In 2016, the National Treasury announced a Sugar Beverage Levy (SBL) on sugar-sweetened beverages (SSBs) scheduled to take effect April 2018. The aim of the levy was to prevent and control obesity in South Africa, but key industry players also viewed it as a potentially significant new source of revenue that could help plug the growing fiscal deficit.
The fiscal deficit has been widening as National Treasury faces slow economic growth and a shrinking tax base. Initially estimated at 3.1% of GDP, fiscal deficit projections increased to 4.3% of GDP in October last year.[i]
However, official data suggests the deficit already reached R195 billion in the first 8 months of the 2018/19 fiscal year, so it could amount to approximately R250 billion, thereby exceeding Finance Minister Gigaba’s October projections by 25%.
The levy has undergone various changes since it was first announced.
When the levy takes effect in April this year, it will amount to 2.1 cents per gram of sugar per 100ml, above 4 grams per 100ml.
This is down from an initial 2.29 cents per gram of sugar with no exempted amount.[ii]
Our estimations suggest the tax burden is approximately 10% given current levels of sugar content, down from approximately 20% previously. In addition, industry has recently reacted to the news of the SBL, reducing the sugar content of popular beverages by including non-nutritive sweeteners.
In addition to efforts to reformulate, the industry introduced smaller bottle sizes to curb excessive sugar consumption and limit the excise tax burden.
SBL excise revenue estimations
We estimated that in a scenario in which the beverages industry makes no change to the sugar content of SSBs, the levy would result in an estimated R1.5 billion loss in sales revenue and a R 1.4 billion excise revenue gain for government.
However, a reformulation by industry would result in a lower loss in sales revenues of only R1.07bn and lower than expected excise revenue gain for government of R990mn.
Given the estimated fiscal budget deficit of up to R250bn, additional revenues of between R990mn and R1.4bn are unlikely to make a significant dent in plugging the deficit and could support the assertion that the levy will focus on curbing sugar consumption rather than providing significant additional revenue inflows.
In our quantitative analysis of the proposed tax on SSBs, we use the PwC Economic Impact Assessment Model to derive the potential impacts, based on a 10% sales reduction calculation due to potential excise driven price changes.
Although excise revenues are expected to increase, other tax revenue streams are likely to experience a decline. Not considering excise impacts, the prospective tax revenue loss stemming from reduced sales revenues and showing in lower VAT, corporate income tax (CIT) and personal income tax (PIT) could range between R363 million and R518 million in the reformulation and non-reformulation scenarios, respectively.
Therefore, the net impact on estimated tax revenue combining the implications for excise tax, VAT, CIT and PIT revenue would only range between R631 million and R856 million, subject to which scenario is implemented.
It is unclear whether the SBL levy will assist in reducing consumers’ sugar consumption. However, industry facilitates lower sugar consumption by reducing bottle sizes and through reformulation.
Smaller sizes nudge consumers to lower sugar consumption
In addition to reformulating popular SSBs, the beverages industry has altered the size of the 500ml buddy bottle to 440ml, potentially nudging consumers to reducing their sugar consumption.
The move to the 440ml bottle represents a 12%[iii] reduction in size and means that sugar content fell from 53 grams in the 500ml bottle to 46.6 grams in the 440ml bottle.
The implementation of the new levy could still result in an approximately 61 cent increase in the price of the 440ml bottle.
It remains to be seen how South Africans will react to the current and impending price change of SSBs and if the SBL can indeed assist in reducing obesity. It is clear that monitoring and evaluation are key tools to help government and industry understand the effectiveness of this initiative to prevent and control obesity in South Africa.
- [i] Treasury, 2017. Medium Term Budget Policy Statement. [Online] Available: http://www.treasury.gov.za/documents/mtbps/2017/speech/speech.pdf [Accessed 08 February 2018]
- [ii] SARS, 2017. SARS to collect for sugar tax (SBL) from 1 April 2018. [Online] Available: http://www.sars.gov.za/Media/MediaReleases/Pages/15-December-2017—SARS-to-collect-for-sugar-tax-from-1-April-2018-.aspx [Accessed on 06 February 2018]
- [iii] PwC calculations
Hooked On Ethics
The business that puts ethics at the forefront of its culture is the one that will shine in a landscape littered with dishonest behaviour.
