Industry to blame sugar tax for global job cuts?

Industry to blame sugar tax for global job cuts?Cola splash. Credit: Roland Lausberg/flickr.

Unions and government are on the look-out for industry using job loss claims as an excuse to fire workers in the name of profit.

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Parliamentary public hearings on the Rates and Monetary Bill which includes the proposed sugary drinks tax, government and union leaders have raised concerns that industry might blame planned job cuts on the tax are set to go ahead today.

“The entire sugar industry is in decline and we’ve lost 15 000 jobs in the last few years,” said the Congress of South African Trade Union’s (Cosatu) Matthew Parks.

Parks said that while Cosatu is worried about any job losses resulting from a tax, there is also a “huge danger” that industry may use the tax to their advantage.

“It’s a global crisis and a real minefield. We want the government and business to work together with us to find creative solutions to the job crisis,” he said.

Global strategy and jobs

Coca Cola International’s new CEO, James Quincey, announced earlier this month that the company is planning to cut around 10 000 jobs globally due to outsourcing and technological advancements.

Treasury Deputy Director General Ismail Momoniat, speaking to Health-e News on Tuesday, said:  “We don’t want industry to use the sugar sweetened beverage tax as convenient rationale to fire staff. Rather the focus should be on how the industry will adjust, through reformulating their products or substituting with alternative activities.”

The Beverage Association of South Africa (BevSA) has claimed that up to 70 000 jobs are in danger. But Momoniat said these claims amounted to “scare tactics”.

Previously, Treasury had estimated that approximately 5000 jobs would be at risk if the industry fails to reformulate – but this was before the tax was reduced from 20 to around 11 percent on a can of Coke earlier this year.

BevSA’s estimates were also published before the tax was revised but they still claim that 4000 to 6000 informal outlets will be closed as a result of the tax.

According to BevSA general manager Tshepo Marumule, these outlets make 17 percent of their revenue from the sale of sugary drinks.

“The total job losses across the industry and value chain will number around 24 000 jobs in our view,” he said.

 Misunderstanding of job loss studies

But Momoniat said that the “impact [on jobs] is being exaggerated is not expected to be very large”. His department has conducted a socio-economic modelling study on the impact of the tax which is currently being finalised.

“But there is a lot of misunderstanding around these modelling studies. They present scenarios based on assumptions and shouldn’t be taken as fact,” he said. They also do not necessarily assume any change by industry, like reformulating their products.

Former Tourism Minister Derek Hanekom, now a member of the parliamentary Standing Committee on Finance, said that one solution would be to increase the amount of sugar the country exports.

He said that the industry’s job loss claims were “exaggerated” and there were many ways to reduce the impact, particularly on small black farmers in Mpumalanga and KwaZulu-Natal – about whom unions have raised concerns.

“Many farmers will be able to switch crops and, in environments where that is not possible,  we should try facilitate more exportation,” he said.

Cosatu’s Parks agreed that higher exports should be encouraged and urged government to ensure that these farmers be given access to international markets:“We also need the government’s assistance to reduce sugar imports so that the local demand will be higher,” he said.

Scapegoat accusations

Last month, it was reported that job cuts were made as a result of a sugar tax in the United States city of Philadelphia. But the city’s Mayoral Office claimed industry was using the tax as a scapegoat.

Professor Karen Hofman, from the University of the Witwatersrand’s School of Public Health, said that the sugar industry’s claims amount to “fake news”.

“Worldwide, the beverage industry’s plan is to cut jobs for all sorts of reasons including streamlining their processes. That is why they are making these exaggerated claims now, ahead of time. They will blame local cuts on the tax but, in reality, it is a business decision based on profits that has already been made,” she said.

Momoniat urged businesses to follow proper labour practices in the future and that using the tax as a scapegoat is “one thing to look out for”. “It is important that trade unions monitor that employers are not doing so,” he said.

BevSA said the industry has committed to reducing the sugar content in their products by 15 percent by 2018 and plans to extend lower sugar and sugar-free products.

Said Momoniat: “We welcome the industry making drinks less sugary. But the question is: is it enough?” – Health-e News.

* An edited version of this story was first published in The Star