Proposed sugar tax nearer after Nedlac negotiations

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The proposed tax on sugary drinks is likely to go ahead later this year, following negotiations between government, labour and industry at the National Economic Development and Labour Council (Nedlac).

“It’s quite clear that the tax will happen and maybe even this year. If not, the conservative estimate is for the tax to be introduced at the beginning of the next tax season in March 2018,” Matthew Parks from the Congress of South African Trade Unions’ (Cosatu) is quoted in an Health-e News report as saying.

Parks was speaking after the recent Nedlac discussions. Negotiations are due to continue next week but Parks said the debate is now less about whether or not there should be a tax and more about how to mitigate against job losses and save the “livelihoods of families.

In parliamentary hearings, health experts were unanimous in their support for the tax as a measure to reduce obesity and its related health problems, such as hypertension and diabetes. South Africans are now amongst the fattest people in Africa, with 70% of women either overweight or obese and diabetes is now the biggest killer of women in the country.

However, the beverage industry and sugar farmers warned of massive job losses should the tax be implemented and Cosatu, while conceding the unhealthy effects of sugary drinks, has also raised its concern about job losses. “We are especially concerned with sugar cane farmers and we call on government and industry to raise the percentage of locally sourced sugar from 85% to 100%,” said Parks.

In parliamentary hearings on the proposed tax, the report said industry proposed that Nedlac was the appropriate forum for consensus to be reached on the tax. However, while chair of the finance parliamentary Yunus Carrim, agreed that Nedlac “has the capacity to find a significant degree of consensus”, he warned that the final decision on the tax rested with Parliament. “Ideally, we would vote on the (Rates and Monetary) Bill after the Nedlac process, but, at the very least, we will consider the progress in Nedlac before we vote,” said Carrim.

The report says Nedlac excludes the Food and Allied Workers Union (Fawu), which represents most of the workers who could be affected by the tax-related job losses threatened by the Beverage Association of SA and allied industry players. However, there were no job losses in Mexico, which introduced a similar tax in 2015.

Initially, Treasury has proposed a tax of around 20% on a can of Coca Cola. However, it later proposed a 2.1 cent tax per gram of sugar on all sweetened drinks, but offered to exempt the first 4g per 100ml from the tax. This was an attempt to encourage industry to reformulate its drinks to reduce their sugar content.

The second Treasury concession was to exempt 100% fruit juice from being taxed as they contain other vitamins and nutrients that regular fizzy drinks don’t.

The report says the beverage industry estimated potential job losses across sectors in the tens of thousands after the implementation of the tax. But a socio-economic study presented by Treasury to Nedlac showed total job losses could be as low as 1,500 – if industry reformulates and reduce the sugar content of 37% of their products.

 

Various processes are under way within the government and in Nedlac, to resolve differences over the proposed health promotion levy, previously dubbed the sugar tax. Business Day quotes Treasury deputy director-general Ismail Momoniat as saying that an interdepartmental committee comprising the Treasury and the departments of economic development, agriculture, trade and industry and labour, was working on a mitigation strategy to limit the effects of the proposed levy on sugary beverages. Momoniat told Parliament’s standing committee on finance that he was “optimistic” a solution would be found.

He added that he did not expect the introduction of the levy to be delayed, and that it could take effect in the first few months of 2018 when the Rates and Monetary Amounts and Amendment of Revenue Laws Bill was promulgated.

Acting finance committee chair Derek Hanekom said the progress was encouraging. He pointed out that no party was going to be completely happy, as there were conflicting interests at play.

The report says both labour and business have supported the proposal that an independent study be undertaken to assess the effects of the proposal, but Momoniat said this might not be necessary before implementation of the levy. It could form part of the ongoing evaluation and monitoring of the levy once it has been introduced.

Health-e News report
Business Day report


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