Coca-Cola Beverages Africa, the continent’s largest soft drinks bottler, may close business in South Africa if the government goes ahead with a proposed tax of 20 percent on sugary drinks from April 1, 2017 in a bid to curb obesity and unhealthy diets.
The plant, jointly owned by the US-based global soft-drink manufacturer and SABMiller Plc will see profit cuts by nearly 25 percent and struggle to maintain a steady employee number for three years as agreed with the government in May, this year.
“Our profit will more than half. It will result in us scaling down our operations,” Velaphi Ratshefola, the managing director of Coca-Cola Beverages Africa and chairman of Beverage Association of South Africa (BEVSA), told Bloomberg at his office on Friday.
Ratshefola added that the move is discriminatory and will push smaller enterprises out of business.
However, the government dismissed the claims by the company describing them as diversionary moves meant to derail efforts to healthy living in the Southern African nation.
The proposed tax is part of a strategic plan for the prevention and control the spread of non-communicable diseases, Mzanzi Live.
“The industry should not jeopardize constructive engagement on this issue by resorting to scare tactics. It’s universally accepted that sugar consumption has negative health consequences,” Phumza Macada, National Treasury spokeswoman said.
Nutritionists lauded the government’s move on the 20 percent tax, saying that on average, one sweetened drink daily increases the likelihood of being overweight by 55 percent in adult and 30 percent in children.
“South Africa is not the only country battling with obesity, this is a world-wide phenomenon and currently causing the most deaths because of bad lifestyle, “Food Ingredients First quoted Prof Tess van der Merwe, Chari of the South African Society for Obesity, Surgery and Metabolism (SASSO).
The beverage sector has employed about 200,000 people and as many as 60,000 job losses in the beverages industry if the proposed levy takes effect, BusinessTech reported.
In Nelson Mandela Bay where taxes on average account for 25 percent of the purchase price of soft drinks, more than 5,000 people are likely to lose their jobs if the new taxation takes effect.
BEVSA said that most soft drinks manufactures will be forced to increase the price of other drinks such as bottled water and fruit juice as a way of mitigating against the anticipated revenue losses.
South Africa follows Mexico, which became one of the few nations to impose tax on sugary drinks when it adopted the law in January 2014.