Taxation of Sugar Sweetened Beverages: public hearings

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Finance Standing Committee

31 January 2017
Chairperson: Mr Y Carrim (ANC)
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Meeting Summary

The Department of Health told a joint meeting of the Portfolio Committee on Health and Standing Committee Finance that 38 million people die due to non-communicable diseases. 28 million deaths occur in low and middle income countries. 16 million people die before the age of 70. Cardiovascular diseases are the most prevalent in the non-communicable diseases group. There is a high level of hypertension in South Africa as well as diabetes. Even in the 15 - 24 year old group, there is a significant prevalence of diabetes and pre-diabetes. Prevalence of obesity in SA shows males at 10% and females at 40%. So this is something South Africa really needs to worry about. In children, there are large numbers as young as 2 to 5 years old who are already overweight and even obese. The intake of added sugar is increasing steadily. Children consume about 40-60g per day, which increases to 100g per day in adolescents. The health system is burdened by non-communicable diseases (NCD) and it increases healthcare expenditure. Food taxes were one of the most cost-effective ways of reducing NCDs. The impact of fiscal policies to improve diet and NCD prevention is in the range of 20% to 50%. It has a significant opportunity cost for governments. The tax is part of a number of interventions. There are other strategies such as the private sector reformulating its products. Sugary beverages and unhealthy foods should be less freely accessible.

Treasury highlighted that the fiscal measures took the form of excise taxes or subsidies. The role of excise taxes is to compensate for the negative effects of unhealthy foods. The tax is not on sugar per se but on beverages with added sugar. With beverages that contain added calories including natural sugars, the amount of sugar becomes the tax base. It comes down to R2.42 per litre. The administration of the tax will be through the customs and excise tax. The revenue general from the Sugar Sweetened Beverages (SSB) tax will be channelled to assist in health development programmes. So this exercise is not simply just about raising general revenue.

Medical professors from various universities shared similar views about the burden of health of NCDs resulting from obesity and sugar consumption through sugar sweetened beverages. Stakeholders were in consensus about the proposed fiscal measures to avert the epidemic of NCDs and reduce the expenditure burden on Public Health. UCT School of Public Health highlighted that at a national population level, fiscal intervention is the most effective method. There is a connection between the health of a woman of reproductive age and the health of her child. The offspring of an obese mother are likely also to be obese. Stakeholders argued that people are surrounded by misinformation and there should be policies stringent enough to deal with this. The NCD epidemic is low key but clinicians need to battle with it every day and there are not enough resources to deal with it. Many cancers are driven by obesity and the food we eat. It can be reduced by simply changing one's diet. Statistics show that people who die from diabetes in Africa are the highest in the world. Drinking one sugary beverage a day increases the chance of getting diabetes by 26% so it cannot be part of a healthy diet because you stimulate hunger for the entire day, and causes insulin resistance. Mexico implemented the same intervention in 2014, and in the first year of implementation there were already positive outcomes.  Mexico’s per litre tax on sugary beverages which was a 10% cost increase, effectively reduced SSB purchases and sales particularly among the lowest income group and heavier SSB consumers. Important to note, the SSB tax does not lead to net job losses, which proved to be consistent with experiences from tobacco taxes. Lastly, additional economic benefits showed reduced healthcare spending, increased productivity and enhanced development.

Members asked questions about the impact of SSB on jobs and were particularly concerned about the estimated 5 000 job loss and the negative implications on industry; how the tax revenue generated would be distributed; the effectiveness of a regulatory regime as an alternative to fiscal intervention; regulatory measures that can be employed to stop the poor from consuming SSBs. The Committee asked why there had been no research on the regulation of sugar content in SSBs; what the alternatives were in dealing with obesity apart from SSB consumption reduction; had putting an age restriction on SSBs consumption been considered; what did the proposal to push the SSB tax to 30% mean in real terms; about recommendations for cultural and lifestyle changes for the 70% of South African women who were obese and in particular black women.

In the afternoon session, the Committees heard that Beverage Association of South Africa (BevSA) contributed some R62 billion to SA’s GDP, supported up to 300 000 jobs and contributed R17.5 billion towards taxes. BevSA said the proposed SSB tax would have substantial unintended economic consequences at a time when the economy needed to grow. The SSB tax would curtail their ability to help grow SAs economy through sustaining current jobs.  It would negatively impact agro-processing and agriculture and the transport and logistics sectors. BevSA understood that sugar had problems but small scale cane farmers would feel the impact of the SSB tax immediately. About 25% of the jobs in the non-alcoholic beverages industry were at risk. The significant job losses would be felt particularly in the informal job sector.

BevSA proposed that Government fast track the Foodstuffs, Cosmetics and Disinfectants Act regulations so that there would be compulsory declarations on what was contained in products, together with the Agricultural Product Standards Act, so there could be easier classification of the sugar types people used.
Their proposal was that a holistic approach be explored in fighting obesity and that the proposed SSB tax would not yield any positive results.

The South African Cane Growers Association said the last normal season KwaZulu Natal had had been in 2013 as since then cane growers, especially the small scale farmers, had been ravaged by drought. The industry as a whole had a 25% reduced crop production. A SSB tax would increase job losses in rural areas where SACGA came from. It would increase the unsustainably of small scale farming operations which were the backbone of the KZN and Mpumalanga rural economies.

The South African Fruit Juice Association (SAFJA) requested the exclusion of 100% fruit juices from the scope of the taxation of sugar sweetened beverages, noting that 100% juices contained no added sugar and was therefore not an SSB and had well recognised nutritional benefits for consumers. This recommendation was consistent with international best practice. It said the agricultural value chain and employment in especially rural areas should not be adversely affected.

Tiger Brands had a concern about concentrated beverages versus ready-to-drink beverages. The dilution ratio of 1:3 for concentrated beverages after addition of water reduced the sugar content grams per 100ml by some 24%. A 2 litre bottle of Oros normally cost R30.00 but if the same methodology as the tax on SSBs would be applied, the bottle would cost just over R50.00. Point of sale data showed that this would reduce sale volumes by over 70%.

The South African Sugar Association represented sugarcane growers and sugar manufacturers. The sugar industry generated about R14 billion revenuefor millers and growers. The industry had embraced land reform and was progressing at an impressive rate in transferring land and empowering historically disadvantaged growers and landowners. It had currently transferred 22% of freehold land under cane from white to black owners. Much had been said about job losses being minimal in the beverage industry but nothing about job losses in the sugar industry. Two of the 14 mills had not run over recent years because of uneconomical viability. SASA, though acknowledging that sugar contributed to obesity, proposed that a study be commissioned on the effect of oil and maize consumption and what impact those had on obesity as well.

Food Allied Workers Union (FAWU) stated that they were in support of efforts to curb obesity and reduce the NCDs in SA. FAWU said that it would have been right for both National Treasury and DoH to have meaningfully engaged with affected labour unions, the industry and interested players such as health sector non-governmental organisations. FAWU said job losses were not good for anyone as shown in the poultry industry which FAWU hoped would not occur in the sugar value chain. As in the Tobacco Amendment Bill the arguments that jobs lost in that sector would find expression in a different value chain still had to be researched as to whether that actually had happened. FAWU was not convinced of the argument that job losses as a result of the SSB tax could result in other value chains absorbing those people. Certainly more comparative analysis and research together with discussion were needed. The trade-offs as expressed by the Committee that loss of 5 000 jobs versus a reduction in obesity for half the population of SA would be worth pursuing, meant an addition of 5 000 more unemployed to the 9 million unemployed people in SA. Deeper debates had to happen on where to strike that balance between job losses and health gains.

Section 27 drew attention to the constitutional rights and obligations at issue, including the obligation to take reasonable legislative and other measures to realise rights, and the constitutional requirements for policy making. Obesity and NCDs were health and health system issues as the health system had a limited amount of funding and as the burden on the health system increased it could do less and less in treatment. The legislative impact on the private sector in the form of an SSB tax (or regulation of the food sector) was not, as some would have it, an erosion of liberty, equality and dignity by “Department of Health fascists”.

South African Medical Association (SAMA) stated that obesity causation was multifactorial and therefore required a multipronged, multilevel intervention. It said the Philadelphia approach was useful. That United States city had debated a similar tax and the proposal had been defeated. However, Philadelphia had intervened in other ways. Amongst those were that it banned SSBs sales in schools and limited the availability of SSBs in vending machines. They introduced strict labelling laws; developed specific curricula in schools for children and provided retailers incentives to highlight healthier food alternatives. By doing that Philadelphia had amongst the lowest obesity rates amongst US cities.

The Non Communicable Diseases Alliance (NCD Alliance) strongly supported taxation of SSBs in South Africa as a critical highly effective measure and part of a broader programme to address this. NCD Alliance was also asking for an equitable share of the budget from that tax. In the past when tobacco and alcohol were taxed nothing was given back to healthcare to make the policies and strategic plans work. NCD Alliance therefore requested a ring fenced conditional portion of the proposed SSB tax revenue to go directly to a national NCD commission as part of the National Health insurance (NHI). This would go to prevention and treatment of NCDs for which there currently was no budget.

