The Health Promotion Levy Nicholas Stacey PRICELESS SA MRC Rural Public Health and Health Transitions Unit School of Public Health University of the Witwatersrand

Overview Disease burden Sugary drinks Taxation of Sugary Drinks The Health Promotion Levy legislation Conclusion

Obesity and NCDs

In South Africa there are now 19 million obese or overweight adults Source: SADHS 2003, SADHS 2016, Stats SA

Over 20% of children obese or overweight Source: NFCS, SANHANES-1

Diabetes is a crisis in motion and largest killer of South African women Ranking Cause % of all deaths in 2015 1 Tuberculosis 7.2% 2 Diabetes 5.4% 3 Cerebrovascular diseases 5.0% 4 Other forms of heart disease 4.8% 5 Human immunodeficiency virus [HIV] disease Source: Stats SA

~10 000 new cases of diabetes/ month in the Public Healthcare Sector Source: DHIS

Significant Growth in diabetes among medical scheme members Condition Prevalence, cases per thousand (2013) % Change in Prevalence (2008 - 2013) Hypertension 87.2 33.1 Hyperlipidaemia 34.78 25.5 Diabetes Mellitus type 2 26.91 67.9 Ischaemic heart disease 6.87 4.4 Cardiomyopathy 4.22 6.5 Source: CMS (2015)

Sugary Beverages

Sugary drinks are high in sugar and South Africa is a high consumer Sugar content in 330ml SSB Per capita consumption of Coca Cola products (Top 10) Source: Coca Cola Company annual review, 2012

While obesity rises, sugary beverage sales growing… Source: Euromonitor International (2016)

Sugary Beverages and Health Evidence linking sugary beverages to obesity and related diseases in adults and children Consumption increases risk of diabetes Consumption increases risk of weight-gain (Malik et al., 2010; Malik et al., 2013; Malik et al., 2006; Hu, 2013; Popkin and Hawkes, 2016) Even cross country studies find higher sugary beverage intake increases obesity and diabetes (Basu et al., 2013)

Sugary Beverage Taxation

WHO: Fiscal Policies for Diet and Prevention of Non Communicable Diseases (2016) Well designed fiscal policies with other actions will contribute to reducing health/economic burden from NCDs Evidence strongest for SSB taxes – at a minimum 20% Low income and young people are most responsive to price change Taxes on beverage sugar content will have greatest impact

Increased Prices reduces Sugary Drinks Consumption Sales of Carbonates vs Per litre Price in South Africa Tax increases price, increased price reduces consumption In absolute terms, raised prices reduces resources for sugary drink consumption (Income Effect) Tax also raises price relative to alternatives (Substitution Effect) Cost-effective means to prevent NCDs (Ceccini et al., 2010) Source: Euromonitor International (2016)

Sugary drinks tax could impact burden of overweight and obesity in South Africa Literature review shows that excise tax on SSBs is likely to reduce consumption and potentially obesity in South Africa Modelled potential impact of a 20% SSB tax based on 2012/13 SANHANES consumption (Manyema et al, 2014): Obesity reduction by 3.8% in men and 2.4% in women Decrease in obese people by 220 000 Mostly in first 3 years

Taxation versus other measures? Front-of-pack labels and advertising restrictions: In preparation at NDoH Reformulation: Voluntary commitments to reformulate are not credible Small reductions in sugar content per drink will be un-dun by growth in number of drinks consumed Education and media campaigns: Without revenue from tax, complementary education and health promotion interventions not affordable Crisis mode requires intervention with quickest and largest population impact

Scare tactics: exaggerated claims of job losses Industry groups hired financially-conflicted consultants to undertake non- academic studies Made misleading assumptions Assumed people would not buy other non-taxed beverages or other products Assumed revenue would not be spent by government All of their “studies” ignored beneficial impact of reduced disease and disability In other settings, underlying trends in employment continue regardless of tax

NCDs have an Economic Impact NCDs are an economic burden on households: Lost wages of prime-age adults due to death and disability There are significant costs of mortality (funerals, etc.) on households In 2009, 2000 diabetes-related amputations, 8000 diabetes-related blindness (Bertram et al., 2013) Macroeconomic impact of NCDs in SA (% of GDP) 2015 Early retirement due to ill health 2.1% Absenteeism + Presenteeism 4.7% Total 6.8% 2030 2.2% 4.9% 7.0% Source: USCC (2015)

The cost of inaction: as we delay, obesity rises 16% increase in obesity by 2017 (9 million people) 20% of this increase due to sugary drinks- 280,000 people Mostly young South Africans affected SA Beverages, Investors February 2012 Soft drink projected growth of 2.4% per year: 2012 – 2017 SAB targeting LSM 1 - 3 Source: Tugendhaft et al, 2015

The Health Promotion Levy Legislation

The revised proposal reduces rate significantly

The Health Promotion Levy legislation The changed rate structure is a significant CONCESSION to industry interests Effective tax rate reduced from 20% to ~10%, below WHO recommendations Health effects likely will be smaller, however a 10% tax in Mexico yielded meaningful reductions in beverage sales (Colchero et al., 2016, 2017) Lower marginal rate on concentrates a further concession to industry Commitment of revenue to health promotion is important

Conclusion We are in the midst of obesity and NCD crisis. Consumption of sugary drinks linked to onset of these diseases The Health Promotion Levy presents opportunity to: reduce consumption of these harmful products, Incentivizes production and marketing of healthier products simultaneously raise revenue for further health promotion interventions

Thank you