The Sugar Tax: implications for the cane industry, obesity and consumer behaviour

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Recently, it has come to light through a study conducted by South Africa’s Heart and Stroke Foundation that South Africa has the highest overweight and obesity rate in Sub-Saharan Africa, with up to 70% of women and a third of men being classified as overweight or obese. This is indeed worrisome, especially considering the fact that obesity is a leading cause of non-communicable or chronic diseases such as diabetes, stroke and heart disease which drive up health-care costs.

According to the CEO of the Heart and Stroke Foundation South Africa, Dr Vash Mungal-Singh, there are many reasons as to why South Africa is facing this obesity epidemic. However, Dr Mungal-Singh clearly pointed out that it is difficult to pinpoint one culprit for this crisis but suggests that people need to understand that their lifestyles are largely to blame, saying that South Africans eat too much, drink too much alcohol, and don’t move enough.

Nutrition transition

In recent years, South Africa has gone through a noticeable nutrition transition. The bulk of the country’s population used to be physically active, ate a diet high in fibre and indigenous vegetables, low in animal protein and refined carbs. However, due to increased urbanisation, people are adopting a more westernised diet, high in unhealthy fats, sugar, and salt. Greater disposable income and a faster-paced lifestyle have resulted in people consuming more fast foods and convenience foods. According to Dr Mungal-Singh, this is partly why there has been an increase in overweight and obesity in the country over the last 15 years.

Moreover, South Africans are becoming inactive - another major contributor to the obesity epidemic. Dr Mungal-Singh asserts that the problem starts in childhood and continues into adulthood, with less than two-thirds of children participating in weekly physical activity. In adults, half of males, and almost two-thirds of females are physically inactive.

Educating consumers to change behaviour

In light of the obesity crisis, the government is imposing a tax on sugary beverages as a strategy to reduce obesity in the country. It is true that sugary sweetened beverages are one of the major contributors to the obesity epidemic. However, the source of this problem lies at the heart of dietary behaviour. There is a great need to educate the South African public about the risks of an unhealthy lifestyle and being overweight.

What government needs to realise here is that if the public does not believe that they need to change their dietary behaviour by eating healthier and exercising more, any strategies that address the issue of obesity will be unsuccessful, and cost ineffective.

The idea behind imposing a tax on sugary beverages according to the government is to make the cost of sugary beverages higher, making them less affordable and hence less appealing to the consumers. This is true, at least in theory of cause (economics 101: when prices go up demand goes down ceteris paribus).

However, it is illogical to think to think that tax on sugary beverages will effectively change consumer behaviour especially for the middle to higher income consumers. The tax, however, is likely to lead to a reduction in purchases of sophisticated or premium sugary drinks for the low-income consumers or for the households with fewer resources. But that is debatable considering that there are always cheaper, fizzier and sweeter alternatives on offer.

Serious implications for the sugarcane industry

From an agricultural perspective, the biggest concern is that the implementation of tax on sugary beverages will have serious implications for the sugarcane industry in the medium to long term as it will cascade down the value chain. This will have an adverse impact on the sugar industry – it’s not only cane growers that will have to bear the knock-on effect, but also millers.

Given that the sugar industry operates primarily in rural areas, the negative impacts will have a serious knock-on effect on rural development and the ambition to create thriving rural economies, as it will lead to a reduction in production levels and job losses in the industry. Currently, the sugarcane industry is a significant contributor to the country’s economy, inter alia employing about 79,000 people.