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Treasury figures suggest job losses a smokescreen by opponents of sugary drinks tax

JUNE 27, 2017
Treasury figures suggest job losses a smokescreen by opponents of sugary drinks tax

The Healthy Living Alliance (HEALA) is encouraged that National Treasury has rejected the delaying tactics of interest groups opposed to the new tax on sugary drinks along with exaggerated predictions of job losses by the beverage industry and sugar producers.

Treasury’s position was made clear in parliament yesterday (Wednesday) during a joint meeting of the Standing Committee on Finance and the Portfolio Committee on Health when Treasury Senior Economist Mpho Lekgote summed up the department’s response to various submissions on the proposed tax.

Treasury has dismissed the submission that the tax should introduced through the potentially lengthy process of the Taxation Laws Amendment Bill and indicated that it would continue to use the route of the Rates and Monetary Amounts and Amendment of Revenue Laws Bill.

Treasury has also undertaken economic modelling of the impact of the proposed 11% tax in terms of probable job losses and has concluded these would be much lower than the numbers bandied about by the beverage industry and sugar producers.

National Treasury’s analysis indicates the country can have the benefits of a tax on sugary drinks with a modest loss of jobs across the entire value chain.

Its modelling shows that the tax would achieve a drop of 6% to 8% drop in sugary drink sales. But this reduction in sales could be “significantly reduced and potentially reversed” over time if the industry reformulated its products to reduce their sugar content.

With reformulation that reduced sugar content of drinks by 37%, job losses could be as low as 1 475 across all economic sectors, Treasury calculates. If industry chooses not to reformulate, some consumers will shift from taxed sugary drinks to untaxed fruit juices and “light” drinks, and in these circumstances total job losses would be between 5 000 and 7 000, Treasury indicated.

 “Treasury has affirmed the tax as an instrument for reducing our consumption of sugary drinks and we are confident that our MPS will get this message,” says Health Living Alliance (HEALA) coordinator Tracey Malawana. “In addition, it puts the ball firmly in the court of the beverage industry. Let them prove the sincerity of their concern about jobs by moving forward rapidly with reformulation and the production of lower sugar alternatives for the public.”

She said all job losses were a matter of concern. But the rising obesity-linked non-communicable disease epidemic was depriving families and the economy of tens of thousands of breadwinners every year, as diabetes, strokes and heart disease caused death and serious disability. “We are losing increasing numbers of workers simply by failing to take disease prevention seriously enough.”

HEALA is disappointed that Treasury has rejected submissions for an increase of the sugary drinks tax to 20% as this would almost certainly have been a stronger deterrent to the consumption of sugary drinks.

According to National Treasury, the impact on jobs in sugar-related agriculture will be around 335 without product reformulation and just over 200 with reformulation. This is scarcely the heavy blow to the industry that has been suggested by South African Sugar Association (SASA).

“In fact, the sugar industry in South Africa has been in decline for several years and, apart from drought, the heaviest blow was dealt by major companies – household names in this country – moving a large portion of their crops to neighbouring countries,” says Malawana. “The sugar industry is being blatantly opportunistic by trying to blame its failures on the sugary drinks tax.”

Small-scale cane producers have been going out of business in their thousands for years and the industry has not invested adequately to avoid this decline. The current number of small scale farmers is about half that in the first few years of this century and many who are still nominally active have not replanted their cane and are not delivering crops for milling.

The South African industry boasts that it is among the 15 most price-competitive sugar producers and exports a substantial portion of its yield, reducing its reliance on local consumption. A major factor in this competitive “success” is the poverty-level wage paid to many cane-growing workers.