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Sugar tax could fatten illegal trade

| Legislation

South Africa’s non-alcoholic beverage industry has warned that the proposed sugar tax could fuel an illegal cross-border market for sugar-sweetened beverages (SSBs) and result in job losses while not reducing obesity.

And the food industry has raised concern that the government intends to consider taxing sugar-sweetened foodstuffs, saying the tax is unnecessary as it is already working closely with the Department of Health on projects to fight obesity and reduce the marketing of unhealthy foodstuffs to children.

Mapule Ncanywa, spokesman for the Beverage Association of South Africa (BevSA), which represents beverage manufacturers including Coca-Cola, Pepsico and Red Bull, said the industry did not believe sugar tax would address the high obesity rate, but that it would result in the potential loss of an estimated 10 000 jobs among small informal retailers.

“The tax is discriminatory as it only targets one product category, yet the calories consumed from SSBs represent a small percentage versus the consumer’s total calorie intake,” he said.

“The tax will also disproportionately affect poor and low-income households as they spend a greater proportion of their income on basic foodstuffs. It will have a negative impact on the beverage industry and lead to a loss of jobs in the value chain, especially among small business owners like spaza shops,” he said.

Ncanywa said some 30 000 jobs were lost in Mexico when it implemented the tax, and Denmark had abandoned the tax due to hoarding and cross-border shopping.

He added that KPMG had warned in a recent study that if SA’s neighbouring countries did not adopt a similar tax, it could spur illegal cross-border trade; and if this occurred on a large scale, the tax wouldn’t change consumer behaviour.

“This tax ultimately will make people poorer, not thinner,” he said.

He said the industry was already working with the health department on alternatives such as sugar reduction, reduced serving sizes, consumer education, better labelling and a guideline on marketing to children.

Francina Makhoane, head of the Consumer Goods Council of SA’s Food Safety Initiative, said treasury had confirmed plans to include sugar-sweetened foodstuffs for taxation, but the organisation was concerned about unforeseen risks to the economy.

 “The tax on sugar-sweetened beverages and other foodstuffs will not be an effective way of tackling obesity.

“It has already been demonstrated that similar taxes imposed in other markets have not yielded the desired outcome of significantly reducing consumption of sugar-sweetened foodstuffs and beverages,” she said.

She said industry had established the Healthy Food Options Forum, which was partnering with the health department to tackle the rise of non-communicable diseases and to achieve its goal of reducing obesity by 2020. The forum aims to promote healthy eating habits to reduce obesity.

“The HFO Forum is developing a comprehensive HFO action plan with measurable targets over the period 2016-2020. This plan includes an enforceable code on marketing communication to children that restricts advertising to children 12 years and under, of food and non-alcoholic beverages that do not meet specified nutrition criteria,” she said.

She said industry would encourage consumers to make healthier food and drink choices by producing”better-for-you” food and non-alcoholic beverages.

“South Africa-specific data, generated through a dietary intake study, is an indispensable first step towards a science-based strategy that will drive targeted interventions towards the national goal of reducing obesity by 2020.

“Simply implementing a tax in the face of the well-progressed co-operation that has been taking place between the industry and the department of health will not achieve this,” she said.

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