The Heart and Stroke Foundation (HSF) said that often they were accused of providing biased evidence. Epidemiological studies in SA over the years had become more reliable. In vulnerable groups like children, one in four girls and one in five boys between the ages of 2-14 years were overweight or obese in SA. There were 31.3% obese adults in SA. Cardiovascular disease was the second highest cause of death and it was 18% prevalent in women and 13% in men. Some provinces in SA recorded 28% of Type II diabetes prevalence. In terms of SA’s global obligatory targets the country had committed to reducing premature deaths from NCDs by 25% by 2025 and by 30% by 2030. The SSB tax would:
- decrease risk factors and could prevent 80% of premature deaths from cardiovascular diseases.
- mitigate the poor health outcomes of NCDs by influencing purchasing behaviour of SSBs.
- serve a protective function for marginalised and the high risk groups for which poor health contributed to their cycle of poverty in SA.

Drinking more than one SSB per day doubled the risk of diabetes onset and increased cardiovascular onset by 23% more than those who would have less than one SSB per month. HSF agreed that the SSB tax would not be a solution in isolation but would have to be complemented by other population-wide interventions known to decrease the burden of disease. The benefits of the SSB tax would be through reducing the burden of NCDs that would reduce income disparities in SA.

The World Health Organisation (WHO) supported the sugar-sweetened beverages tax in South Africa
as the intake of free sugars was directly linked to unhealthy diet, weight gain and increased incidence of NCDs, which was why WHO had recommended sugars intake of less than 10% of total energy intake, with 5% as a better target. A single can of SSB was more than the recommended 10%. WHO said the association of ultra processed food and soft drinks with sports and celebrity personalities was wrong and conveyed flawed messages to children. A child eating burger and chips washed down with a sugary drink and followed by crisps and chocolate bar would have to run a half-marathon to get rid of the effects. You could not out-exercise a bad diet. WHO had modelled the impact a SSB tax would have on longevity. It could prevent 477 680 deaths over 40 years in South Africa and result in savings of R1.7bn in health costs over 10 years.

Members remarked that two competing perspectives had emerged at the hearing - one of which was the sugar industry wanting to maintain the status quo and the opposing view from academics and health practitioners was that if the situation continued unabated there would be dire health consequences. The Committee said they definitely needed guidance to work their way through the statistics presented. They would hear further submissions and hold a workshop.

Meeting report

The Chairperson noted that this was a joint meeting with the Health Portfolio Committee as the agenda speaks to both health and finance.

Obesity & Non-Communicable Diseases: National Department of Health briefing
Mr Melvyn Freeman, Chief Director: Non-Communicable Diseases, noted the alignment of the Sustainable Development Goal (SDGs) and the NDP on this. The SDG goal was to reduce by one-third premature mortality from non-communicable diseases (NCDs) by 2030 through prevention and treatment. The NDP 2030 Vision was to reduce the prevalence of NCDs by 28%.  NCDs kill 38 million people each year globally, and almost three quarters of NCD deaths (28 million) occur in low- and middle-income countries. Sixteen million NCD deaths occur before the age of 70, and 82% of these premature deaths occur in low- and middle-income countries. Its important to note that cardiovascular diseases account for most NCD deaths, and there is a range of activities such tobacco use, physical inactivity and alcohol use as well as unhealthy diets contributing to the risk of dying from an NCD. With that being said, South Africa is the most obese country in the sub-Saharan Africa.

NCDs are responsible for 27% premature mortality in SA, which makes it the highest number of deaths in the African continent due to NCDs within the 15-69 age group. The country’s high HIV and AIDS burden contributes to the NCD burden, as these put people at a higher risk of developing Type 2 diabetes and diabetes complications. This is due to the intake of sugar that is increasing steadily in SA, statistics show that children consume 40-60g per day increasing to 100g per day in adolescents. Sugar consumption in SA is 32kg per person per annum which equates to 88g of sugar per day. The health system in the country is burdened by NCDs because it increases healthcare expenditure significantly, and it imposes higher premiums paid by all private users and poorer service for all public users.

Other risk factors is dental decay because of the acid (low pH) of the drink  which dissolves the enamel of the tooth to create holes. Any form of acid in the mouth will dissolve the enamel, which means that sugary acidic drinks have a double ‘whammy’ on demineralisation of teeth. Dental caries are the most preventable chronic disease and very expensive to treat. During 2015/16, 2 691 197 teeth were extracted just in public health care facilities. In the first two quarters of 2016/17, of the school children screened, 69 033 were referred to oral health care services. Children are the most targeted by dental caries, and a significant amount of it is borne by acid and low pH contained in sugar-sweetened beverages.

Amongst the risk factors, obesity is a major risk factor for NCDs. It increases the risk of NCDs by 4 to 8 times such as diabetes, cardiovascular disease and cancer. Moderate obesity is associated with an 11% increase in healthcare costs, whilst severe obesity with a 23% increase in health costs. This compromises productivity significantly. The economic implications and consequences for NCDs reflect 6.8% of SA’s GDP being spent on absenteeism, presenteeism and early retirement. For children school absenteeism is mainly due to tooth related problems.

Government’s role is to develop policies that address burdens on the national fiscus and create equitable, safe healthy and sustainable environments to prevent and control obesity and diet-related NCDs. Fiscal measures prove to be the most cost effective interventions to address obesity. The Department is fully aware that taxation is not a ‘silver bullet’ and there are a number of interventions that can be used to complement the fiscal intervention in order to achieve maximum results.

Proposed Tax on Sugary Beverages: National Treasury Policy Rationale
Mr Ismail Momoniat, Deputy Director-General: Tax & Financial Sector Policy, stated that Minister Gordhan announced in his 2016 budget speech the proposal to introduce the tax on sugar-sweetened beverages. The decision was the result of growing concerns about obesity in the country, and weight gain from excess sugar consumption mainly stemming from sugar sweetened beverages (SSBs) and high caloric energy dense foods. Treasury is in support of the fiscal interventions adopted by the National Department of Health to address the epidemic of NCDs, because it is a most effective tool, even worldwide in countries that experienced the same challenge. The fiscal measures come in the form of excise taxes on unhealthy foods, and subsidies on healthy foods. Although this would influence manufacturer production and consumer purchasing decisions, it would definitely yield greater results in reducing the burden on the public health sector.

Studies suggest that a 10 to 20% price increase in SSBs may be required to translate into a meaningful impact on health outcomes. There are concerns that the tax will be regressive and cause harm to the poor. However, obesity itself is a regressive disease that disproportionately affects those in lower socio-economic groups. Therefore, poor people will benefit the most in terms of positive health gains from the SSB tax due to price elasticity of demand within this group. The rationale is that the poorer you are, the more likely you will not purchase SSBs after a price increase which will consequently reduce the consumption and in effect reduce obesity and the NCD risk, which in the long term will yield better health outcomes.

The scope of the tax is all beverages that contain added caloric sweeteners such as sucrose, high-fructose corn syrup or fruit-juice concentrates (i.e. soft drinks, fruit drinks, sports drinks, energy and vitamin water drinks, sweetened iced tea, and lemonade etc.). the tax is determined by the actual sugar content in sugary beverage in grams, and the tax is proposed at a rate of R0.0229 (2.29 cents) per gram of sugar which equates to a 20 per cent tax incidence on 1 litre of Coca-Cola. For example, a litre of Coca-Cola has about 106 grams of sugar, which means the tax rate will be around R2.42 per litre. In terms of administration, the SSB tax will be implemented through the Customs and Excise Act of 1964 as a levy. The exemption will include 100 per cent fruit or vegetable juice and unsweetened milk products.

The tax is not intended as a revenue raising instrument, but as an a health promotion tool.

In terms of socio-economic impact, National Treasury recorded that the formal sector will experience a decline in about 286 million litres by taking the substitution effect between carbonates and low calorie cola carbonates into account. This amounts to an estimated decline in revenue of R1.4 billion. Whilst the informal sector will only experience a decline in 35 million litres, with a revenue decline of R165 million. The impact on GDP and job losses is less severe. Job losses are estimated to amount to 5 000 assuming that the industry reformulates their products, the net decline in volumes and job losses could be reduced significantly if not prevented. Treasury is only moving on this proposal to tax sugary beverages not sugar itself. This taxation measure is not going to get rid of obesity, it has to go with a set complementary measures, such labelling, social awareness and education. Once you talk tax, people start paying attention, so tax on sugary-sweetened beverages proves to be a most effective measure. The first democratic government in SA took this stance with smoking.

Discussion
Ms T Tobias (ANC) commented about the studies that are being used within the South African context, regardless of the organisation that conducted the studies, especially studies done in well developed countries. The economic environment is not the same, and that may lead to incorrect conclusions.

The Chairperson interjected to say that members of the Committee are not allowed to exceed the time that has been allocated to them to ask questions, because today the Committee intends to allow the stakeholders to speak out and express their views. He concluded that members have two minutes to ask questions or comment.

