South Africa’s Sugar Tax Debate Is About More Than What Goes Into Your Drink

The cheapest ingredient in a bottle of fizzy drink may be becoming one of the most expensive problems for South Africa’s beverage industry.

Sugar is at the centre of a growing dispute between the country’s sugarcane growers and the government, with SA Canegrowers calling for the abolition of the Health Promotion Levy — better known as the sugar tax — ahead of Finance Minister Enoch Godongwana’s Medium Term Budget Policy Statement on 21 October.

The organisation argues that the levy is contributing to the decline of locally produced sugar by encouraging beverage manufacturers to reduce their sugar content or change their sourcing decisions. With imported sugar also putting pressure on domestic producers, growers say the policy risks damaging an agricultural value chain that supports rural employment and manufacturing.

But there is a complication.

The levy was introduced to address a serious public-health problem, and research suggests it has achieved at least part of its intended objective. The question facing policymakers is whether South Africa can protect public health without undermining the domestic agricultural and manufacturing industries that supply its drinks.

It is a debate with consequences stretching far beyond the supermarket soft-drink aisle.

A tax designed to change behaviour

South Africa introduced its Health Promotion Levy in April 2018, becoming one of the first countries in Africa to impose a national tax on sugar-sweetened beverages.

Administered by SARS, the levy currently charges 2.1 cents for every gram of sugar exceeding four grams per 100ml. The first four grams are exempt, and the levy applies to qualifying sugary beverages manufactured locally or imported into the country. Alcoholic beverages are excluded.

The design matters. Rather than applying a flat charge to every bottle, the system creates a financial incentive for manufacturers to reduce sugar content.

A drink containing less sugar can attract a lower levy. A sufficiently reformulated product may fall below the threshold altogether.

For public-health advocates, that is precisely the point. The policy aims not merely to raise revenue, but to encourage manufacturers to produce drinks with less sugar and consumers to choose alternatives.

There is evidence that it has worked.

A 2025 working paper published through the United Nations University World Institute for Development Economics Research examined South Africa’s levy using excise-return data from manufacturers and importers. The researchers estimated that, within two years of its introduction, the policy had reduced sugar consumption through taxable beverages by 33%.

The study also identified a 15% increase in consumption of non-taxable sugary beverages, suggesting that some consumers shifted towards products outside the levy’s scope.

That distinction is important. The evidence indicates that the tax changed consumption patterns, but it also raises questions about whether the policy captures the full range of drinks contributing to excessive sugar intake.

For the government, removing the levy would therefore require more than an economic argument. It would mean explaining how the
public-health objective would be maintained.

The agricultural cost of changing the recipe

SA Canegrowers wants the government to reconsider that balance.

In its statement on 7 October, the organisation called on Godongwana to scrap the levy in the upcoming budget review, arguing that its effects extend through the sugar value chain.

The concern is not simply that manufacturers are paying a tax. It is that the levy changes the economics of producing sugary drinks, potentially reducing demand for the ingredient that local farmers grow.

When a beverage manufacturer reformulates a product, the reduction in sugar required for each litre may appear small. Multiplied across millions of litres, however, the cumulative effect can be substantial.

For sugarcane growers, that translates into a smaller potential market for their crop.

The problem is compounded by imports. SA Canegrowers has reported that 94,984 tonnes of sugar were imported between January and May 2026, compared with 55,213 tonnes during the same period in 2025 — an increase of approximately 72%.

The organisation argues that imported sugar is displacing locally produced supplies from retail shelves and food and beverage manufacturers.

That creates a difficult commercial equation. Local growers are asking manufacturers to buy South African sugar while manufacturers face incentives to use less sugar overall and must compete on cost.

A tax intended to influence consumer health can therefore have consequences for farmers, mills, transport operators and factories that depend on the domestic market.

The scale of those consequences is difficult to attribute to one policy alone. Import competition, production costs, market conditions and the financial difficulties facing parts of the sugar industry all contribute to the pressure.

