It therefore becomes evident that the consideration is truly whether the levying of a sugar tax curbs those deaths related to the consumption of these beverages toghether with the obesity rate, the medical costs associated to such coupled with the strain it is said to put on the country’s health system? Or, is the creation of such a tax, Parliament’s quick utility of the rapidly growing obesity rate within the country as a method of reducing the budget deficits currently experienced?

 

In order to arrive at the answer to such a question, one needs to observe the effectiveness of such a tax on a country which faces many of the same issues which plague South Africa. The most appropriate is without a doubt Mexico. Mexico is currently dubbed the country with the world’s highest death rate linked to sugary beverages. The country’s legislature, in an attempt to deter the growth of obesity, introduced a 10% sugar tax on all sugary refreshments within the country. The result of such has seen a decline in such beverages’ sales of around 6%. However it is important to note that year on year, Mexico still remains the country with the world’s leading death rate linked to such beverages.

 

The 6% decline in the demand of such beverages cannot however be overlooked, but importantly such demonstrates very minimal results, which in South Africa’s context would take much longer than the suggested 5 year period provided to achieving its goal of a 10% reduction of obesity.

 

Therefore despite the fact that the tax can be seen to operate as a deterrent to the pruchasing of such beverages, such does not dramatically decrease death rates associated to such and it can therefore be reasonably inferred that the imposition of such a tax does not prevent those who are already at risk of dying as a result of the consumption of such beverages from purchasing them, rather such persons are still willing to pay for these or find cheaper sugary beverages as an alternative. Hence the tax misses its mark on whom it is targeted for and rather unduly burdens those who are already poor through the increase of such prices, thus procluding such persons altogether from purchasing these beverages.  

 

This may very well be the strategy of the legislature in enacting the tax as many of these multinational companies have aimed to offset much of their declining sales, occurring since 2011, by targeting the poor in South Africa’s townships. A very good example of such is SABMiller who, in 2011, aimed to double the consumption of Coca-Cola in South African townships. However many consumers don’t have the means to make and carry out informed decisions, which in turn leads to higher healthcare costs.

 

Notwithstanding this, the increasing of such beverages by 20% does not mean that healthy food products shall in turn be decreased by 20%, and as a result of such, the sugar tax is in effect merely increasing the price of the products which are most in demand within the country. It is without a doubt that leading a healthy eating lifestyle is costly, and the introduction of this tax does nothing to make it more affordable.

 

Furthermore, the imposing of this tax will not deter companies from continuously producing cheaper, fizzier and sweeter variants of its product in order to attract a larger customer base and maintain the demand of its product and its profits. Many companies have responded through techniques which will see their beverages shift closer to the end of the spectrum of sugar-free drinks whilst maintaining the same quality. The question this therefore poses is whether such does not create even more health threats to a system which is already under pressure?

 

The introduction of such a tax would, as the legislature would ideally have it, accelerate the consumers shift to non-sugary drinks, and if this was to be the case, there is argument to be made that many people , through such a shift, would stop purchasing such sugary refreshments which would thus lead to a situation of a decline in many companies profits, the reduction in their market share which ultimately causes job losses.

 

A dichotomy lies in the further example of salt. Salt is without a doubt a major contributor to the increase in blood pressure, which in turn contributes to heart attacks and strokes. South Africans are said to have a discretionary salt consumption rate of around 40%, which, compared to many Westernized countries, sits at 15%. However if the legislature continously taxes those foodstuffs which are in demand, how long until the country is faced with the scenario of France as it was in 1789.

 

It is therefore evident that those who can continue to pay an additional 20% for such beverages will continue to do so undistrubed, however those who lie on the opposite end of the spectrum, who battle to make a daily living, will be constrained further through the increase of such prices whilst those foodstuffs which are healthy remain at their ordinary prices.

 

It is therefore submitted that if the legislature is destined on the enforcing of such a tax, that all revenue generated through such be directed not to the resolving of the deficit within the budget but rather to the reduction of healthy produce and the upgrading of the health system’s infrastructure within the country.

 

 

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