- How Botswana is An Exception to the ‘Resource Curse’ - January 2, 2023
- The Current Political State of Zambia: Will Foreign Investments Be a Viable Decision? - December 29, 2022
- South Africa: First Sub-Saharan Country to Implement a Sugar Tax - August 26, 2022
South Africa‘s health department is facing a huge amount of comorbidity which has led to the government implementing a Health Promotion Levy. Not only does this benefit the health department, but it simultaneously benefits the economic well-being of the country.
In April 2018, South Africa became the first Sub-Saharan nation to initiate a tax on sugar-sweetened beverages (SSBs), namely the Health Promotion Levy (HPL). According to Gouda et al, in the Burden of non-communicable diseases in sub-Saharan Africa, 1990-2017: Results from the Global Burden of Disease Study 2017, within Sub-Saharan Africa, South Africa has one of the highest levels of burden related to non-communicable diseases; this occurred simultaneously with a rapid rise of SSB sales. At the same time, South Africa continues to fight HIV/AIDS as well as tuberculosis. It is important to note that almost 17% of the population lives under the international poverty line within the context of an inequality-adjusted Human Development Index of 0.463.
Concurrently, 55.5% live below the current South African food poverty line of R441 per capita per month, equivalent to 40 US dollars. Considering these factors, the Department of Health’s National Health Strategic Plan of 2015-2020 prioritizes addressing the social determinants that affect health and diseases through preventing and reducing the disease burden, promoting health, and financing universal healthcare coverage.
Views on Sugar and Its Implications
Sugar, particularly in liquid form in beverages, has been viewed as an important cause of the increased risk of obesity, diabetes, hypertension, cardiovascular disease, and many common cancers. According to Hofman, Popkin et al., the simulated mathematical model-based research showed that a 20% price increase on SSBs would result in lowering obesity prevalence by 2.4%-3.8% points, thus averting 8500 incident stroke cases, 550,000 stroke-related disability-adjusted life years, and 72,000 deaths among South African adults. This means that the estimated savings are calculated to be over 5 billion South African Rand in healthcare costs over 20 years while also increasing the tax revenue.
These improvements would have a greater positive impact on the lower-income individuals who have less access to healthcare resources. These lower-income individuals solely rely on public health services and makeup 85% of the population according to the National Health Act.
Comorbidities and Economic Impacts during Covid-19
The nationwide lockdown that was implemented in March 2020 led to demand and supply-side shifts. In supply, human resources shifts have led to limited services for the diagnosis, treatment, and prevention of communicable diseases. Those who have uncontrollable comorbidities are at a higher risk for death but more especially those who are obese and have conditions related to obesity such as hypertension. The lockdown policies implemented in South Africa have been praised in that they had slowed down the transmission of the virus in the early stages but also caused economic disruption. During the period of quarter 3 of 2019 and quarter 3 of 2020, the employment rate amongst adults in South Africa decreased by 1.684 million, while the number of unemployed and not economically active adults increased by 2.269 million.
The average gross earnings paid to employees decreased by R43.848 billion during the Covid-19 period Quarterly employment statistics (QES). In response to this economic crisis, the South African government responded to the welfare impacts through the increase in the value of the existing social grants and by introducing temporary COVID-19 relief of social distress cash grants for those who were not eligible for the existing social support. Through these interventions, they were however not enough to prevent the increases in food security. Telephonic surveys indicate that 47% of households report not having enough money to buy food according to the Household resource flows and food poverty during South Africa’s lockdown. There is a risk of there being an increase in obesity and diabetes rate and prevalence through food security. This is further fueled by the increasing food prices as well as the consumption of innutritious, energy-dense cheap foods which are highly processed. The impacts as a result of COVID-19 on the government indicate that the revenue needs have increased quickly due to the higher financial needs and anticipated loss in income and corporate tax revenues. HPL in this instance can address the needs that are directed at supporting health.
Intersectoral Health Promotion Policies and Needs to Strengthen HPL
The health benefits that come with the reduced SSB intake can further be evaluated and adjusted to a 20% rate that was originally proposed by the South African National Treasury. This has to be inflation-indexed. The HPL also has the ability to enable double-duty benefits, in the event that the collected tax revenues are used to finance other health-promoting and equity-enhancing programs. These are urgently needed, especially during the COVID-19 situation. It is important to note how other countries have tried to strengthen their economy through the HPL. The Thai Health Promotion Foundation is a structure that is a representation of various sectors and ministries, all of which converge on the same pre-decided health targets and notes that these health targets cannot be achieved by one sector. South Africa has proposed health promotions and development foundations that were used to direct the HPL revenue to health promotion across different sectors and ministries.
South Africa has 12 mills that include six companies. Millers in South Africa are facing demand and supply-side challenges. The decrease in the international prices of sugar has had a negative impact on the revenue as well as the decrease in demand for sugar due to the SSB manufacturers has and continue to challenge millers. Millers have found alternatives to improve their production process or even find ways to diversify their production. Many SSB manufacturers that have previously relied mostly on sugar in their production process before the introduction of a sugar tax have turned to using artificial sweeteners.
In 2018, South Africa implemented the Health Promotion Levy. Monitoring the sugar consumption during the first year, it was evident that the policy indeed reduced the sugar consumption from SSBs which in turn may have positive health benefits in the future. This is beneficial to the lower-income South Africans as they have poor access to healthcare services. Covid-19 struck and the importance of having the HPL was evident as mortality was higher among people who had obesity-related NCDs and Covid-19 highlighted the importance of inter-sectoral health promotion policies.
- How can South Africa maximize the economic benefits from the HPL without affecting citizens?
- How does the sugar tax affect businesses in South Africa?
- What are the disadvantages of the sugar tax?
Recommended readings
Nyamongo, Morekwa E. 2007. Tax Reform and the Progressivity of Personal Income Tax in South Africa, South African Journal of Economics
Consider this before implementing a higher sugar tax levy in South Africa
SA’s tax on sugary drinks has brought in R8 billion – less than 1% is spent on health ‘promotion’, Business Insider South Africa