There is significant research into how the work environment influences ethical behaviour. Study after study has shown how the ethical values upheld by management filter down to all employees, affecting behaviour and business practice. The biggest influence on a person’s ethics is their environment. In South Africa, the after effects of the recent political regime continue to shake both country and citizen. Corruption has seeped into almost every part of the government and in some of the country’s most prominent private organisations.
The old saying that the ‘fish rots from the head’ has never been truer, nor more obvious.
The ethical dilemma
The reality is that the government’s flagrant disregard for ethics saw corruption become a part of everyday life. This makes almost everyone ask themselves questions like – why should I pay X utility bill? Why should I pay my TV license? The money is being clearly used fraudulently. Sure, it is the law, but leadership has proven that ethical behaviour isn’t rewarded or recognised.
But it is. The value of building an ethical business and upholding a culture that promotes honesty and integrity cannot be understated.
Here are five reasons why…
- Those who skirt the edges of ethics almost always get caught. There has been a steady shift in the country’s moral compass as leadership has taken a far stronger stance on rooting out corruption and already some of the country’s biggest names have been found guilty. KPMG, McKinsey, Bell Pottinger and SAP have all had their names tarnished by the scandals that have rocked the country.
- Employees are more engaged and better behaved. A weak ethical culture filters down from the top, influencing behaviour and attitudes. If employees feel that they can get away with bad behaviour that benefits them, or if they feel that their environment encourages this, then they will.
- A strong ethical influence will dictate how employees treat customers and one another. If your company enforces and rewards honesty and integrity, then these will be the qualities that clients will perceive. Their lack may also see you lose market share and your reputation.
- Like attracts like. If you create a culture that rewards employees that work all hours, deliver the goods and commit themselves then you will attract more people with these qualities. The same applies in reverse – reward bad behaviour and the results will rapidly speak for themselves.
- Your business reputation. Trust can’t be bought. It is hard won and easily lost. If you lose your reputation then it is very unlikely you will win it back and it will follow you for the rest of your life. The same applies to your staff. If their behaviour is questionable it could damage your company. Make sure you set the rules of what is or is not tolerated by your company culture and consider investing into ethics courses that allow your teams to stay ahead of the curve.
Solutions To Get Your Business Through Tough Times
We are happy to announce that times are changing and that Start-Ups and SME’s never have to leave legal unattended again!
It is no secret, things are really tough at the moment. South Africa is in a technical recession and consumer spending is at a low. To many small businesses this means that the pressure is very, very real. As a result, cost cutting will inevitably have to follow, and the reality is, that the legal side of things are often one of those aspects left unattended. Resulting in massive risk exposure that could threaten the business’ ultimate sustainability or success.
But everything is not just doom and gloom! We are happy to announce that times are changing and that Start-Ups and SME’s never have to leave legal unattended again!
We have put in a lot of money, time and effort creating a pioneering online platform that hosts standard legal documents, which are the crucial pillars of best practices for any business. By utilising technology, we aim to provide access to trusted legal products and services in order to empower Entrepreneurs.
The SchoemanLaw SME Self- Service Desk TM is the first solution of its kind in South Africa! In testimony hereof, SchoemanLaw was honoured earlier this year as a finalist in the Nedbank Business Accelerator Programme, for the platform’s unique ability to provide access to trusted legal resources that empowers Entrepreneurs, to create sustainable businesses that are scalable.
The platform further addresses the need of effective management of individual needs, such as drafting your will, the management of crucial relationships in business, including employment relationships and contractors, as well as stakeholder relationships in the ecosystem, such as clients, debtors, shareholders, directors and joint ventures. It also allows the users access to personalised support in case of any unforeseen legal incident occurring. Supporting entrepreneurs to effectively establish legal foundations in their business for optimum growth and overall business success.
