A new alcohol tax – and why it won’t work in South Africa

Health minister Dr Zweli Mkhize says that his department has previously looked at using alcohol and other sin taxes to help fund the country’s healthcare sector.

Mkhize was responding in a written parliamentary Q&A in which he was asked whether his department had considered an alcohol tax to fund the impact of alcohol on the budget of his department.

The impact of alcohol on the healthcare sector was thrown into the spotlight in recent months as the country grappled with the coronavirus pandemic.

The health minister said the proposal of using taxes from alcohol to fund healthcare services is referred to as ‘earmarking’ and has been looked at historically, but faces hurdles with the National Treasury.

“The earmarking is usually legislated and would usually lead to all or a portion of the funds being used to finance healthcare services in general or a specific aspect of healthcare, e.g messaging on the harmful effects of alcohol. This legislative mandate lies with the minister of Finance,” he said.

Mkhize confirmed that the Department of Health has historically raised the earmarking of sin taxes – including alcohol, tobacco, sugar – as an option with the National Treasury. However, he said the National Treasury has been reluctant to accept the proposal, citing the following reasons:

  • It introduces rigidities in the budgetary process, limiting the availability of funds for alternative and (sometimes) more urgent purposes;

  • It can lead to waste of resources when not carefully planned by the recipient institution/ programme;

  • When tax revenue collection is low then the dependent programme will be negatively affected;

  • This may result in fragmentation of pooling and similar demands from other sectors;

  • Will eventually shrink as consumption of harmful/unhealthy products declines.

The impact of alcohol and the coronavirus

South Africa has relaxed some of its rules around the sale of alcohol under level 1 lockdown – however, some restrictions remain in place in what the liquor industry has called a ‘punch in the gut’.

Under the country’s move to a level 1 lockdown, alcohol for home consumption can be sold between 09h00 – 17h00 from Monday to Friday. On-site consumption will be allowed subject to adherence to the evening curfew which runs from 00h00 – 04h00. Explaining the continued restrictions, Cooperative governance minister Nkosazana Dlamini-Zuma says that the government is proceeding with caution when it comes to opening up alcohol sales in South Africa under lockdown level 1. “Alcohol sales are restricted so that we don’t do it in a ‘bang’ and find that there are unforeseen problems as there have been in the past,” she said. The minister referenced when alcohol sales opened up the first time, under lockdown level 3. She said when that happened, trauma cases went up, which later led to sales again being banned temporarily. At the time, hospitals were under severe pressure, she said. Despite healthcare facilities not being under the same pressure now, the government was learning from the past and opted to proceed with caution. Alcohol sales will open up gradually, she said. When asked about criticism from those operating in the alcohol industry such as wine farms, who say that the weekend prohibitions would negatively impact their businesses, Dlamini-Zuma said there were no exemptions to the regulations.


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