Mr Alf Lees (DA) stated that there are undeniably health issues borne by sugar-sweetened products, he asked if the tax has been referred to the Davis Tax Committee and, if not, is it going to be. Has a full assessment been done on it?

Prof W James (DA) stated that there is definitely a need for intervention to reduce the growing number of NCDs borne by consumption of sugar-sweetened beverages. However, he does not think the fiscal measure is the best intervention. He believes that there may be other forms of intervention that are more effective. If a purpose of this fiscal measure is to raise general revenue and it is hooked against health, this makes the purpose immoral. Especially, if the revenue is not going to be used to support the Department of Health, but used as general revenue.

An ANC Health Committee member asked about how far has the Department of Health invested in health promotion, in order to educate and empower citizens about the health implications of excessive sugar consumption. In this way they will have the option to make their own informed decisions. There are unintended consequences that will put small farmers in KwaZulu-Natal at a disadvantage, although this is specifically targeted at sugar-sweetened beverage manufacturers, it can potentially trickle down to affecting the small farmers. Big businesses may take a decisive action to reduce the sugar, therefore, leaving those farmers without business. The Department of Health is not introducing the measures to have the big corporates reduce sugar in beverages and set limits in the amount of sugar contained in the beverage, but instead, the Department is implying that people should drink ‘poison’ and Treasury will tax the corporates.

Dr M Khoza (ANC) stated that the challenge she faces is wondering if a tax instrument is the best tool to address the health concerns. Perhaps, we should be looking at the national regulatory regime in terms of what is allowed and what is not. This tax will have negative implications on the industry.

Mr P Mabe (ANC) stated that if it was indeed about maintaining healthy lifestyle and in the interest of the public, government should be making sure that it focuses on regulatory measures and monitor or regulate the amount of sugar put in the beverages. And if they go beyond that, the manufacturer will be penalised. He emphasised the point that fiscal measures are not the best way to go about this, because the implications on jobs needs to be taken into account. Government cannot introduce measures that will largely marginalised the people. The measures introduced need to be in the best interest of the South African public. Clarity is needed because people are going to lose jobs. He suggested perhaps even criminalising the offenders who do not abide by the regulations.

Mr M Hlengwa (IFP) referred to the GDP and the job loss impact, stating that job losses are estimated at 5 000 and that will be people who are typically on the lower end of the economy who are mainly the people who are dependent on public health care. He asked about the implications of job losses, and how these measures will introduce other health care problems such diseases borne by poverty and starvation, because people would have lost their jobs and are unable to feed themselves and their families. The ripple effect is quite extreme, and he pleaded for a ‘hamba kahle’ approach on this aspect. What are other interventions or programmes that have been put in place, because prevention is better than cure. And he asked how the revenue is going to be spread because it does not seem that it will be channelled towards health programmes to address the epidemic of sugar consumption that is a cause of non-communicable diseases.

Mr Momoniat assured them that the revenue generated is not for general purposes, it is intended to be used to assist the Department of Health in addressing NCDs borne by consumption of sugar. There will obviously be a basket of complementary measures that have already been considered and driven by health policy, such as public awareness and education. That is the main reason, certainly these complementary activities need to be funded in order to be effective, and the monies to fund them can now be available through this fiscal measure.

This tax has not been referred to the Davis Tax Committee, because it is a simple, straightforward exercise and there is nothing further it can add. When there is a new tax, there is always a lot of stories around it. The issue of job losses has been dealt with, and that depends on assumptions, and how substitution takes place and a range of other assumptions. Obviously, the policy will deal with those who will be losers as a result, and it is important to note there is never an all-win situation with new policy, there will be always be winners and losers, and the public needs to be assured that the latter has been considerably dealt with.

Mr Freeman stated that the regulations in the tax are not either or, the tax goes hand in hand with the regulations, and what is essentially being communicated is that if sugar level on a beverage is below a certain margin – there will be no tax. But, if it is above the set regulations, then tax implications will kick in.

Mr Momoniat said that criminalising it is not necessary because ultimately people have a choice on whether they want to consume the products or not. He completely shunned this ideology, furthermore, it is a range of other issues that one needs to look at. The tax system is progressive, however, there may be taxes that may be regressive, for example; tax on tobacco which is regressive because there are poor people who smoke. The impact on the poor is a very difficult one, because you also find that unhealthy food is very cheap which is most likely what poor people can afford. So these are some of the issues that need to be looked at.

Speaker form the Department of Health, stated that perhaps members are not appreciating how good taxation is as a change in behaviour mechanism. As the price rises, there is a change in behaviour regarding a particular product’s consumption. Take for instance, alcohol and tobacco, there will be evidence shown that when price rises consumption drops and this is the main reason that the Department is doing this, including poor people – and these products are not an essential, therefore, the Department is not putting a burden on them but actually taking it off.

University of Cape Town School of Public Health submission
Prof Tolu Oni, Public Health Physician Scientist, stated that there needs to be a multi-sectoral approach to addressing health issues at different levels such as community level, individual level and population level. The biggest challenge is coming up with a most effective method to avert NCDs on a population level. Some of these interventions include decreasing the likelihood of diabetes by looking deeply into the source of calories. Sugar calories promote fat storage and trigger hunger faster when compared to fats, proteins and complex carbohydrates.

She noted that focusing on physical activity alone does not effectively address obesity at a national population level. As alternatives to taxation, people have suggested consumer education to balance calorie choices, but systemic reviews confirm that such interventions lack evidence for effectiveness. So there is definitely a need for radical intervention, and the country cannot afford to delay.

There is a connection between the health of woman of reproductive age and the health of her child. The offspring of an obese mother is likely to also be obese. Obesity is more than just the physical, maternal obesity leads to lower cognitive function in children. The use of tax instruments to boost public health is not only limited to South Africa. It happens all over the world. Therefore,  UCT strongly support National Treasury's proposals to help combat this.

Discussion
Ms Tobias stated that the Prof Oni insisted on a community based approach in dealing with the issues. However, the perspective of Ms Tobias comes from a thinking that poverty is the main driver of the current conjuncture. So in an environment where people are poor and forced to consume products that are unhealthy and cheaper, what should be the right approach in that context?.

Dr Khoza asked if there is a reason why the submission did not touch on the regulatory environment, because she believes that tax alone (fiscal intervention) will not be effective enough to deal with the problem.

Dr James said sugar tax is one option, the content of the sugar in sugar-sweetened beverages or by-products can also be regulated. He asked if the content of the submission was put to the UCT Faculty of Health Sciences because she is speaking on behalf of the faculty, and as member and honorary professor he does not recall this matter being presented and put to a vote. 

Ms P Kekana (ANC) asked if other mechanisms have been considered to reach out to the public, there is consensus that public education on the matter is needed and it is always been a big challenge.

Prof Oni replied that the purpose of highlighting the population approach is definitely due to that. There are different environments such as physical and economic, so it is crucial when thinking about these population approaches the keyword is multi-faceted; it is important that we look at multi-faceted approaches. We cannot come across as punishing people without putting in measures to support healthy approaches. At an individual level it is levelled down to lifestyle choice and sometimes ‘lifestyle’ implies that the consumer has a choice even in situations where the choice is not really there. The evidence in terms of the different types of interventions shows that fiscal interventions are most effective in influencing consumer behaviour. She focused on sugar tax only because of time constraints and her written submission does include other approaches that can be looked into.

With regards to the regulatory environment, it is important to reiterate that the cost effectiveness of fiscal measures within the South African context is crucial to curb NCDs and the epidemic of sugar consumption on a population level. It is not by any means the only approach but it is shown to be the cost effective and to impact the population.

She welcomed Dr James’ question, and stated that she represents Public Health and she received multiple inputs from other departments within the Faculty of Health Sciences. In terms of mechanisms to educate, it is important to start at school level and ensure the Department of Health hones that craft because it is as important to educate as it is to tax.

The Chairperson suggested that instead members ask questions at the end of all the submission and must note who their questions are directed to. He then handed over to SEMDSA to submit its submission.

Society for Endocrinology, Metabolism & Diabetes of SA submission
Dr Sundeep Ruder from the Society for Endocrinology, Metabolism & Diabetes of South Africa (SEMDSA) stated that endocrinologists are doctors that deal with diabetes and there are very few of them in the country, and difficult to find in small clinics and in the most remote areas. There are many South Africans who have been misled by big corporations to consume products that are not good for their health yet they are actually told that these products are good for them through ‘sexy’ images and advertisements. This is plain psychological manipulation to get people to consume foods that are unhealthy.

As a doctor who has worked in the rural areas, he knows the struggles of clinicians on the ground who try to help people on the 'salvage' level. Health is the intrinsic nature of human beings. People become unhealthy due to the things that are being put into them for consumption. Endocrinologists are doctors who deal with diabetes every single day. Many people with diabetes are unable to work and are dependent on state grants.

