First Health tax in South Africa; A Welcome Development?

On April 1st, South Africa imposed a new tax on sugary drinks. This health tax has been one of the most hotly debated taxes in the history of South Africa, eliciting threats and massive lobbying from beverage companies.

The tax was renamed the Health Promotion Levy by the government and is the first tax in which any African government has committed some of the proceeds to health. While Treasury generally refuses to ring-fence income from taxes, for the first time it has committed to giving a portion of the income to the health department to try to stop the diseases associated with high sugar diets such as diabetes, hypertension and strokes.

The Healthy Living Alliance, the company which campaigned for the tax over the past year congratulated Parliament, Treasury and the Department of Health for “resisting enormous pressure from the beverage industry and introducing the country’s first health tax.”

“South Africa is the first country in Africa to tax sugary drinks and we hope the rest of the continent will follow suit, as the sugary beverage industry has identified Africa as a major new market.”

The company further described the levy as “one tax that no one has to pay. It’s a win-win if we refuse to pay the tax and consume water and milk instead. Our pockets and health both benefit.”

But what the effect of the tax will have on health and exactly where the proceeds of the tax will go still remain to be seen.

“In Mexico, a 10% tax still did have a significant impact reducing consumption by 6% in the first year and close to 10% in the second year,” added Professor Karen Hofman of Wits University.

In a bid to curb the backlash that may accrue from this act, Treasury reduced the tax to 2.1 cents per gram of sugar but exempted the first four grams in every 100ml to encourage beverage manufacturers to reduce the sugar content in their drinks.

Last week, Coca-Cola said there would be price increases on “some of Coca-Cola’s products” but that “lower sugar (less than 4g/100ml) and zero sugar products and 100% juices” would not be affected.

“The Coca-Cola Company supports current recommendations of leading health authorities, including the World Health Organisation (WHO), that people should limit their intake of added sugar to no more than 10% of their total daily calorie/energy intake,” Coca-Cola said in a statement.

More than three-quarters of South Africans supported government taking measures to reduce their consumption of sugary drinks, according to research conducted last year by economic research company Genesis Analytics. However, some respondents were wary of the proceeds being swallowed up by a rapacious state.

Though there are still uncertainties with the other allocation of proceeds from the Health Promotion Levy, this taxation act ought to serve as a call for other African countries to wake up and promote the taxation of imported products that could be harmful to their citizenry.