Modelling the potential impact of a tax on fruit juice in South Africa: implications for the primary prevention of type 2 diabetes and health financing.

Abstract

Background: South Africa is experiencing a persistent growth in non-communicable diseases. Diabetes is among the top ten causes of mortality, especially among women, which is partly driven by high levels of added sugar consumption and obesity. To reduce obesity rates and the incidence of diabetes, South Africa introduced a tax on sugar sweetened beverages (also known as the Health Promotion Levy (HPL)) in 2018. The tax is applicable to sugar-sweetened beverages but excludes 100% fruit juice. The government is currently considering extending the tax to include fruit juices. This study models the potential health and economic impact of taxing fruit juices at 20% of the retail price of one liter.

Methods: To analyze the distributional impact of the tax, this study uses extended cost-effectiveness analysis methodology. Data on price elasticities, healthcare cost, income, fruit juice consumption were sourced from the literature and representative national surveys. The potential impact of the tax on diabetes incidence, prevalence, mortality, and financial benefits were estimated for each income group (lowest, quintile 1 to highest, quintile 5).

Findings: We estimate that a 20% tax on fruit juice would avert 156,640 incident cases of type 2 diabetes mellitus over 20 years, with most disease averted occurring among the first- and fifth-income groups. Averted deaths from diabetes would average 2,000 deaths per quintile (for quintiles 1 to 4) and about 2,800 in quintile 5. The improved health resulting from averted incidence and deaths will reduce overall healthcare expenditure by R7.5 billion over 20 years, of which R2.3 billion will occur in the fifth quintile. The South African government will also save about R300 million in subsidizing diabetes-related healthcare cost as a result of prevention; and would raise R8.6 billion in tax revenues per annum. Out-of-pocket expenditure savings will be R303 million and a financial risk protection (money-metric value of insurance) of R4.6 billion over the 20-year period.

Conclusion: We conclude that an HPL that significantly raises the retail price of fruit juices would reduce consumption and diabetes-related morbidity and mortality. The tax will also provide significant financial benefits in the form of reduced healthcare costs for both government and households as well as providing financial risk protection to individuals. Health taxes are win-win policies that improve population health and generate revenue for governments to fund public health services delivery and thus improve overall health financing activities of the government. Therefore, population level disease prevention measures such as health taxes are important for achieving universal health coverage.