Sugary beverage taxation in South Africa: Household expenditure, demand system elasticities, and policy implications

South Africa faces a severe and growing obesity epidemic. Obesity and its co-morbidities raise public and private expenditures on healthcare. Sugary beverages are heavily consumed in South Africa and are linked to the onset of overweight and obesity. Excise taxation of sugary beverages has been proposed and adopted in other settings as a means to reduce harms from their consumption. A tax on the sugar content of non-alcoholic beverages has been proposed for implementation in South Africa, however, the public health effects and revenue raising potential of this measure hinges on estimates of the targeted beverages own- and cross-price elasticities. This study applies demand system methods by combining expenditure survey data and sub-national price data to provide the first estimates of price and expenditure elasticities for categories of soft drinks that would be subject to South Africa's proposed sugary beverage tax. The results suggest that demand for these products is sufficiently price-elastic such that a significant reduction in consumption may result from a tax.