Sugar, Spirits, and Your Wallet: Is SA’s ‘Health Tax’ Actually Making Us Healthier?

The World Health Organization has a message for governments around the world: raising taxes on sugary drinks and alcohol is a good start, but if the taxes aren’t designed properly, they won’t change behaviour. They’ll just raise revenue.

South Africa, which introduced its Health Promotion Levy on sugary drinks in 2018 and has long taxed alcohol, finds itself partly aligned with WHO’s recommendationsbut with critical gaps that may be limiting the impact on public health.

Why Tax Design Matters

According to the WHO, a well-designed tax should do more than just collect money. It should actually make people healthier by reducing consumption of harmful products. The key principles are straightforward:

• Tax based on content, not price. A tax on sugar or alcohol content directly targets the harmful ingredient, rather than penalising all products equally.

• Cover all relevant products. Exemptions create loopholes that undermine the policy.

• Adjust for inflation. A tax that isn’t indexed loses its bite over time.

• Scale with strength for alcohol. Stronger drinks should cost more.

How South Africa Measures Up

Sugary Drinks: A Smart Start

South Africa’s Health Promotion Levy, introduced in 2018, is notable for being content-based. Drinks with more than 4 grams of sugar per 100ml are taxed, directly targeting the sugar content rather than the price. This aligns with WHO’s recommendation.

However, the levy has two significant weaknesses. First, certain productslike some fruit juices and milk-based drinksare exempt, creating gaps in coverage. Second, the tax does not automatically adjust for inflation, meaning its real-world impact diminishes over time as incomes rise and prices increase.

Alcohol: Partial Compliance

Alcohol taxes in South Africa vary by category: spirits are taxed by the litre of pure alcohol, while beer and wine are taxed by volume. This means stronger drinks are generally taxed morepartially aligning with WHO’s recommendation.

But the gaps are significant. Like the sugar tax, alcohol taxes are not inflation-adjusted. There is also no minimum pricing policy, which means very cheap, high-alcohol products can still flood the market, undermining health objectives.

Cheaper, high-alcohol drinks may remain affordable, particularly for heavy drinkers, limiting the tax’s impact on consumption.

The Big Picture

When measured against WHO’s principles, South Africa’s system is a mixed bag:

• Strengths: Content-based taxation for sugar; graduated taxation for alcohol strength.

• Weaknesses: Incomplete coverage; no inflation adjustment; no minimum pricing.

The result is a system that raises revenue but may not be achieving its full potential in reducing obesity, diabetes, and alcohol-related harm.

Why This Matters to You

For the average South African, the design of these taxes affects both wallet and health. Well-designed taxes can:

• Make unhealthy products less affordable, encouraging healthier choices

• Reduce rates of obesity, diabetes, and alcohol-related disease

• Provide steady revenue for public health programmes

Badly designed taxes, by contrast, may simply become another cost of livingpaid by consumers, absorbed by industry, and ultimately ineffective at changing behaviour.

The Road Ahead

The WHO’s message is clear: South Africa has made a good start, but there is room to improve. Closing coverage gaps, indexing taxes to inflation, and introducing minimum pricing for alcohol could significantly strengthen the health impact of these levies.

For a country grappling with high rates of obesity, diabetes, and alcohol-related harm, the question is not whether to tax, but whether to tax smarter. The health returnsand the savings to the fiscuscould be substantial.

{Source: IOL}

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