In South Africa: Between Health and Employment Figures
In a crisis situation, short-term losses for long-term gains are often a hard sell. This comes to the limelight as South Africa’s unemployment rate peaks, and now the countries rates of diseases especially diabetes is on the rise. Pitting both rates against each other, tax, on the one hand, is aimed at reducing the consumption of sugary drinks and improving citizens’ health in the long run, while the resultant effect is the short-term job losses.
Implemented in 2018 after a first draft was tabled in 2016, the ‘sugar’ tax went up this year with inflation. South Africa’s treasury department based its tax on international standards to discourage consumers, settling on 20% or 2.29 cents per gram of sugar. By doing so, they became the first African country to implement the tax. Sweetened beverages that would be taxed included sodas, energy drinks, fruit drinks and vitamin water that all contain, high-fructose corn syrup, sucrose, or fruit juice concentrates.
In a strategy to reduce obesity by 10% come 2020, the Department of Health’s includes the tax as part of the process. It further forms part of a broader public health strategy to reduce the advent of non-communicable diseases. The tax had raised 2.3 billion rands (nearly $160 million), which the government plans to use on public health campaigns as of December last year. The national treasury is resigned to the fact that jobs would be lost, but that it would even out in time.
The South African Cane Growers Association said that translated to a loss of 1.3 billion rands for the 2018/2019 season, with the industry calling it a crisis. The price is too high for the sugar industry though. South Africa exported 40% of its processed sugar in the 2017/2018 season, but the industry will likely increase that to 47% of the total this year, selling nearly half of it at a lower price on the global market.
“This revenue loss will no doubt translate into severe job losses which could put up to 10 000 jobs at risk–in the cane-growing sector alone. This does not even include potential job losses in the sugar milling and non-alcoholic beverage industries” Graeme Stainbank, the associations’ chairman.
A number of Health experts, who prefer to refer to the tax as “the health promotion levy,” have accused the sugar industry of aggrandizement. Sue Goldstein, a researcher with Priority Cost Effective Lessons for System Strengthening South Africa (Priceless SA) at the University of the Witwatersrand, argues that the 7% loss to GDP caused by healthcare requirements and missed work due to illnesses like diabetes, which will be the leading cause of death by 2040.
Coca-Cola South Africa said the new sugar tax will lead to the loss of more than 1,000 employees. Along with “economic headwinds,” and lower consumer spending, Coca Cola South Africa reported lower volumes (paywall) that it will only recover from in 2021. Increase prices due to the tax, hurting their growth. Coca-Cola South Africa could not be reached for comment. Coca-Cola has enjoyed growth in South Africa’s development, with the per capita consumption of Coca Cola products rising from 132 servings in 1991 to 254 in 2010, according to Priceless. Despite a 10% increase in the price of sugary drinks, it only led to a 12.1% reduction in consumption, showing that it isn’t enough to change behaviour. Huge advertising budgets that equate soft drinks with family, friends and fun compete for consumers’ mindset, Priceless SA found. Energy drinks, which contain the highest amount of sugar, have experienced a surge in sales, rising from 98 million litres’ consumes in 2009 to 168 million in 2014.