Still, the industry is asking whether the levy is adding avoidable strain to an already vulnerable sector.

The beverage industry has already responded

The sugar tax has not simply been absorbed as an additional cost. It has helped change the products available to consumers.

Manufacturers can respond to the levy in several ways: reformulate existing drinks, introduce lower-sugar alternatives, adjust prices or alter their product portfolios.

Research published in PLOS Medicine examined beverage consumption among adults in Langa, Cape Town, before and after the levy was introduced. It found that sugar intake from taxed beverages fell significantly, while intake from untaxed beverages increased.

The findings reinforce an important point. Product formulation, consumer choices and pricing all influence the final outcome.

For beverage companies, reformulation is not necessarily a straightforward exercise. Sugar contributes more than sweetness. Depending on the product, it can affect texture, mouthfeel, flavour balance and the overall drinking experience.

Replacing it requires investment in formulation, testing and manufacturing. Brands must also decide whether consumers will accept the new taste.

Large manufacturers may have the technical resources to adapt their portfolios. Smaller producers can face a more difficult calculation, particularly when operating on narrow margins or competing against imported products.

That makes the design of beverage policy relevant to the competitive structure of the industry as well as to public health.

A tax that encourages reformulation may stimulate innovation. But if compliance costs and changes in consumer demand fall disproportionately on smaller producers, it can also influence which businesses are best placed to compete.

The challenge is to understand those effects rather than assume that every manufacturer can respond in the same way.

What happens if the sugar tax disappears?

Scrapping the levy would offer the sugar industry relief from one of the policies it believes is undermining demand. It could also change the incentives facing beverage manufacturers.

But it would not automatically guarantee that more South African sugar would be purchased.

Import prices, domestic production costs, supply contracts and the relative competitiveness of local suppliers would continue to influence sourcing decisions. Manufacturers might use more sugar without necessarily buying more of it locally.

Nor would removing the levy guarantee that sugary drinks would become cheaper for consumers. Retail prices reflect packaging, transport, distribution, marketing and retailer margins, as well as ingredient costs.

The public-health trade-off is equally significant.

South Africa introduced the levy because excessive sugar consumption contributes to obesity, diabetes and other non-communicable diseases. Research showing lower sugar intake from taxed beverages provides a substantive reason to retain a policy that encourages manufacturers and consumers to change their behaviour.

The question is whether the current structure is the best way to achieve that objective.

Could government review the threshold, improve the treatment of alternative sweetened drinks, support local agricultural competitiveness or use a portion of public revenue to strengthen affected communities? Could the sugar industry accelerate its diversification into other products and markets rather than relying so heavily on domestic beverage demand?

Those options deserve serious consideration alongside the call for outright abolition.

The Medium Term Budget Policy Statement provides an opportunity to examine the competing economic and health objectives. It should also prompt a more detailed discussion about how much of the pressure facing domestic sugar production can reasonably be attributed to the levy and how much stems from other structural problems.

The ingredient behind the argument

South Africa’s beverage industry is often discussed in terms of brands, market share, consumer preferences and shelf space. Sugar is less visible, but the decisions made about it reach deep into the supply chain.

A change in a soft-drink recipe can affect demand for a farmer’s crop. A change in sourcing can influence the viability of a local supplier. A change in tax policy can alter the economics of a product sold millions of times a year.

That is why the sugar-tax debate deserves attention beyond the agricultural sector.

The government has to weigh the value of reducing sugar consumption against the economic consequences of the tools it uses to achieve that goal. The industry, meanwhile, must demonstrate that protecting local production can coexist with healthier products and responsible reformulation.

Neither side can afford to ignore the evidence.

On 21 October, the government will have an opportunity to signal how it intends to approach the levy. But the more consequential question is whether South Africa can build a beverage supply chain that rewards local production without making consumers’ health the price of keeping it alive.