UPDATE ON
SUGARY DRINKS LEVY


Priya Seetal


Originally billed as the proposed tax on sugar sweetened beverages (SSBs), the Health Promotion Levy (HPL) has been passed by Parliament, with its implementation earmarked for April next year.


Delivering his Mid-Term Budget Policy Statement (MTBPS) on 25 October, Finance Minister Malusi Gigaba confirmed that the HPL was under consideration by the relevant committee of the National Assembly. The Standing Committee on Finance has since adopted the report on the HPL and the National Assembly has passed it. After the completion of the parliamentary process, the HPL will be sent to President Jacob Zuma for his signature. 


Another announcement emanating from the MTBPS was the tabling of the Rates and Monetary Amounts Bill which includes the HPL to the National Assembly and proposed as section 77 of the constitution. Section 77 of the constitution outlines the definition and process for the bill to follow before being signed into law. Section 77 permits Parliament to not only debate but also amend the levy.


The South African sugar industry does not support the mooted HPL. The imposition of the tax will negatively impact both the sugar milling and sugarcane agricultural sectors in the country without achieving the desired outcome of reducing levels of obesity and non-communicable diseases (NCDs) such as diabetes and heart disease.


Parliament raised a serious concern about the negative impact of the levy especially with regards to job losses.

During the consultation process, Parliament raised a serious concern about the negative impact of the levy especially with regards to job losses. At the same time the National Economic Development and Labour Council convened a task team to establish the negative impact of the levy and measures required to offset this impact. The team was made up of business, labour and government – it was called the Nedlac SSBs Tax Task Team. SASA formed part of the business representation. The outcome of the task team was to produce a report for submission to the Minister of Finance and the Minister of Labour in terms of Section 8 of the Nedlac Act No. 35 of 1994, and be simultaneously submitted to the relevant parliamentary committee. 



Following several engagements, since the first meeting of the SSBs Task Team on 3 April 2017, a report was produced and handed to Parliament. bodys of the draft report included areas of agreements and disagreements between the constituencies on the levy and mitigation proposals. SASA mitigations proposals included adequate tariff protection against imports, increasing access to preferential markets, diversification into ethanol and targeted support for land reform and small scale growers. 


An outcome of the report is the establishment of a task team to progress the mitigation measures. The task team will be led by the Economic Development Department (EDD) and includes the involvement of SASA.


Recognising the need for an independent credible study on the impact of the tax on the sugar industry, SASA commissioned the Bureau of Food and Agricultural Policy (BFAP) to conduct this study. BFAP comes with an excellent 11-year track record of conducting unbiased and independent, research based analyses on the impact of policies in the agricultural sector. The Bureau’s expertise lies in their access to an extensive system of models and economic intelligence that is unique to the South African context. It is the only system that has the ability to undertake simultaneous quantitative impact analysis of external shocks on farm, sector and consumer level. The system also has the ability to generate a set of plausible future scenarios of the South African food system, taking risk and uncertainty into consideration.


Based on the assumption that the HPL will result in a 200 kilo ton reduction in demand for sugar, BFAP concluded that there would be an additional 13 200 ha decrease in area under cane with an estimated 3 129 jobs being lost. The cane area reduction will take place mainly in the Coastal production regions with small-scale growers and small commercial growers going out of production first. Low world price for sugar, inadequate tariff protection and the rising input costs added to a bleak outlook and with the additional impact of the levy, sugar mills will have to close in the Coastal production regions, resulting in a loss of over 20 000 direct jobs (farm and mill) in the next five to seven years and negatively affecting the livelihoods of over 90 000 people. The BFAP report was included as part of the Nedlac Task Team report submitted to Parliament.



Priya Seetal

Priya is the Nutrition Manager at SASA



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