South Africa: The bittersweet extension of sugar tax to pure juice

In brief

It was recently announced that South Africa's Health Promotion Levy (HPL) on sugary beverages was to be extended to pure juice. The South African government is expected to publish a discussion paper on the levy soon. This is intended to aid consultation on the proposals to extend the levy to pure fruit juices and lower the four-gram threshold. This means that after public consultation, a levy may be charged on 100% juice. The main objective of the sugary beverage levy, as stipulated by South Africa's HPL policy, is to decrease incidents of diabetes and obesity. However, it has had a negative impact on the South African sugar industry, with thousands of jobs lost since the tax was implemented.


In depth


The Minister of Finance, Enoch Godongwana, announced in his 2023–2024 budget speech that the Health Promotion Levy (HPL) on sugary beverages was to be extended to pure juice. The South African government will soon publish a discussion paper on the levy to aid consultation on the proposals to extend the levy to pure fruit juices and lower the four-gram threshold. This means that after public consultation, a levy may be charged on 100% juice. The HPL is calculated as follows: the rate is fixed at 2.1 cent per gram of sugar content that exceeds four grams per 100 ml. The first four grams per 100 ml are currently levy free. HPL is paid in addition to any other Customs and Excise duty payable. Sugar content means both intrinsic and added sugar and other sweetening materials. For powder and liquid concentrates, the sugar content will be calculated based on the total volume of the prepared beverage.

The main objective of the sugary beverage levy, as stipulated by South Africa's HPL policy, is to decrease incidents of diabetes and obesity. According to a report released by the World Health Organisation, about 70% of women and one third of all men in South Africa are obese or overweight. This is alarming because obesity and being overweight can be associated with diseases like diabetes and cancer. The South African government blamed the obesity crisis on the high consumption of "processed sugars". Thus, they began engaging with industry on a proposed "sugar tax", which later morphed into the Health Promotion Levy when it was eventually legislated.

Economic effect of the sugar tax

In a 2021 Baker McKenzie report, it was noted that the sugar industry suffered an overall job loss of 16 621 employees. It is said that the proposed extension of the sugar tax to pure juice will result in an estimated 5 000 additional job losses. This will be devasting considering that the unemployment rate in South Africa has reached its peak in the last five years, according to figures by StatsSA. The Consumer Goods Council of South Africa (CGCSA) also criticised the increase and expansion of 'sugar tax' by stating that it will contribute to many sustainable sugar farmers losing their livelihoods, which will inevitably result in job losses.

Expenditure of the sugar tax

The sugar tax is a domestic consumption tax because it is payable by local producers and importers of sugary beverages. In the past three years, it has contributed the sum of ZAR 7.9 billion to the South African Revenue Service (SARS). This was revealed by the former Minister of Finance, Tito Mboweni in his reply to a question concerning the effectiveness of the HPL in reducing obesity. The Minister further stated that the tax revenues from the HPL are not ringfenced for any particular expenditures, but instead flow into the National Revenue Fund. It is worth noting that of the ZAR 7.9 billion that has been collected from the domestic consumption tax on sugary beverages, only ZAR 38 million has been spent on the National Department of Health to promote healthy living standards. Therefore, about 0.5% of funds are being spent on promoting health awareness. It is paradoxical that the main objective of the sugar tax is to promote healthy living, but only 0.5% of the funds from the tax are spent by the National Department of Health to promote healthy living. It is a known fact that the most underprivileged in our society are in need of support to overcome diabetes in particular, but after six years, they still have no access to healthcare facilities and medical assistance aimed at treating diabetes.

The government is clearly not taking the necessary steps to rehabilitate or resolve the health hazard that is allegedly caused by sugar. Furthermore, it has been six years since the sugar tax was implemented in South Africa and the government has not released any update on whether the incidences of obesity or being overweight has reduced since then. The CGCSA has also raised the concern that the government refuses to accept previous requests to allocate or ring-fence money raised from the levy for health promotion as originally planned.

Considerations before expanding the sugar tax

It must be considered that the sugar tax was implemented when sugarcane growers and millers were recovering from a lengthy drought. Since then, the industry has faced continuous challenges, such as cheaper sugar imports and lower global prices for sugar. In addition, the industry was affected by civil unrest, the burning of sugarcane fields in June/July 2021 and the COVID-19 pandemic. These events have added to the sugar industry's woes. Moreover, the industry has also lost revenue of about ZAR 700 million due to loadshedding and is still being impacted by this because electricity shortages have not been resolved.

A path for the future of the sugar and beverage industry

The sugar industry could look to producers in India and Brazil to develop and diversify their operations, allowing sugarcane to be used for a wider stream of products like animal feeds, biofuels, alcohol and the co-generation of electricity. The beverage industry must also look for more innovative ways to make their beverages taste the same, without exceeding or overly exceeding the sugar tax threshold.


While the government has not published a notice on sugar tax since the budget speech was presented by the Minister of Finance in February 2023, the sugar and beverage industry must remain alert for such notices. This will allow the industry to provide detailed comments on the new proposals, before any potential enactment of the intended expansion or increase of the sugar tax is finalised.

This article was written by Virusha Subban, Partner and Head of Tax, and Kamogelo Mashigo, Candidate Attorney, Johannesburg. It first appeared as a column in Independent Media's Personal Finance publication.

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Virusha Subban
Partner at BakerMcKenzie
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