People are surrounded by misinformation and there needs to be policies stringent enough to deal with this. NCDs are happening but it is low key and clinicians need to battle with it every day and there are not enough resources to deal with it. In a country where education standards are very poor, we are expecting the consumer to make choices, but based on what knowledge. Consuming sugar at a young age is correlated with cardiovascular disease later in life. We reflect the numbers without first world resources to deal with this problem. The women of our country are very obese, among the highest of the world. If a child-bearing woman is not healthy, the child will not be healthy. Many cancers are driven by obesity and the food we eat. It can be reduced by simply changing the diet. Statistics show that people who die from diabetes in Africa are the highest in the world. Drinking one sugary beverage a day increases the chance of getting diabetes by 26%. It cannot be part of a healthy diet because you stimulate hunger for the entire day, and cause insulin resistance. Secondary sugar is when a mother consumes sugar and it affects her unborn child. Just like secondary smoke. Where is the evidence that sugary drinks are good for you (as the advertisers of these products proclaim), it has not been seen. There comes a time in the history of a nation when we must do what is right rather than what is pleasant. He appealed as a clinician to think about this carefully.

Priceless SA submission  
Prof Karen Hofman, University of Wits School of Public Health, stated that the sugary drinks tax will save lives, increase life expectancy at low costs and send a public health message to counter marketing. She also noted that it will avoid further impoverishment for poor families and avert huge costs to the economy. The health system is burdened by NCDs pushing up costs, because NCDs continue increasing healthcare expenditure in the private and public sector. She highlighted 50% increased health costs for obesity in the 54-69 year age group, which clearly reflects that the public purse is currently subsidising sugary drinks. In 2010, government spent between R11.5 to R20.5 billion on diabetes. Without the SSB tax, the expenditure is predicted to be between R14.4 to R26.6 billion in 2030 on diabetes alone.

The macro-economic impacts of NCDs is severe, because it poses an economic burden on households due to loss of wages of prime-age adults due to death and disability, significant costs of mortality on households and a poverty spiral. As a result, this translates to a 6.8% cost to the economy as a percentage of GDP. The consumption of tobacco declined from 40% to 20% as a result of the increase in sin tax. There is no doubt that the same can be achieved with the fiscal intervention on SSB tax. This means that a quarter of a million people will be prevented from obesity. Lastly, she cautioned that a lot of people from different organisations will say different things, but it is important to remember that these big companies want to stimulate growth by expanding reach to the main markets, which is the poor in South Africa and in Africa.

Submission by Prof Chaloupka, University of Illinois, Chicago
Prof Frank Chaloupka stated that he will touch on Mexico’s experience with sugary beverage tax as a case study, and provide some empirical evidence on the employment impact of both the tobacco taxes and SSB tax. He highlighted that the SSB tax in Mexico was implemented in January 2014. The excise tax was 1 peso per litre which equated to a 10% increase in price on all non-alcohol beverages with added sugar. The impact of the tax in year one was a 6% decline in purchases of taxed beverages compared to pre-tax trends. Concurrently there was 4% increase in purchases of untaxed beverages which were 100% juices and products with artificial sweeteners. Sales were expected to drop in those sectors but there was a prevalent increase in bottled water sales of 5.2%.

The impact on health as a result of a 10% reduction in SSB consumption would lead to 189 300 cases of diabetes prevented, 20 400 strokes and myocardial infarctions prevented, and 18 900 premature deaths averted. The public health sector would save $983 million that would have been otherwise spent. Looking at Mexico’s case alone there is no doubt that fiscal intervention is the most effective method to avert the epidemic of NCDs.

Industries argue that production and consumption of their products lead to significant economic impact, but industry-sponsored studies tell part of the story because they focus on the gross impact but the net impact reflects that money not spent on taxed products will be spent on other products. The industry estimates of gross impact do not reflect overall impact on the South African economy. In the case of Mexico, the impact of taxes showed no decrease in total employment in the manufacturing sector for beverages and non-essential foods following the implementation of the SSB and junk food taxes. There was also no change in employment in commercial stores that sell these goods, and there was also no increase in unemployment in the country.

In conclusion Mexico’s peso per litre tax on sugary beverages effectively reduced SSB purchases and sales particularly among the lowest income group and heavier SSB consumers. Important to note, the SSB tax does not lead to net job losses, which proved to be consistent with experiences from tobacco taxes. Lastly, additional economic benefits showed reduced healthcare spending, increased productivity and enhanced development.

University of Western Cape School of Public Health
Prof Thandi Puaone highlighted that obesity contributes to NCDs and Type 2 diabetes as already mentioned. This is because of the price factor inherently attached to these products. They are cheaper which makes them more enticing to the poor, and this explains why the poor are the biggest victims of obesity and NCDs. She stated that UWC School of Public Health supports National Treasury fiscal interventions, but Treasury must not only focus on beverages. It must take into account the seriousness of proper food labelling and ingredients, advertisements (some advertisements that may be misleading consumers should be banned from being aired), food re-formulation, community awareness and perhaps subsidising healthy products and foods. Lastly, she said that revenue generated from SSB tax should be re-directed to health programmes, as it is not clearly outlined how exactly the money is going to be spent. If Treasury could share some light on that, it would put a lot of people at ease.

Discussion
Dr W James (DA) commended the submissions on the factualness of their conclusions on public and medical health. The issue at hand though was with which instrument to intervene and whether it had to be a normal, graduated tax or even a tax to begin with. The one area where no work had been done in terms of the submissions was the regulation of sugar content in sugar-sweetened beverages (SSBs). Why had no research been done on that regulation of sugar content in SSBs?

Mr P Mabe (ANC) said he had heard some presenters saying there would be no job losses with the introduction of SSB tax and another presenter had suggested that the SSB tax had to be increased towards 30%. No presenter had spoken about comparing relative prices of SSBs in terms of increasing tax on standard SSBs and then compensating those having less SSB content. He had also expected a submission on the possibility of increasing the scale of production as there would be those already making standard SSBs and those producing SSBs with less sugar content.

Dr S Thembekwayo (EFF) said a reference had been made to Coca-Cola advertisements on misinforming communities to believe the unbelievable through advertisements. There was no way that a hike in price in SSBs would lead to a drop in consumption. An example was that retail discounts on six 2 litre Coke bottles went for R50 and in that respect there was no way people would consume fewer SSBs.

Mr M Hlengwa (IFP) asked what the basket of alternatives was in dealing with obesity apart from SSBs. What was the cost of poverty on healthcare? He wanted elaboration as the Committee ran the risk of compartmentalising obesity to only SSBs, without considering other contributing factors. What other alternatives were there in dealing with obesity holistically? In restricting SSB consumption by children, had the academics considered putting an age restriction on SSB consumption in a similar manner as the illegality of underage drinking of alcohol.

Ms P Kekana (ANC) said that the focus of the research presented seemed to have focused only on SSBs. She had expected that television could be a contributing factor to obesity as children watched that after meals and did no physical activities. Additionally she had expected a national approach followed by individual intervention in terms of what the submission from the University of Cape Town had said on obesity. Black or poor communities had their children consuming liquefied sugar beverages. Seemingly nutritional education had not been prioritised in the research presented rather taxation on SSBs had been the focus. The sitting was aware of the amount of sugar in tomato sauce and chutney but the hearing had focused only on SSBs; the next thing there would be hearing on both with taxation being called for. She agreed with Mr Hlengwa that taxation on sugar sweetened products be addressed holistically and not to focus on SSBs only.

Mr A Lees (DA) noted the Members’ questions about percentage of taxation whereas the actual proposal is R2.29c per gram of sugar so the tax would be determined by the amount of sugar in a product. What did the proposal to push the SSB tax to 30% really mean in terms of the actual tax proposal?

Mr T Tobias (ANC) asked for recommendations to cultural and lifestyle changes based on the finding that 70% of South African women were obese and in particular black women.

The Chairperson said that the presenters would be allowed to send more elaborate answers in writing, if they were not able respond sufficiently to the questions and comments made by the Committee.

Prof Karen Hofman, Healthy Living Alliance (HEALA) and Wits Health economist, replied that evidence had shown that nutritional education alone had not been very effective in reducing obesity and that there was also no evidence in the world that regulation of SSBs would have the desired effect as well. As academics they had focused research on SSBs because SSB liquid sugar had a particularly toxic effect on the body. The liquid sugar exhausted the pancreas which controlled insulin and that resulted in diabetes.

As important as physical activity was it could not possibly match what was needed in terms of what was consumed as food and beverages. Though the academics had not focused on everything, they had looked at all the possible interventions, and marketing to children had obviously become a big issue.

Dr Ruder Sundeep, SEMDSA executive committee member and spokesperson for the Healthy Living Alliance (HEALA), said that indeed obesity was a complex issue and the debate on sugar tax had highlighted so many other issues that had never been discussed before like nutritional education, cultural issues and activity levels. The largest contributor of calories that came in the average diet came from SSBs as they were easily accessible and cheap. For instance, if anyone had drunk a soft drink that person had dumped ten teaspoons of sugar on average into their blood stream with no work of digestion required. This stressed that individual’s pancreas and caused that individual to release so much insulin that there was no work for it. The insulin would then store around that individuals waistline as fat and would dip that individual’s sugar levels rapidly. The individual would start feeling tired and an hour after drinking the soft drink the person would want to sleep. The point was that Government institutes a tax that would change behaviour and reduce consumption. Only after that could discussions about nutrition and cultural issues follow. As frustrated clinicians they had done so much nutritional education to no avail as the SSBs had so much influence that patients continued consuming them. Therefore a regulatory instrument would have an impact which could then be followed up as stated.

