A recently leaked report on the health promotion levy’s economic impacts affirms that the levy can play an important role in financing healthcare in South Africa. However, the Healthy Living Alliance (HEALA) disputes the report’s claims — based on flawed methodology — that the levy will lead to job losses.
In 2018, South Africa introduced a health promotion levy of 11% on sugary drinks with more than 4 grams of sugar per 100 ml to help curb skyrocketing rates of noncommunicable diseases — such as diabetes, high blood pressure and heart disease — linked with increased sugar consumption. Many of these conditions are now among the leading causes of natural death, according to Statistics South Africa.
Practically, the levy — also sometimes called a “sugar tax” — adds about 46 cents to the price of an average can of original Coca-Cola, for instance. The levy does not apply to natural fruit juices or sweetened dairy products.
No, the Nedlac report did not argue the sugar tax should be cut
In 2018, the Portfolio Committee on Trade and Industry directed the National Economic Development and Labour Council (Nedlac) to commission a study to assess the levy’s impact on South Africa’s economy.
Although the official report has not yet been released, a leaked copy circulated in June recommended that the levy should continue and that the tax funds be earmarked to support public healthcare. Currently, these funds are not specifically designated for the health budget.
Yet, the research also used what HEALA believes is a flawed methodology to argue that more than 16,000 jobs and an estimated R 653-million in economic investment were lost due to the sugar tax. These calculations fail to account for other forces such as EXAMPLE that are affecting the sugar industry.
The NEDLAC document fails to consider the levy’s proven health benefits
But more glaring is the Nedlac report’s failure to account for the health promotion levy’s economic benefits.
By reducing the amount of sugar people consume, the levy creates a healthier South Africa, reducing the cost of treating noncommunicable diseases and creating a healthier and more productive workforce.
The South African government spent R2.7 billion treating people living with diabetes in 2018, and the costs for 2030 are projected to be R35.1 billion. A 2016 modelling study estimated that an increased health promotion levy of 20% would save R5 billion in healthcare costs in the next two decades.
According to the 2016 research, a health promotion levy of 20% could save 72,000 lives in the next 20 years.
The NEDLAC report lacks transparency
The sugar industry has had a history of misrepresenting the economic impact of a tax on sugar-sweetened beverages. The industry has repeatedly made unproven claims about alleged job losses connected to the sugar tax without backing these up with data, as AfricaCheck found in 2016. The fact-checking organisation also revealed that industry claims downplayed sugary beverage consumption among South Africans and masked inequalities within consumption levels.
Today, there is no publicly available information on how the NEDLAC report authors, Wesbound (PTY) Ltd, were appointed, the timeframe for the research or their terms of reference.
The evaluation appointment process and terms of reference must be made freely available to ensure public confidence in the report. Transparency is crucial for ensuring that the work was independently conducted and free of influence from industry, the Portfolio Committee on Trade and Industry or NEDLAC.
Here’s what we do know about the health promotion levy’s impacts
Since the Portfolio Committee on Trade and Industry’s request for an economic impact evaluation, two local, peer-reviewed published studies assessing the HPL’s impact have found that levy works to reduce harmful sugar consumption.
University of Witwatersrand researchers found that the levy led to a 60% reduction in sugary beverage consumption among people who consumed a lot of sugar in Soweto. In the Langa outside Cape Town,
In short, the levy is working just as intended to — incentivising people to change the way they consume sugar.
The sugar tax also generated an extra R5.4 billion for the country in its two years.
The Nedlac report is a wasted opportunity
HEALA believes in food justice, or the right of all communities to access nutritious, affordable, and culturally appropriate food. Because of shortcomings in both methodology and transparency, HEALA believes that the NEDLAC report represents a missed opportunity to evaluate a transformative and innovative policy to improve the lives of all South Africans.
HEALA also continues to demand that the National Treasury Department increase the health promotion levy to 20% to ensure the tax keeps pace with inflation and remains effective.
HEALA is sympathetic to the sugar industry’s concerns regarding job loss and fully supports the implementation of the Department of Trade, Industry and Competition’s Sugar Master Plan.
However, South Africa simply cannot afford to rely on sugar consumption at the expense of our current and future health and productivity – nor do we need to. The industry can and should transform to build more diversified revenue streams for sugar producers, including capitalising on global demand for biofuels.
Noncommunicable diseases fuelled in part by dangerous sugar consumption remain a significant risk factor for developing severe COVID-19. Today, COVID-19 has cost more than 200 000 people in South Africa their lives and pushed another two million into poverty.
Government can and should use all the tools at its disposal to help enable and grow a healthy population that can fully realise their potential and contribute to our shared future.