Sugar tax comes too soon, says university

Johannesburg - The University of Oxford’s economics researchers have warned that it was too early for South Africa to implement a tax on sugary beverages next year.

The Oxford Economics research institute yesterday said the country was not yet ready for the proposed tax on the beverages.

File picture: Uew Hermann. Credit: FLICKR

The institute’s development economist and finance specialist and co-author of the report, Nick Stewart, said the government had to consult more with the industry role players before the tax was implemented.

Stewart said while the institute understood the government’s need to tackle health problems associated with sugar, it still needed to do some more work before implementing the tax.

“We don’t say that the government must not tax the industry, but the government has given itself a short space of time to implement it,” Stewart said. “We understand that they want to do away with obesity affecting the health of its citizens, but the time it has given itself is not enough. It took the UK two years to do proper consultation on this subject.”

This week Stats SA said the consumer price index showed that South Africans with a sweet tooth forked out a fifth more in August than they did last year as the prices for sugar, sweets and desserts rose by 20.7 percent year-on-year, up from 15.5 percent.

Oxford Economics said the government had to think about job losses and revenue it might lose if it implemented the tax.

It said the industry contributed R17.2 billion to the country’s gross domestic product (GDP) or 0.5 percent to the economy. Stewart said the industry provided between 86 000 and 133 000 jobs and the implementation of the tax could affect the informal economy.

“But its impact does not end there, the effects of manufacturing activity ripple out through the economy, through supply chains and wage spending, in total supporting a contribution to GDP of R62.3bn and between 260 000 and 306 000 jobs across the formal and informal sectors,” said Stewart.

On average the tax would increase the price of sugar beverages by 25 percent. The tax levied would be based on the absolute sugar content of the drink leaving consumers of certain types of drinks, notably cordials and colas, exposed to a price increases in excess of 30 percent.