South Africa has announced an increase in tax on sugary drinks in a move to cushion the economy against inflation despite a struggling sugar industry in the country. South Africa’s Finance Minister, Tito Mboweni, said that the tax will increase from 2.1 cents to 2.21 cents per gram of sugar per 100ml, with the first 4grams of sugar still exempted from taxation.
The tax on sugar-sweetened drinks, known as Health Promotion Levy (HPL), was introduced in 2018 to reduce the consumption of sugary beverages, which has adverse effects on health such as obesity.
However, South African Cane Growers Association said that the tax has cost the sugar industry nearly US$72.12 million since its implementation in 2018 and projects to further impact on the industry.
According to Graeme Stainbank, Chairperson at the association, the sugar tax has also decreased the local demand further by 200,000 tonnes which have subsequently put over 6,000 jobs at risk.
Additionally, Hackmann, chairperson South Africa Sugar Association said that the sugar industry has been in trouble for a while, and its problems are largely unrelated to the levy.
“The HPL has already had a significant impact on the volumes of refined sugar sales in the local market and a consequent increase in the exposure of the sugar industry to the loss-making export market,” Hackmann added.
The implication has also impacted on sugar drink manufacturers with companies like Coca-Cola Beverages South Africa unveiling plans of retrenching over 1,000 employees due to the impact that the tax has had on production.
The increase in sugar tax is now expected to push up the price of fizzy drinks across the country.
The levy was introduced as a calorie-controlled diet measure with an aim of addressing issues concerning diabetes, obesity and related diseases which are contributed partly by sugary soft drinks especially among children.
South Africans are among the top 10 consumers of sugary drinks in the world, and research has shown that drinking just one sugary fizzy drink a day increases the chance of being overweight by 27% for adults and 55% for children.
Sugar production contributes about US$1 billion to South Africa’s gross domestic product (GDP) and the industry employs 85,000 people directly, and a further 350,000 indirectly through food processing and other sectors.