National 23.8.2016 01:12 pm

Sugar tax could reduce GDP by R14b, warns Beverage Industry

Picture: Thinkstock

Picture: Thinkstock

The Beverages Association of South Africa says the proposed sugar tax could have devastating consequences on the economy.

The Beverages Association of South Africa (BevSA) on Tuesday warned that the proposed tax on sugar-sweetened beverages had the potential to reduce the industry’s contribution to GDP by R14 billion.

At the the release of its formal response to National Treasury’s policy paper, BevSA said the proposed sugar-sweetened beverages tax could have devastating consequences on the economy, as it could trigger 62 000 – 72 000 job losses, doing more harm than good.

In July, treasury published a policy paper on a proposed 20 percent tax on sugar-sweetened beverages, to take effect April 2017, that would generate almost R11 billion revenue in a bid to curb non-communicable diseases such as diabetes and hypertension.

BevSA said this tax was the equivalent of 0.4 percentage points of GDP growth this year.

The industry said sugar tax would exacerbate the broader fiscal and societal costs associated with unemployment, increase the burden on consumers with 25 percent beverage price increases, and damage the competitiveness of the non-alcoholic beverage industry.

“It is also unlikely to raise the revenues expected by the National Treasury,” BevSA executive director Mapule Ncanywa said.

“Government revenues from its existing taxes could fall by at least R3.1 billion per annum, representing more than 40 percent of the revenue the government hopes to raise through the sugar-sweetened beverages tax.”

BevSA said the tax would force many smaller producers to exit the market, thereby reducing industry competition.

Ncanywa said some of the hardest hit business owners would be spaza-shop owners since they always had no defence against the effects of tax.

“As the proposed tax is levied per gram of sugar, smaller players who compete with lower prices and larger pack sizes will be most severely impacted,” Ncanywa said.

“The sugar-sweetened beverage tax would represent a higher markup on their relative prices. Price increases could be as high as 80 percent on some 2-litre packages.”

For instance, Ncanywa said a bottle of Coca-Cola that would normally cost R18.50, would suddenly cost R24.50 if the sugar tax was implemented.

Ncanywa said BevSA was therefore calling for government to drop the proposed tax and conduct a full socioeconomic assessment with industry’s role players.

She argued that sugar-sweetened beverages accounted for just three percent of daily calories in South Africa, saying there was a range of different policy interventions that governments could use to tackle obesity.

“We are committed to working with the government to tackle the obesity problem in South Africa,” Ncanywa said.

Organisations such as Coca-Cola Beverages Africa, Little Green Beverages, Softbev, and Food and Allied Workers Union (Fawu) have all come out in support of BevSA.

On Monday, Coca-Cola Beverages Africa said it may have to close South African plants and see profit more than halve if the government pushed ahead with a proposed sugar tax.

– African News Agency (ANA)

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