Prof Frank Chaloupka, Global Health Advocacy Incubator, University of Illinois, said academic research around obesity did in fact take a holistic approach. His work looked at a range of interventions and policies and how those would work in reducing consumption, improving weight and health outcomes. When he worked on tobacco he had considered everything from, tax the market, smoke free policies, what was happening with packaging and labelling requirements, mass media and education campaigns. They had done similar work on the obesity research except that obesity was much more complex as behaviour and a broader range of interventions had to be considered. They had been looking at interventions that promoted physical activity and what had been happening at schools’ food environment and in terms of physical education requirements in schools. They had considered advertising restrictions as well. What had been heard and which would continue to be discussed for sometime was that it did take a comprehensive approach to have a significant impact on behaviour. However, that did not mean that individual policies could not have a real impact. The SSB tax had become a topic because there was good evidence elsewhere in the world that SSB tax did have an impact on consumption amongst people that were most vulnerable to obesity and that the tax was highly effective and also cost effective.

A good place to start was that it was known that SSBs had no nutritional value and added a lot of excess calories to diets and a tax on SSBs would be a very effective strategy in reducing consumption and promoting health. Additionally the tax would generate revenues that could be used to support other efforts that took significant resources to implement such as mass media campaigns.

Prof Thandi Puoane, University of the Western Cape, School of Public Health, said that her submission had recommended that reducing obesity had to be addressed not only in terms of the SSB taxation but through a wider approach. For example, they had recommended community awareness programs that would educate about normal portion food sizes; dealing with cultural perceptions and the mindset that success was determined by how large a person was; and expanding community knowledge about what was meant when a food type was said to have a certain number of calories.

Dr James said he was not satisfied that there was no evidence on the ineffectiveness of regulation of SSBs and if there was, even if not efficient, he would like the presenters to send that through to the Committee.

UWC said that as well as all the interventions presented could be effective what was needed more was the support of communities to make those healthier eating choices because in the context of poverty and inequality people could not be just given information without giving them the environment and ability to use the information.

The Chairperson said that no decisions would be taken yet as the Committee was still going though the information. There were two ways going forward and one was a workshop kind of environment where the Committee could ask categories in the industry and the health sector to send two representatives each to a  Committee workshop which would then be followed by intense discussions.

Afternoon session
Beverage Association of South Africa (BevSA) submission
BevSA said it was the only industry body which represented the non-alcoholic sector excluding fruit juices and dairy and represented about 92% of the beverage sector in terms of volume. Their members were large multinationals, medium sized and very small players within the country. Their primary objective was to ensure the sustainable growth of the non-alcoholic beverage sector.

Ms Mapule Tiny Ncanywa, Executive Director, BevSA, said they appreciated the challenge of obesity as a non-communicable disease (NDC) and as a contributing industry to the disease they wanted to be part of the solution. BevSA said it punched way above its weight as the sector contributed some R62 billion to SA’s GDP, supported up to 300 000 jobs and contributed R17.5 billion towards taxes. Since 2002 when the SSB tax was mooted, BevSA had sustained economic growth and managed to grow jobs by 5% per annum and contributed 4.5% in terms of gross value add. After 2002, small and medium players had flourished and BevSA strongly believed the introduction of an SSB tax would unravel all the good work done to date.

In the 2016 Budget Speech, Minister Pravin Gordhan had said: ‘we want to support the attainment of the National Development Plan’s 14 outcomes; the Nine Point Plan towards the reduction of unemployment down to 6%; contribute to the creation of new jobs which will grow our economy in all sectors’.

As a responsible industry, BevSA’s mandate had been shaped by Government’s key initiatives and it shared in the spirit of frankness both about their challenges and the opportunity to turn the economy’s direction towards hope, confidence and a better future for all. It was sad that the debate, though its intentions were good, could also have negative outcomes by making South Africans poorer. BevSA believed the proposed SSB tax would have substantial unintended economic consequences at a time the economy to grow. The SSB tax would curtail their ability to contribute and help grow SA’s economy through sustaining current jobs.

The non-alcoholic beverage industry contributed to the revitalisation of agriculture and agro-processing. BevSA considered that if the SSB tax was passed in the manner that it had been proposed it would negatively impact agro-processing and agriculture because their entire value chain included transport and logistics sectors including sugar cane which was agriculture. BevSA understood that sugar had problems but small scale cane farmers would feel the impact of the SSB tax immediately. If BevSA reduced their values there would be a reduction in local procurement as its members sourced their sugar locally.

Ms Ncanywa said that they worked very closely with cooperatives in township and rural areas for revitalisation and development which would be affected with black women and youth mostly affected.

About 25% of the jobs in the non-alcoholic beverages industry were at risk. The significant job losses would be felt in the informal job sector and BevSA did not want to contribute to job losses in SA.

Mexico had been referred to as an example where no job losses had occurred after an SSB tax had been introduced. However, SA was different from Mexico in that Mexico had an unemployment rate in the single digits. Mexico’s GDP was also more robust than that of SA. BevSA believed that government regulation would yield better results.

Ms Ncanywa said it had been mentioned in the discussion that when quoting numbers, this had to be contextualised. If it is said that SSBs are the largest contributor to obesity, this had to be contextualised. What was the make-up of a plate of food for an average South African? BevSA knew their facts and said that SSBs contributed only 3% towards the calories that an average South African consumed.

BevSA proposed that SSBs be regulated and it had engaged the Department of Health (DoH) on healthier food options as an initiative which the DoH had endorsed. All the work on reformulating their products with the intent to reduce sugars and size of portions and in ensuring that they did not advertise to children under the age of 12 years had been shared with DoH. BevSA had also proposed a partnership with DoH to ensure that they had effective awareness campaign outcomes. As industry, they were saying the measures they had proposed to DoH could be binding but had to be measurable. They had targeted to reduce the sugar content in their products by 15% by 2020. Reformulation meant reduction of sugar content in products and industry was also committing to doubling those reduction values as proposed by the current National Treasury paper. BevSA was proposing that Government fast track the Foodstuffs, Cosmetics and Disinfectants Act regulations so that there would be compulsory declarations on what was contained in products, together with the Agricultural Product Standards Act, so that there could be easier classification of the type of sugars that people were using.

Their investment, which BevSA said its members wished to maintain in a no tax environment, would ensure that the non-alcoholic beverage industry would continue growing the economy by putting down bigger lines in the form of a R1 billion capital expenditure which BevSA members had invested in. They wanted to ensure the continual training of people in the retail industry and to sustain all the jobs they had as well as creating about 120 000 jobs.

Their proposal was that a holistic approach be explored in fighting obesity and that the proposed SSB tax would not yield any positive results.

BevSA put these questions forward: Was there sufficient empirical evidence to justify the proposed 20% tax on SSB. What were the other contributors to the rising rates of obesity in SA? Could a total dietary study be commissioned? What would be the impact of the SSB tax on small manufacturers and rural communities?

South African Cane Growers Association (SACGA) submission
Dr Thomas Funke, SACGA Director: Industrial Affairs, said their cane growers delivered to 14 mills in the sugar cane industry in South Africa. Their structures were democratically elected from individual cane farmers that joined local associations. Local associations would then be represented by their member organisations which formed local grower councils as industry bodies. Local grower councils participated in the milling and quality control of sugar cane. Councils would then get elected to the Congress of Growers and from the Congress, were then elected to the board of directors of SACGA which represented sugar cane farmers in the industry.

Dr Funke said the last normal season for KwaZulu Natal had been in 2013 and since then cane growers, especially the small scale farmers, had been ravaged by drought. The Umfolozi area had reduced its crop production by 40%. The Felixton area at Empangeni had crop production reduction of 44%. The aMatikulu area south of Empangeni had reduced crop production by 35% with the industry as a whole reducing crop production by 25% in total.

Dr Funke named a specific cane farmer that delivered to the Sezela sugar mill who farmed two hectares of sugar cane supporting eight people. SACGA did what it could to assist him in becoming a better farmer through providing the necessary training, research, extension services and industrial support to the total value of R160 million per annum to assist him and other farmers like him. The volume of sugar supplied by the industry to the SSB sector was approximately 600 000 tons per annum. Mr KwaShukela’s fortunes depended on the industry’s fortune and the SACGA’s calculation showed that the implementation of a tax on SSBs meant their total supply volume to the SSBs sector would reduce by 170 000 tons per annum.

