August 23, 2016 / 1:50 PM / 2 years ago

South Africa sugar tax will hit economy and jobs, says lobby group

* South Africa has proposed 20 pct tax on sugary drinks

* Industry body says tax to wipe out 14 billion from GDP

* National Treasury dismisses claims as ‘scare tactics’

By Tanisha Heiberg

JOHANNESBURG, Aug 23 (Reuters) - A South African business lobby group warned on Tuesday that a proposed tax on sugary drinks will hurt the economy and lead to job losses, an assertion tossed aside by the government and health campaigners as fear-mongering propaganda.

The government has proposed a 20 percent tax on sugar-sweetened drinks to fight growing obesity in the continent’s most lucrative market for Coca-Cola.

However, the Beverage Association of South Africa (BevSA), a non-profit organisation that represents the interests of the non-alcoholic drinks industry, said the levy would wipe 14 billion rand ($1.04 billion) from the economy, representing 0.4 percentage points of GDP growth, and cost as many as 70,000 jobs.

Coca-Cola’s South African head Velaphi Ratshefola, also chairman of BevSA, said that implementation of the tax would force his company to rethink its investment plans over the next three years.

“It means we will postpone and reduce capex in the next two to three years,” Ratshefola told Reuters on Tuesday, adding that the tax could also lead to a 25 percent drop in Coca-Cola volumes in the country.

The National Treasury dismissed BevSA’s the industry comments on the impact of the tax — first announced by Finance Minister Pravin Gordhan in February — as speculative “scare tactics” aimed at frustrating the process.

“Claims of job losses are mere speculation at this stage of the process. The industry should not jeopardise constructive engagement on this issue by resorting to scare tactics,” spokeswoman Phumza Macanda said.

National Treasury data shows that more than half of South Africa’s adults are overweight, with 42 percent of women and 13 percent of men categorised as obese.

“We do believe there is a need to regulate. There is no nutritional value in the beverages that have sugar in them,” said the Department of Health’s head of communications, Popo Maja.

If the proposed law is passed, South Africa will join Mexico, France, Hungary and most recently Britain in introducing taxes on sugary drinks to fight obesity. ($1 = 13.4518 rand)

Additional reporting by Tiisetso Motsoeneng; Editing by David Goodman

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