SOUTH AFRICA – The so-called “sugar tax” is not meant to be a revenue-raising instrument, but was intended as a “health promotion tool”, MPs heard on Tuesday.

Treasury gave MPs sitting on parliament’s standing committee on finance and the health portfolio committee a presentation on the policy rationale for the proposed taxes on sugary beverages.

“Studies show that a 10 to 20 percent price increase of SSBs [sugar-sweetened beverages] may be required to translate into a meaningful impact on health outcomes,” the policy rationale document, tabled during public hearings on the tax proposal, said.

Treasury noted there were concerns that the proposed tax would be “regressive and cause harm to those most vulnerable in society”, but insisted obesity had mostly affected lower socio-economic groups making a sugar tax favorable to poor people.

Obesity being a global epidemic is a major risk factor for NCDs [non-communicable diseases] like diabetes and heart problems.

In South Africa the number of overweight people has grown over the last 30 years, and the country now has the highest obesity rate in sub-Saharan Africa, with 42% of women and 13% of men being obese.

“Weight gain from excess sugar consumption mainly stems from sugar-sweetened beverages,” according to Treasury’s rationale.

The policy rationale mentions the World Health Organisations stance that “fiscal measures such as taxes are increasingly recognized as effective complementary tools to help tackle the NCDs and obesity epidemic at a population level”.

According to Statistics South Africa, in 2013 HIV and AIDS had been receiving the lion’s share of public health funding, despite 51.3% of all deaths being attributed to NCDs.

“The increased health care costs and increased utilization rates will place a heavy burden on the health system,” the Treasury document said.

“The growing NCD burden will reduce productivity levels and GDP [Gross Domestic Product] (6.8% of GDP was lost due to NCD-related deaths, absenteeism, presentism, and early retirement in 2015).”

In July last year treasury published a draft policy paper for public comment.

A total of 144 comments including from the Sugar Industry, NGO’s, Academia, and individuals were received.

In its consideration of the comments, Treasury said: “The proposed tax is in line with the Department of Health’s Strategic Plan for the prevention and Control of NCDs 2013 – 2017, and National Strategy for the Prevention and Control of Obesity 2015 – 2020.”

Treasury said the economic impact study by the sugar industry “appears an exaggeration”.

In August last year, the Beverages Association of South Africa cautioned taxes of SSBs would cost the economy R14 billion.

Treasury analysis differs, and estimates that the formal businesses selling sugar-sweetened drinks would suffer a loss of R1.4 b, while the informal sector would lose around R165 million.

South African formal businesses selling carbonated sugar drinks is estimated to suffer a R1.4 billion losses in revenue, should a “sugar tax” be implemented, National Treasury said on Tuesday.

Treasury officials participated in public hearings on the proposed tax on sugar beverages before the standing committee on finance as well as the health portfolio committee, providing MPs with an analysis of the socioeconomic impact of the policy proposal.

The analysis document tabled during the hearings states: “Higher prices discourage consumption of soft drinks, with lower-income households most affected.”

“Overall, the impact of the tax is negative, but relatively small, real Gross Domestic Product (GDP) is 0.02 percent lower compared to the no-tax baseline,” said National Treasury.

January 31, 2017;