The price that this cane farmer was paid was made up of the growers’ share of local and export markets and molasses sales. If the industry made fewer sales in the local market, it would be forced to export the sugar onto the dumped export market. That would mean the revenue available for all growers would be less and therefore this cane farmer price would be less as well. Revenue per hectare would drop by 15% under normal circumstances and by 75% in drought circumstances according to the SACGA revenue analysis. That would mean this cane farmer’s financial stability would be severely impacted and the future of his farming operation would be under serious threat. That applied to all small scale sugar farmers who would face the brunt of the financial impact of the proposed SSB tax.

A SSB tax would increase job losses in rural areas where SACGA came from. It would increase the unsustainably of small scale farming operations which were the backbone of the KZN and Mpumalanga rural economies. It would have a negative on all rural service providers because if there were no farmers there would be no business for their services. SACGA was pleading that SSBs not be taxed as proposed.

Inkosi Sandile Gumede of the Qwabe Traditional Council and Qwabe Nkanini Communal Property Association chairperson, said he represented land reform beneficiaries and cooperatives owned by widows and would speak to the impact of the proposed SSB tax on those vulnerable groups. He said the SSB tax could be on sugar in beverages but it came from the cane growers in those areas. If the proposed tax was imposed commercial farmers could with ease manage to farm still.  However, what did it say about that farmer employees who would have been on the farm for more than two decades with no other place to go, when the circumstances forced the farmer to cut down on labour? With the little the land restitution farmers had after paying dividends at the end of the year, and the sugar industry increasing tariffs because of the proposed SSB tax; beneficiaries had already started complaining about the small dividends being paid. With over 300 households with more than five people per household, small scale farmers were barely surviving with the little tonnage and low income which they had. Anymore deductions such as the SSB tax would cripple them further. The cost of transport and harvesters to the mill had already been a significant cost and therefore the proposed SSB tax would end business for small scale farmers, cooperatives and land restitution beneficiaries.

As good as the intention of encouraging people to eat healthier foods through the introduction of the SSB tax, thousands of jobs would be lost and the loss of homes and shelter and children going to school without having eaten, would be big. Why could sugar imports not be decreased as everything that was consumed was dangerous for people’s health including cooking oil? Every year the tax on alcohol increased but people continued consuming it. Why could Parliament not join hands with SACGA awareness campaigns on healthy living alternatives and together engage non-governmental organisations (NGOs) and others? People who had never been poor themselves, were speaking on behalf of poor people. One Department was helping people, whilst the other was trying to take that assistance away. It was not true that people would not lose jobs and though poor people were suffering from obesity and other NDCs, none of the presenters had presented on interventions they had already undertaken to tackle obesity.

The general perception that rural people could not speak for themselves had to end and they had to be allowed to voice their opinions on their own.

South African Fruit Juice Association (SAFJA) submission
Mr Rudi Richards, General Manager: SAFJA, acknowledged that that there was a health problem and the matter was how a balanced solution could be found to that problem in relation to fruit juices. SAFJA represented primary fruit processors who took the fruit and converted it to concentrate all the way through to juice packers, the ready-to-drink (RTD) juices made by packers and bottlers big and small.

SAFJA strongly supported the recommended exclusion of 100% fruit juices for the following reasons:
100% fruit juice contained no added sugar and was therefore not an SSB and it had well recognised nutritional benefits for consumers. This recommendation was consistent with international best practice. The agricultural value chain and employment in especially rural areas should not be disrupted or adversely affected (see submission).

Tiger Brands submission
Mr Grattan Kirk, Group Business Executive: Consumer Brands, said that Tiger Brands was a member of BevSA and the Consumer Goods Council of South Africa (CGCSA). Its concern was about concentrated beverages versus RTDs. The implications for concentrated beverages were fundamentally different compared to RTDs as concentrated beverages were 60% of business. The dilution ratio of 1:3 for concentrated beverages after addition of water reduced the sugar content grams per 100ml by some 24%.

He said a 2 litre bottle of Oros normally cost R30 and if the same methodology and logic for SSB tax were applied to concentrated beverages then the price of Oros would increase by 50% which would mean the bottle would cost just over R50.

If Tiger Brands increased the price of Oros by 50% using the Nielsen Pricing Study for Tiger Brands beverages of July 2016 as the reference to point of sale data, that would reduce its volumes by over 70%.

The Chairperson commented that the hearing was getting very technical submissions and there were only two content advisors for the Committee. The question arose from where Parliament could get independent research to arrive at its own independent conclusions? He asked the Committee to think about how to go forward from that hearing.

South African Sugar Association (SASA) submission
Mr Rolfe Lϋtge, SASA Chairman, said that SASA represented sugarcane growers and sugar manufacturers. The 22 000 registered growers were able to produce 20 million tonnes of cane on about 370 000 hectares of cane land. There were six milling companies that owned the 14 mills in SA, 12 of which were in KZN with two in Mpumalanga. Between those mills they were able to mill about 22.3 million tonnes of sugar under normal circumstances but that was not always the case. SASA members were in the rural areas of KZN and north Komati and Malelane in Mpumalanga. The sugar industry generated about R14 billion in revenue and this was shared between millers and growers.

The industry embraced land reform and was progressing at an impressive rate in transferring land and empowering historically disadvantaged growers and landowners. It had currently transferred 22% of freehold land under cane from white to black owners. In 2001 SASA had 52 000 registered growers but the number had dropped to 22 000 by 2016. 10 029 black women were registered sugar growers and that translated to R230 million going to those growers. Their only livelihood was sugar cane production.

Much had been said about job losses being minimal in the beverage industry but nothing about job losses in the sugar industry. Two of the 14 mills had not run over recent years because of uneconomical viability. SASA, though acknowledging that sugar contributed to obesity, proposed that a study be commissioned on the effect of oil and maize consumption and what impact those had on obesity as well.

Discussion
Dr M Khoza (ANC) said that she was trying to reconcile the statistics the Committees had received since the morning. The expectation was that Government would generate R7 billion from the SSB tax and BevSA had reported that the beverage industry currently contributed approximately R17 billion towards taxes. It had been reported by BevSA that only 3% of SSBs contributed to obesity. If the challenge was to address NCDs, was the SSB tax the correct instrument? It was frustrating was that no submission had been about the participation of black people in the supply side of the industries represented at the hearing.

Dr P Maesela (ANC) said the hearing was about SSB tax and not about hampering sugarcane growers from selling their produce. If the concern would be about the bottom line then the hearing would not progress to what was the aim of the proceedings which was the tax on SSBs. If bottom lines would be the overriding theme then the conversation should move on to whose land was the bottom line a worry? Why would the owner of the land sell his labour power. If the choice would be between losing 3000 jobs versus saving 3 million lives he would choose the latter. The tax that the stakeholders claimed to have contributed had not even been enough to put NCD sufferers on maintenance therapy.

Ms N Ncube-Ndaba (ANC) said her concern was with the submission by Inkosi Gumede as it sounded like he was more concerned with individual profit, over the benefit of South Africans health. Most of the industry organisations had presented on job losses over and above the health risks of South Africans. What guarantees were there if Parliament did not pass the SSB tax, that the jobs would remain without being shed? There had been a drought and Parliament was not aware if people had not been retrenched because of that.

She had thought as well that the sugar tax would be tackled holistically as there was a lot of sugar in some of the cereal brands from Tiger Brands. She agreed with earlier sentiment from the Committee that taxing sugar content in food products could not be done piecemeal.

Mr Hlengwa said as serious as the potential job losses were, real or apparent, the working conditions of the very people being spoken about was a separate conversation. It had to be questioned if the farm workers to the factory workers were deriving maximum benefit in terms of their labour input. Sugar as a problem was appreciated by all those that had presented but he had yet to see an independent campaign by the industry and the SSB sector which actively went out to schools to educate school children and communities about all that had been presented. Cigarette boxes told consumers about the dangers of smoking to their health but he was yet to see SSBs labelled about the dangers of the sugar contained in them.

Ms D Senokoanyane (ANC) asked to what extent did sugarcane growers interact with SSB manufacturers represented by BevSA, since BevSA represented sugar manufacturers rather than sugarcane growers.

Mr Lees said that the sugarcane growers industry had done really well in terms of empowerment in that the small scale growers had grown and actually owned the properties on which they farmed. Why was it that the sugar industry could not change the sugar into ethanol, for cogeneration and other energy renewables? If there was a blockage that Government could unblock and save the jobs which would be threatened by a SSB tax, then surely that had to be explored?

Ms Kekana appreciated that agriculture was a significant job creator in rural areas and the Committee understood that some of those jobs were seasonal. She agreed with Mr Lees about the sugarcane growers diversifying their value chains. BevSA also had to assist the Committees in reducing the sugar content in some of its member’s products in light of the jobs-under-threat scenario which it had reported on should the SSB tax be approved. She was glad that SAFJA had presented as she had been told by one of her doctors that 100% juice was sweeter than SSBs and therefore she did not think it fair to say 100% juices had to be exempted. The fructose in natural juice products had also to be investigated as to what impact it had on the body and NCD outcomes.

Ms Tobias asked if sugarcane growers had considered that sugar bagasse contributed 2% less in its content which would make the tax on sugar lower if growers focused on diversifying and not only producing cane. She contested that 100% juice were natural products as poppy seeds which produced cocaine were natural products.