The following documents are examples of those available on the platform:
- NDA (Non-Disclosure Agreement)
- Independent Contractor Agreement
- JV Agreement
- MOI (resolution included)
- Shareholders Agreement
- Various Company resolutions
- Acknowledgement of Debt
- Distribution Agreement
- Agency Agreement
- Supplier Agreement
- Last Will and Testament
- Residential and Commercial Lease Agreements
- Loan Agreement
- Letter Demanding Payment
- Various HR Documents, such as:
- Employment Contract (fixed and indefinite term)
- Generic Human Resource Policies
- Certificate of Service
- Written Warning
- Disciplinary Hearing Pack
- Offer to purchase (freehold and sectional title)
- BBBEE Affidavits (EME and generic QSE)
and many more!
Prices range from R195 and R895 per document if downloaded on a pay as you need basis or R249 / R495 per month on a subscription basis, this is over 75% less than usual rates if traditionally drafted by an attorney. What is more, users have the support of a law firm not only having created, but who maintains the platform and supports each User.
The platform is also ever evolving and completely customer driven because documents are added constantly as customers request them. All the documents are also constantly updated to ensure that they align to the latest best practice. So, never leave the legal unattended ever again! For more information or to Empower your small business today, go to: https://www.schoemanlaw.co.za/online-legal-services/
Effective Business Insurance Supports The Economy
The insurance industry has an important role to play in assisting SMMEs to effectively manage risk and resist the temptation to save money by buying less insurance cover than their actual risks suggest.
The success and growth of small, medium and micro-enterprises (SMMEs) are essential to the development of our economy. The insurance industry has an important role to play in assisting SMMEs to effectively manage risk and resist the temptation to save money by buying less insurance cover than their actual risks suggest.
Value of advice to create trust
This is where the value of advice can be clearly demonstrated. Henry Ford said: “If we asked our customers what they needed, they would have said faster horses.”
Therefore, as risks become more complex and costs grow, we need to, as an industry, enable SMMEs to trust us to advise them where to place their hard earned money to safeguard themselves against potentially devastating setbacks.
In every business, customers are unique and face their own challenges and risks. For a manufacturer, protecting valuable stock during storage or transportation will be essential. A motor fleet owner will need comprehensive cover for their specialist vehicles to protect them against accidents, theft or liability.
Insurance brokers have the knowledge, experience and skills to guide SMMEs in identifying the risks their businesses face and choosing the correct insurance products to meet their specific requirements.
Changing environment = changing needs and solutions
Property damage cover, such as fire insurance, compensates SMMEs for buildings or stock, while business interruption cover allows them valuable time to recover without feeling the strain of lost profits after an unfortunate event. Comprehensive motor insurance can cover vehicle repair costs and provide replacement vehicles allowing businesses to continue to render a service after a loss or damage occurred.
In addition, lawsuits can be costly and time-consuming, with exorbitant legal fees and resulting court awards. Liability insurance protects SMMEs from these and similar claims.
Other important insurance products provide security against financial losses, resulting from theft, fraud or dishonesty by the company’s own employees.
Partnering for success
Any business failure or loss can have far reaching effects on the rest of the economy. Therefore, it is necessary for brokers to partner with insurers who understand the risks inherent in a particular SMMEs field of business – a winning partnership to build the economy by supporting the sustainability of our small businesses.
Lessons Learnt1 week ago
Lessons From The Rich And Famous: Manage Your Money Like Oprah To Avoid Going Into Debt Like Nicholas Cage
Increase Profitability2 days ago
Leon Meyer GM At Westin Cape Town Shares 4 Experience-Driven Tips On How To Keep Your Team Productive
How to Guides2 weeks ago
The 10 Most Reliable Ways To Fund A Start-up
Celebrity Businesses4 hours ago
11 Celebrities That Are Profiting From Their Investments In The Lucrative Pot Industry
Cool Offices4 days ago
6 Companies With Amazing Office Layouts To Inspire Your Office Redesign
Company Posts2 weeks ago
Building Customer Relationships
Self Development1 week ago
(Infographic) How 9 Creative Minds Got Their Ideas
Entrepreneur Today1 week ago
How Are South Africans Feeling About The Work Environment?