Business

Tax On Sugar A Welcome Move, Reduce Uptake

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Market watchers have described the introduction of a levy on sugar content in beverages as a welcome development that will prompt manufacturers to reformulate their products and narrow health risks associated with their consumption.

Reformulation is the process of cutting on sugar content and replacing it with a non-sugar substitute in response to the World Health Organisation’s calls for a tax on sugar-sweetened beverages (SSB).

In his 2024 National Budget Statement, Minister Professor Mthuli Ncube announced the introduction of several tax measures to increase revenue flows into State coffers. Ncube introduced a levy on sugar content in beverages.

The initiative is already being implemented in many countries globally including the Southern African Development Community region following growing concerns about the health risks associated with high sugar intake.

The new measure will push businesses to tweak their products in line with the new levy and general health consciousness.

“A higher sugar tax encourages beverage manufacturers to reformulate their products. This can contribute to a decrease in sugar consumption, potentially lowering the rates of diet-related health issues such as obesity and diabetes,” said FBC Securities.

In the United Kingdom, the drinks industry cut sugar content in response to a 2018 tax. A year later, on average, people were consuming one fewer 250 ml sugary drink per week, replacing it with a non-sugar substitute. After four years, sugar consumed in taxed drinks was down by 35 percent.

Higher taxes can lead to an increase in the price of sugary beverages, making them more expensive for consumers. This can influence purchasing decisions, with some consumers opting for alternatives or reducing overall consumption.”

The initiative might also lead to an increase in unregulated markets and the flourishing of alternative products on the market. Said FBC Securities: “In some cases, consumers might turn to cheaper, unregulated alternatives or the black market to obtain sugary beverages, potentially undermining the intended health impact of the tax.”

The high consumption of sugary substances such as beverages to the prevalence of health problems such as diabetes obesity and other non-communicable diseases. The introduction of a levy on sugar content is expected to tackle such problems and encourage healthy lifestyles.

“In response to the growing concerns on the adverse effects of consumption of sugar, in particular contained in beverages, tax on beverages has been implemented in several countries including in the SADC region and beyond,” said Prof Ncube.

“It is, thus, necessary to discourage consumption of high sugar content beverages, hence, I propose to introduce a levy of US$0,02 per gram of sugar contained in beverages, excluding water, with effect from January 1, 2024,” he added.

Countries like South Africa, Bahamas, Mexico, the UK, and Barbados are among those that have implemented a levy on sweetened beverages to tackle health problems associated with high sugar intake. A World Health Organisation 2022 report suggested 88 countries were implementing the tax on sugar-sweetened beverages.

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