BUSINESS NEWS - Eating less sugar has a bitter price, according to a new report that shows the sugar tax instituted in 2018 has resulted in 16,621 total job losses, a R653 million decline in investment and a R1.19 billion decline in the sugar industry’s Gross Value Added (GVA) contribution to the country’s Gross Domestic Product (GDP) in 2019 alone.
Sugar tax losses
According to Rex Talmage, chairperson of the SA Canegrowers’ Association, the report, Economic Impact of the Health Promotion Levy on the Sugar Market Industry commissioned by the National Economic Development and Labour Council (NEDLAC) 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 jobs.
“As a result of these losses, the sugar industry’s total contribution to South Africa’s GDP declined by a cumulative R2.05 billion that year. Before the implementation of the sugar tax, sugarcane growers supported 94,621 direct, indirect and induced jobs in 2017, accounting for 11.2% of all local farm workers. By 2019, the sugar tax had cost the sector 9,154 jobs, almost 10% of its workforce.”
The report indicates that sugarcane farming contributed R10.5 billion to the national GDP in 2017, but decreased by an estimated R214.7 million per year after the sugar tax was introduced and a cumulative R414.2 million after the second year.
Talmage says it was important to remember these findings only cover the first year of the sugar tax. He expects that these figures are far higher three years later.
“The sugar tax was also implemented at a time when the sugar industry had already been battered by other severe headwinds including drought, increasing production costs and cheap sugar imports. It is clear from the report that the tax was the final nail in the coffin for thousands of rural cane growers and farm workers,” he says.
Talmage says 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.”
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.
Is the sugar tax working?
According to a study by the SAMRC/Wits Centre for Health Economics and Decision Science (Priceless-SA) and its partners, South Africa’s sugar tax led to less people buying sugar sweetened beverages (SSBs), which could mean that buyers are consuming less excess sugar and calories, which suggests less obesity.
The study was led by a local team at the South African Medical Research Council (SAMRC) Priceless-SA) in the School of Public Health at Wits and the University of the Western Cape, in partnership with the University of North Carolina.
Titled Changes in beverage purchases following the announcement and implementation of South Africa’s Health Promotion Levy: an observational study, it was published in April in The Lancet Planetary Health.
It is the first study to evaluate the impact of South Africa’s tax on sugar and calorific intake. The researchers say the findings are consistent with evaluations in other countries with sugar-sweetened beverages taxes, where taxing sugary drinks is an effective public health strategy to reduce the burden of health conditions linked to the overconsumption of sugar.
Researchers examined the nutritional data of more than 3,000 household purchases before and after the tax to assess any changes in daily sugar, calories and volume of taxed and non-taxed beverages. The team found a 51% reduction in sugar, a 52% reduction in calories and a 29% reduction in the volume of beverages purchased per person per day following the implementation of the tax.
They also analysed differences in purchasing behaviour by household socioeconomic status and found that households with lower socioeconomic status bought more taxable beverages before the announcement of the tax than higher socioeconomic status households, but experienced larger reductions after the announcement and implementation of the tax.
“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,” says Professor Karen Hofman, director of Priceless-SA.
“It shows the lower income households that experience the greater burden of obesity, diabetes, hypertension and other nutrition-related non-communicable diseases, benefit greatly from this health promotion levy.”
About 40 countries have so far implemented taxes on sugar-sweetened beverages. Mexico introduced its SSB tax based on volume in 2014, while the UK introduced its two-tiered SSB tax based on sugar content in 2018. Many Pacific island countries have also introduced SSB taxes.