Treasury announces a postponement to the HPL increase

o4 April 2022

 

To:    Hon. E Godongwana Minister of Finance

Per email: Cathy.Shilubana@treasury.gov.za; Mary.Marumo@treasury.gov.za

cc:     Hon. J Maswanganyi MP, Chairperson

Standing Committee on Finance National Assembly

Per email: tsepanya@parliament.gov.za; awicomb@parliament.gov.za

Hon. YI Carrim MP, Chairperson

Select Committee on Finance National Council of Provinces

Per email: tsepanya@parliament.gov.za; awicomb@parliament.gov.za

Hon. SM Dhlomo MP, Chairperson

Portfolio Committee on Health

Per email: vmajalamba@parliament.gov.za

 

Dear Honourable Minister Godongwana,

RE: Revised version of the 2022 Draft Rates Bill

On behalf of HEALA, a coalition of civil society organisations committed to advancing food justice for all who live in South Africa, I am writing regarding the planned increase in the health promotion levy announced in the 2022 Budget. The increase of 4.5 percent – raising the levy from 2.21 cents to 2.31 cents per gram of sugar for sugar-sweetened beverages above the threshold of 4 grams of sugar per 100 ml – was scheduled to effect on 01 April 2022. According to the Revised Draft Rates and Monetary Amounts and Amendment of Revenue Laws Bill, published 01 April 2022, the National Treasury has proposed postponing the increase to the HPL until 01 April 2023.

The HPL was enacted in 2018 to help mitigate the health impacts of the excessive consumption of sugar- sweetened beverages (SSBs), including obesity, type 2 diabetes, hypertension, heart diseases, tooth decay, certain cancers and other diet-related non-communicable diseases (NCDs). As you know, National Treasury adopted the levy at nearly half the recommended rate of 20%. Furthermore, Treasury has not consistently adjusted the levy to account for inflation over time, let alone increase the levy to meet WHO recommendations. The announced increase of 4.5% in the 2022 Budget would have only been the second increase across the HPL’s entire lifespan. Even with this increase for 2022 factored in, the levy rate would still have fallen since its introduction. Hence greater effort is required to maintain the HPL’s initial rate, yet it still represents an essential step. However, the recent announcement proposes to backtrack on even this minor attempt to do so for the current financial year.

As explained in the media statement released by National Treasury, the 12-month postponement of this increase to the HPL is proposed to allow consultation on the expansion of the HPL to include fruit juices and lower the 4g threshold of the levy. We agree with the necessity and value of such consultations with all stakeholders. Nonetheless, the proposal to postpone the 4.5% increase to enable this process conflates the matters without due reason.

In the statement, National Treasury does not explain why postponement is necessary for consultations or how they made this decision. Further, the media statement does not explain how National Treasury will proceed or whether the delay means consultations will be final by the 1st of April 2023. We should all be transparent that this intended increase does not even amount to an effective increase in real terms; instead, it merely achieves maintenance of the levy’s rate from the prior financial year. In simple terms, capitulating to a one-year postponement is another year that government further weakens the HPL and cannot be reversed by a delayed 4.5% increase in 12 months. Without this increase, the HPL continues to fall in real terms since its introduction, jeopardising real health and economic gains.

Local, peer-reviewed studies assessing the HPL have found it works. In Soweto, the HPL led to a 60% reduction in sugary beverage consumption among people who consumed a lot of sugar. Similarly, University of the Western Cape researchers found that adults between 18 and 39 living in Langa reduced their overall sugar intake by almost a third after levy introduction. Nationally this trend has held, with monthly household data from all nine provinces showing reductions in sugar, calories and volume of SSBs purchased following the HPL.

We feel that National Treasury’s decision to postpone undercuts the levy’s capacity to help avert South Africa’s trajectory of NCDs in favour of appeasing short-term and siloed interests. We are also concerned that by delaying the increase to the levy, the National Treasury is signally a severe lack of appreciation for our country’s looming health and economic costs.

As HEALA, we recommend that National Treasury:

  • Overturn the proposed postponement and implement the 5% increase to the HPL immediately, alongside consultations for expanding the HPL.
  • Indicate whether public commentary on the Revised Draft Rates and Monetary Amounts and Amendment of Revenue Laws Bill can be made and provide a deadline for
  • Explain why a postponement of the increase is now considered an essential requirement to enable consultations to expand the levy and reduce the threshold, especially when the announcements made in the 2022 Budget indicated no conflict between the two
  • The intended process for consultations, including timeframes and stakeholders, is transparent to the public at the soonest possible opportunity to help build confidence and ensure proper

We thank you for your time and consideration and look forward to your timely response on the above

Respectfully,

Nzama Mbalati

Head: HEALA