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

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

3. Obesity and NCDs

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

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

6. 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

7. ~10 000 new cases of diabetes/ month in the Public Healthcare Sector
Source: DHIS

8. Significant Growth in diabetes among medical scheme members
Condition
Prevalence,
cases per thousand (2013)
% Change in Prevalence ( )
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)

9. Sugary Beverages

10. 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

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

12. 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)

13. Sugary Beverage Taxation

14. 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

15. 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)

16. 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
Mostly in first 3 years

17. 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

18. 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

19. 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)

20. 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

21. The Health Promotion Levy Legislation

22. The revised proposal reduces rate significantly

23. 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

24. 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

26. Thank you