The Chairperson repeated that stakeholders could submit elaborated responses in writing within seven days.

BevSA replied about the R17 billion in taxes versus how much taxed SSBs would generate for Government. Ms Ncanywa said one of their requests was that a total dietary intake study be commissioned which would determine what constituted particular proportions in calorie intake. This would then determine whether the tax on SSBs would be the correct instrument or not. She said BevSA was ready to work with government departments that could help BevSA in completing such a study.

BevSA already had a healthier foods option programme where affiliate members had started reformulating their products since 2014. They were taking 4.5 gram of sugar out of a 1 litre of SSB which meant there would be four teaspoons less of what was currently in SSB products. There were already products that were lower to zero calories for consumption.

The proposal on a nutritional education campaign at schools was welcomed and there had been a channel that the DoH had launched where BevSA had requested participation but it certainly could do the campaign on its own as a show of commitment towards reduction of obesity.

Prof Nicola Theron, Managing Director: Econex, said the detail in a submission like that of BevSA was important to engage with together with the detail of a policy like the SSB tax. The net impact on the economy had been modelled and therefore one could see the impact on GDP and the job losses that the SSB tax would unleash. The model showed a net negative impact of just less that R3 billion whereas the National Treasury model had showed a net negative impact of R1. 5 billion and therefore there was a cost to the economy. Treasury had also alluded to the loss of 5 000 jobs in its submission.

In terms of the contribution and commitment of the sugar industry, if one looked at the Wits (Healthy Living Alliance) paper which actually quantified the health benefits at 36 kilojoules per day whereas the industry commitment of 14-18 kilocalories (kcals) actually yielded a bigger impact on health, which needed to be considered as well.

Dr Funke replied that diversification was important and SACGA had tried really hard to generate electricity and supply fibre to their milling colleagues which had been modelled on a joint venture called cogeneration. A determination had been made by the Minister of Agriculture a year or so ago but to date the cane growers were still waiting for a price from the Department of Agriculture, Fisheries and Forestry (DAFF). Until the price was communicated, SACGA would not be able to participate in large scale electricity generation. Similarly the policy on ethanol was still under review by the government task team and had not progressed any further which Dr Funke believed was due to the low oil prices.

SACGA did interact with BevSA on a regular basis to discuss the various initiatives they drove together as they were partners in the value chain. SACGA was driving diversification as hard as possible in rural KZN as its growers also participated in vegetable plantations that supplemented their cash flow. Additionally they worked on other commodities and improving on-farm efficiencies and even small scale electricity generation.

Inkosi Gumede replied that his intention was never to present the impression that individual profit outweighed rural communities’ beneficiation.

Mr Richards said the trick was to find holistic solutions to obesity which would limit injury to the economy. He said that a fresh apple had sugar in it together with nutritional benefits. Indeed fruit juice had intrinsic inherent sugar together with the nutritional benefits though as well. Certainly the intention could not be that the intrinsic sugar in an apple would be taxed as well, which was why SAFJA was questioning why the same sugar had to be taxed in a fruit juice. Indeed doctors and scientists seldom agreed on whether people had to consume fruit juice or not which was why the entire world organisations as referenced in SAFJA’s submission had come to the conclusion that fruit juices had to be excluded from the SSB tax.

Mr Kirk said the opportunity to reduce the sugar content in Tiger Brands products could be something the Committee could consider, which would result in a threshold so that the industry could play a role. Certainly the SSB industry would welcome the opportunity to do that first.

Mr Lϋtge said in terms of SASA being perceived as lacking the appreciation of the prevalence and consequences of NCDs and obesity it had simply wanted to illustrate the flipside of the coin of the impact of the SSB tax on the sugar industry if it were implemented. As they also supported healthy living they wanted the SSB tax to be implemented in an evidence-based way and for everyone to be allowed to debate the science properly. SASA certainly did not put profits before the health of South Africans and as far as job losses were concerned the Committee could be assured that one only made it in sugarcane if there were economies of scale. To take the uncertainty out of the debate, it could be better to talk about the job loss rate per hectare of farming rather than getting involved in what the numbers were exactly.

SASA had been involved in nutritional education programmes over the years and the association would make those available to the Committee in written form.

SASA members sold about 600 000 tonnes of sugar to the SSB sector which was about a third of their total sugar sales.

SASA members were not diversifying because the business model was simply unviable and there was no space or opportunity for cogeneration to work for SASA members. There was also no market for ethanol as the regulatory framework had been a ping pong between government departments, which was sad as the technology was well known and available for that together with cogeneration.

FAWU submission
At the first outset, Food Allied Workers Union (FAWU) categorically stated that they were in support of efforts to curb obesity and reduce NCDs in SA for a healthy nation with an obesity-free population.

Mr Katishi Masemola, FAWU General Secretary, raised concerns on the process and lack of meaningful dialogue. He said that it would have be right for both the National Treasury and DoH to have meaningfully engaged with affected labour unions, the industry and interested players such as health sector non-governmental organisations.

Contents Concerns (Jobs Losses and Negative Socio-economic Impact)
Reduction in obesity would well be served by reducing production of SSBs if the proposed SSB tax would be passed onto consumers by the sugar industry. However, this would mean reduced staff complements and job losses. Job losses were not good for anyone as shown in the poultry industry which FAWU hoped would not occur in the sugar value chain. As with the Tobacco Amendment Bill, the argument that jobs lost in that sector would find expression in a different value chain automatically, still had to be researched as to whether that actually had happened.  And because of that FAWU was not convinced of the argument that job losses as a result of the SSB tax would result in other value chains absorbing those people. Certainly more comparative analysis and research, together with discussion, were needed.

The trade-offs, as expressed by the Committee, that the loss of 5 000 jobs versus a reduction in obesity for half the population of SA would be worth pursuing, meant an addition of 5 000 more unemployed to the 9 million unemployed people in SA. Certainly deeper debates would have to happen about where to strike that balance between job losses and health gains.

Section 27 submission
Ms Sasha Stevenson, Section 27 attorney, drew attention to the constitutional rights and obligations at issue, including the obligation to take reasonable legislative and other measures to realise rights, and the constitutional requirements for policy making. Obesity and NCDs were health and health system issues as the health system had a limited amount of funding. As the burden on the health system increased, it could do less and less in treatment.

The legislative impact on the private sector in the form of an SSB tax (or regulation of the food sector) was not, as some would have it, an erosion of liberty, equality and dignity by “Department of Health fascists”. There is an obligation on the state to take legislative and other measures to facilitate access to nutritious food and to promote health (see submission).

The Chairperson requested the Committee think about how to proceed with public hearings going forward. The Committee support staff had suggested that all the stakeholders who could not present that day be asked if they would want to come to hearings before or after the Budget Speech by the Minister of Finance.

South African Medical Association (SAMA) submission
Prof Daniel Ncayiyana said as a resident of KZN he understood sugar to be a staple of the rural communities there.

He said obesity causation is multifactorial; therefore, it requires multipronged, multilevel intervention. The Philadelphia approach was useful. That city in the United States had debated a similar tax and the proposal had been defeated. However, the city had intervened in other ways. Amongst those were that it banned SSB sales in schools and limited the availability of SSBs in vending machines. It introduced strict labelling laws; developed specific curricula for school children and provided retailers incentives to highlight healthier food alternatives. By doing that, Philadelphia had amongst the lowest obesity rates amongst US cities.

Taxation should not be an isolated intervention. Prof Ncayiyana said he had been concerned to hear some submissions advocating for the SSB tax as a panacea to the obesity challenge alone with no other interventions.

The Chairperson asked the DoH what the extent of consultation had been on the SSB tax proposal.

Mr Cecil.Morden, Chief Director: Economic Tax Analysis, National Treasury, said it had engaged with different sectors of the sugar industry intensively on the SSB tax proposal in at least six meetings and then had published a document following those engagements. National Treasury had received about 144 written comments on the document and had one big workshop on 11 September 2016. A few more people had approached Treasury for more dialogue on the matter. Unfortunately, though the labour federations had submitted written comments on the matter, there had been no actual engagements with the unions.

The DoH representative said its engagement had not been necessarily on the SSB tax but on the prevention of obesity. It had engaged with BevSA and other stakeholders that could assist DoH with implementation of some components of the obesity strategy.

The Chairperson said that the Finance Committee would definitely encourage National Treasury to consult stakeholders some more. He asked the Health Portfolio Committee to think about what they would recommend in response to the consultation that had occurred on the SSB tax to date.

Non Communicable Diseases Alliance (NCD Alliance) submission
Dr Vicki Pinkney-Atkinson, NCD Alliance Strategic Development Manager, said the Alliance represented the Cancer Alliance, the Heart and Stroke Foundation, Diabetes South Africa and many others. She was representing patients with NCDs. The NCD Alliance strongly supported taxation of SSBs in South Africa as a critical highly effective measure and part of a broader programme to address these issues. The NCD Alliance was also asking for an equitable share of the budget from that tax. In the past when tobacco and alcohol were taxed, nothing was given back to healthcare to make the policies and strategic plans work. NCD Alliance was therefore requesting a ring fenced conditional portion of the proposed SSB tax revenue to go directly to a national NCD commission as part of the National Health Insurance (NHI). This would go to prevention and treatment of NCDs for which there currently was no budget.

