South Africa’s Proposed Sugar Tax Will Hit Jobs and Hurt the Economy, Claims Beverage Industry

18 Aug 2016 --- The South African beverage industry is lobbying against the proposed sugar tax on soft drinks claiming it threatens thousands of jobs and economic growth in the country. 

Coca-Cola Beverages Africa chairman Phil Gutsche spoke at a press conference earlier this week calling on the Nelson Mandela Bay municipality and the Eastern Cape Government to join forces and oppose the national treasury’s proposed tax on sugar-sweetened drinks (SSBs). 

He claims jobs will be hit hard if the proposed tax comes into force in April 2017 as per the published policy paper of July 8 that details how a 20 percent tax on SSBs will help the country reduce its sugar intake, fight obesity and related health problems. 

“Our industry supports the livelihoods of 14,000 people in this city and many more in the province. Nationally we support more than 200,000 jobs. If this tax proceeds, we stand to lose 60,000 jobs in our industry. More than 5,000 livelihoods will be affected in Nelson Mandela Bay alone,” Gutsche said.          

According to the Beverage Association of South Africa (BEVSA), the beverage industry’s contribution to the economy has rapidly increased since 2008, with a 258 percent rise against the overall GDP of South Africa which grew by 43 percent over the same period. 

Gutsche claims the tax will also disproportionately hit the poor and in reality there will be very little benefit in terms of reducing sugar consumption - Mexico’s SSB tax has resulted in a reduction of 17kj of a daily intake of more than 1,2000kj.  

“The poor will therefore literally become poorer and not thinner as a result of this proposed tax”, adds Gutsche.

BEVSA executive director Mapule Ncanywa echoes this sentiment. She stresses that 97 percent of South Africa’s obesity problems have nothing to do with sugar-sweetened drinks, as they accounted for only three percent of the daily kilojoule intake. 
    
“There are better ways to achieve the government’s goals,” Ms Ncanywa said.

BEVSA emphasize that the industry is strongly committed to the country’s economy with investments planned over the next five years including opening new outlets and creating more jobs. If the industry continues to gather pace, the contribution to tax receipts will quickly outpace expected revenues from the SSB tax, says the body. 

There are alternatives to reducing sugar intake across the South African population, many of which are already in practice: voluntary reformulation, packaging and labeling. 

Plant manager at Coca-Cola Beverages South Africa Randall Dayce, says taxes on average accounted for 25 percent of the purchase price of soft drinks.
                    
He and smaller bottlers Twizza and Little Green Beverages also reported that the tax would have significant implications for employment and growth prospects in the communities where they operated and in the province.

Twizza financial director Nico de Jager said that even in a small town like Queenstown, the proposed tax could wreak havoc, making up to 815 people dependent on the state for their income and sustenance.

Similarly, Little Green Beverages director Glenn Sheppard claimed the company would be forced to reconsider a significant investment in its Buffalo City plant which plans to add another 70 jobs and instead it would have to significantly cut back its marketing spend.
                    
“Our Provincial and city governments should be very engaged on the matter through Cabinet, the so-called MinMec meetings and the South African Local Government Association (SALGA) to appeal to National Treasury to reconsider this harmful proposed tax,” adds Gutsche.

by Gaynor Selby