Industry groups opposed to South Africa’s Treasury plan to tax Sugar-Sweetened Beverages (SSBs) made their concerns heard on Monday which was the last day for the public to submit comments on the proposed tax.
Members of the Tshebedisano Support Network (TSN), a lobby group were joined by the National Union of Food Beverage Wine Spirits and Allied Workers among others who protested against the proposed tax by the Treasury on sugar-sweetened beverages outside of the government’s administrative building in Pretoria, the country’s capital.
TSN said that their members were concerned about the effects of such a tax on small businesses and the community.
“This is a one-way law that will be imposed, with loss of jobs, which is concerning when looking at the state of the economy,” the chairperson of the group, Silas Hermans said.
Coca-Cola Beverages Africa (CCBA), the largest coke bottler in Africa, which is also domiciled in South Africa, added its weight to the conversation saying its volumes would be down 25% and its profits halved should the levy become law. It added that it was likely to lead to loss of jobs.
Other industry groups such as the Beverage Association of South Africa (BevSA), said on Tuesday that the tax could lead to the loss of 10,000 jobs and reduce the industry’s contribution to GDP by R14 billion ($95m). BevSA added that the plan would cause an additional R3.8bn ($25m) loss to the government, with small-scale farmers and spaza shops bearing the brunt of the tax levy.
A study commissioned by BevSA tried to weaken the government’s argument in the supposed fiscal and health benefits of the proposed tax, with the industry requesting the treasury to publish its own socioeconomic study on the effects of the levy.
“From a tax (that the) Treasury was expecting – R7.6bn ($52m) in revenue – they will collect 41% less or R4.5bn ($30m),” Mapule Ncanywa, executive director of BevSA said.
The industry also refuted the Treasury’s assumptions on the health benefits of such a plan saying that their estimates show it would only lead to a 0.3% decrease in average kilojoule consumption.
South Africa’s Treasury sees the sugar-tax proposal, along with other plans to increase taxes on tyres and fuel as potential revenue earners for the state, but more importantly to address the growing problem of obesity and other associated diseases like diabetes which are linked to consumption of sugar-sweetened beverages.
The tax if implemented would go into effect in April 2017.
The beverage industry said the plan was excessively weighted against the industry, which would experience volume decline of about 31%.
“This tax definitely discourages growth. It is anticompetitive because you are singling out one industry in terms of sugar and you leave the rest,” said Ncanywa.
She added that other countries with similar tax plans are beginning to reverse it after it failed to address obesity. She cited Denmark and Finland as examples, whereas in Mexico, 64% of the tax came from lower socioeconomic households, with the bottom 38% bearing the brunt of the tax.
The chairperson of BevSA and Managing Director at Coca-Cola Beverages SA, Velaphi Ratshefola, said on Tuesday that the industry had sought a more collaborative means to the obesity issue with self regulation.
“If the government, through this paper or tax is targeting 9% calorie reduction, we think if we work together, we can double that reduction,” he said.
Others suggested setting aside a part of the revenue from the proposed tax towards “medical research”.
“This would entail a graduated tax on manufacturers that would prompt companies to innovate and develop their product range to include drinks that fall under a proposed sugar threshold that attract no additional taxes,” said Dr. Wilmont James.