Dr Pinkney-Atkinson said she was living with diabetes and asked all present to think of anyone in their immediate family, church group or close friends that lived with high blood pressure, obesity, diabetes, lung disease, cancer, stroke and not enough physical activity? Not one individual at the hearing had not been affected, directly or indirectly, by the illnesses she had listed. The lesson was that the SSB proposed tax was not about someone else but your individual and family’s health.

She said that the DOH Programme 4: Primary Healthcare Services allocated only 8% to NCDs in the DoH budget. Insulin was quite expensive on medical aid and the public health service did not even have half her medication. The links between NCDs and sugar were well documented but so much was preventable.

Heart and Stroke Foundation (HSF) submission
Prof Pamela Naidoo, HSF CEO, said that often they were accused of providing biased evidence. Epidemiological studies in SA over the years had become more reliable so she was pleading that the sitting trust the numbers she would be giving it. In a vulnerable group like children there was one in four girls and one in five boys between the ages of 2-14 years that were overweight or obese in SA. There were 31.3% obese adults in SA. Cardiovascular disease was the second highest cause of death and it was 18% prevalent in women and 13% in men. Some provinces in SA recorded 28% of Type II diabetes prevalence. In terms of SA’s global obligatory targets the country had committed to in the global burden of disease, it should reduce premature deaths from NCDs by 25% by 2025 and by 30% by 2030.

The SSB tax would:
• Decrease risk factors and increase healthy lifestyles and could prevent 80% of premature deaths from cardiovascular diseases.
• Help mitigate the poor health outcomes of cardiovascular, diabetes and other NCDs by influencing purchasing behaviour of SSBs.
• Serve a protective function including the marginalised and the high risk groups for which poor health contributed to their cycle of poverty in SA.

She noted that drinking more than one SSB per day doubled the risk of diabetes onset and increased cardiovascular onset by 23% more than those who would drank less than one SSB per month.

HSF agreed that the SSB tax would not be a solution in isolation but would have to be complemented by other population-wide interventions known to decrease the burden of disease. The benefits of the SSB tax would be reducing the NCD burden that would reduce income disparities in SA. A study in Canada had modelled the anticipated effect of a SSB tax over a ten-year period where it had found that Canada could prevent 2.4 million diabetes person years, 95 000 cardiovascular disease events, 8 000 strokes, 26 000 premature deaths and $17 billion in medical care costs.

World Health Organisation (WHO) submission
Dr Rufaro Chatora, WHO Representative: South Africa, said the WHO had been established to be coordinating authority on public health globally by the United Nations. The Global Action Plan for the Prevention and Control of NCDs provided a menu of policy options for member states and stakeholders to reduce death and disease. One of the policy options was the consideration of economic tools that could include taxes and subsidies, to encourage consumption of healthy foods. Fiscal policies had been shown to reduce consumption of calorie dense foods, reduce obesity, tooth decay and diabetes.

Taxes and subsidies influenced purchasing behaviour when applied to SSBs and that effect was most pronounced amongst low income consumers, the youth and those who were overweight. SSB taxed revenue could be used as investment to promote health.

Dr Temo Waqanivalu, WHO Coordinator, Non-Communicable Diseases and Health Promotion, said the fastest rate increase in obesity in children was happening in sub Saharan Africa. That increase was highest in the lower and middle income countries. Obesity coexisted with micronutrient deficiencies and Type II diabetes in children was increasing so much that it started in children as early as seven years old in the Pacific Islands but seemingly as early as three years in SA. WHO had pronounced at an obesity conference that the world was possibly facing the first generation of children that would die before their parents which was already happening in the Pacific Isles.

WHO maintained that the intake of free sugars was directly linked to unhealthy diet, weight gain and increased incidence of NCDs, which was why WHO had recommended sugars intake to less than 10% of total energy intake, with 5% as a better target. A single can of SSBs was more than the recommended 10% from WHO. He said the association of ultra processed food and soft drinks with sports and celebrity personalities was wrong and conveyed flawed messages to children. A child eating burger and chips washed down with a sugary drink and followed by crisps and chocolate bar would have to run a half-marathon to get rid of the effects. You could not out-exercise a bad diet.

20% tax on SSBs was most likely where SA would have a proportional reduction in consumption and likely to affect the obesity and diabetes as already projected by economic studies. Combining that with subsidies for fresh fruit and vegetables, SA could even increase that health benefit.

Dr Waqanivalu said the WHO Executive Board had asked the WHO Secretariat for more information on a range of policy options and cost-effective interventions proposed by WHO to prevent and control NCDs, including the use of taxation on SSBs, before the next World Health Assembly (22-31 May). We waited too long to intervene in the tobacco industry. Obesity was out of control. There was a need to intervene now. South Africa was not alone in considering a sugar tax. WHO had done nutritional education; it had resolutions on marketing restrictions to children in 2010 already, but not a single country had implemented that resolution completely. The SSB tax was not a starting point but adding value to what SA had already been doing in terms of labelling requirements of food stuffs.

WHO had modelled the impact a SSB tax would have on longevity. It could prevent 477 680 deaths over 40 years in South Africa. It could also result in savings of R1.7bn in health costs over 10 years.

Dr Waqanivalu said implementing the agreed global mandate would save lives and money. Not one country in the world had hit obesity with a 20% tax, so South Africa could be a world leader and reduce childhood obesity. Margaret Chan, WHO Director General, had said: “Not one single country had been able to turn around its obesity epidemic. It was not a failure of individual will power, but a failure of political will to take on big business”.

Discussion
Ms D Mahlangu (ANC) agreed with the Chairperson that National Treasury should further engage stakeholders on the proposed SSB tax. As public representatives, they needed society to support them in taking on big business.

Ms Kekana recalled that SAMA said there should be a comprehensive approach to the problem of obesity and NCDs since sugar was one of the contributors towards obesity. FAWU’s principle of consultation was the Finance Committee’s posture that engagement was important before decisions were taken. She was against a microwave approach as the Minister of Finance would be delivering the Budget Speech in the following weeks.

Mr Mabe said two competing perspectives had emerged at the hearing - one of which was the sugar industry wanting to maintain the status quo and the opposing view from academics and health practitioners was that if the situation continued unabated there would be dire health consequences. His proposal was for all parties affected by the SSB tax proposal to engage each other before returning to Parliament for ongoing hearings, as jobs had to be protected but not at the expense of health outcomes.

Dr James was interested in what assumptions WHO had made when modelling the anticipated effect of SSB tax on mortality rates.

Dr Pinkney-Atkinson replied that the NCD Alliance supported a multi sectoral approach in managing and preventing obesity which was impossible without a commission with funding. NCD Alliance also supported food labelling and marketing regulations which had been mired down for many years unable to be brought forth and concluded.

The WHO representative replied that it had used a micro simulation model which took the population by age, gender and then included the risk factors for obesity based on consumption and how it was linked to several diseases. Demographics were a key input in the model and WHO had used available SA data and price effectiveness. They had then used international evidence on the impact of different types of diseases with their risk factors. They had also relied on the UN model of population projection.

WHO was also looking forward to the enforcement of restrictions on marketing to children, as complementary to the SSB tax, since that had been poorly implemented to date.

Ms Tobias said she was interested to know about the class, race, gender and age cohorts most affected by obesity in society. If Government indeed ringfenced money as Dr Pinkney-Atkinson had appealed, would WHO come on board to assist monetarily in the prevention of obesity?

The WHO representative replied that the documents it would forward to the Committee would show how obesity affected age cohorts and gender but there was no data on race and the socio-economic status of affected groups. The WHO’s biggest strengths were in technical support and its convening power and in that regard WHO could assist the SA Government. In terms of funding, WHO had approached some foundations and entrepreneurs and the WHO logos and emblems could be leveraged in that manner when approaching funders, as that had happened in Mexico and other countries.

The Chairperson said that what amazed him was that the people who did not have vested interests were all taking one position on the SSB tax. Not a single health expert had said anything contrary to the evidence presented. Although he had no doubt that scientists were able to spin a particular point of view, he wondered who had material interests in the matter. He said that the Health Portfolio Committee Chairperson, Mr Mahlalela, had asked before he left about why there had been no discussion about the EU-SA government agreement on the export of sugar. He reiterated his proposal that stakeholders that did not present at the hearing today would be allowed time to give submissions after the Budget Speech by the Minister of Finance in the weeks to come. He pleaded that the Committee allow some of the stakeholders present who had not made submissions, to present their case.

Mr Lees agreed that an extra day would possibly need to be afforded for public hearings but added that his wish was for the Davis Tax Committee to be invited as well to discuss the matter.

The Chairperson thanked everyone who had participated in the hearing and the meeting was adjourned.

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