Kenya’s High Court hands check to Big Sugar

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A judge from Kenya’s High Court has quashed an imposition of excise duty on bottled water, fruit juices, energy drinks, sodas and cosmetic products, claiming the tax as unconstitutional. The ruling has been interpreted by some as a win for the wallet of the everyday consumer and by a number of commentators as an even bigger one for the non-alcoholic drinks industry.

While the revocation of the tax might signal a monetary boon for Kenyan citizens in the short term, it’s sure to have a potentially disastrous effect on their health in the long term. With obesity, diabetes and coronary complications on the rise, the excise duty could have been the perfect remedy. Instead, the epidemic now looks set to continue unabated.

KRA’s excise duty thwarted

The Kenya Revenue Authority (KRA) had sought to improve its meagre tax collection record with the introduction of the Excisable Goods Management System (EGMS) four years ago, leveraging technology provided by a Swiss Company, SICPA Security Solutions. In a bid to boost revenue, crack down on illegal trade and shore up legal loopholes, manufacturers were obliged to affix stamps on all products which fell under the purview of the scheme. Though the EGMS initially only covered cigarettes and alcohol, it was subsequently expanded to include bottled water, sodas, other non-alcoholic beverages and cosmetics last November.

Despite estimates that the wider focus would bring in (at minimum) Sh3.6 billion in annual revenue for the KRA, a challenge from activist Okiya Omtatah has now resulted in Justice John Mativo blocking its imposition. Justice Mativo justified his ruling by claiming the KRA and the National Treasury did not meet their public consultation participation obligations.

While the decision deals a major blow to the Kenyan state’s finances, Omtatah has hailed it a victory for the everyday Kenyans. The levy would have resulted in an overall taxation of up to Sh5.5 for a one litre bottle of water. In Omtatah’s telling, it would have jeopardised the affordability of water as a basic commodity. The court evidently agreed citing constitutional rights to clean water.

Sacrificing public health for pocket change?

While no side disputes the necessity of keeping water universally accessible to all Kenyans, it seems the judge forgot that the bottled water industry is vulnerable to cheap frauds such as the illegal refilling of bottles. There is also, of course, a distinction between cheap clean bottled water and luxury brands.

Critically, the ruling also ignores the multitude of other drinks which came under the excise duty’s remit. Fruit juices, sodas, energy drinks and other non-alcoholic beverages are loaded with sugars and artificial sweeteners that are directly linked to Kenya’s ballooning obesity and diabetes problems.

There was a time when the problem was confined to more affluent nations. That’s no longer the case. In 2012, 80% of the 1.5 million deaths attributable to diabetes occurred in low- or middle-income nations. Kenya is a textbook example of this process at work. 1 in 17 Kenyans are clinically obese, and an estimated 6% of the population suffered from diabetes in 2014. That’s a 150% increase from the 2.4% diagnosed with the condition in 1980.

In fact, 1% of all deaths in the country in 2012 were directly linked to diabetes. This shocking statistic is itself believed to be a gross underestimate, as many poor people cannot afford the medical attention that would result in diagnoses and many more die of other complications indirectly related to diabetes. Disease awareness on the national level is low. Even those who have been successfully diagnosed struggle to afford appropriate treatment.

Sour aftertaste from Big Sugar

Type 2 diabetes is caused by a poor diet and has been specifically linked to excessive soft drink consumption. One particular research paper even found those with an otherwise healthy diet were far more likely to contract diabetes if they consumed one or more cans of sugary drinks per day.

Far from being ignorant about the grave ramifications of overindulging in their products, it appears that the soft drinks industry has actively sought to cover them up. A 2016 report in JAMA Internal Medicine exposed the long history of this strategy, relating an attempt made by Big Sugar to sweep the issue under the rug in the 1960s.

Industry influence has had profound and noxious effects on nutritional research and, as a result, regulation of the soft drinks sector. That pattern holds equally true in Africa. While consumers in the developed world have become savvier to the risks of sugar consumption, many in Kenya and many other African markets remain (perhaps not so) blissfully unaware.

In the absence of public awareness, industry players have been able to peddle apocalyptic rhetoric to torpedo proven public health measures – especially taxes on sugary drinks and other products like the one Justice Mativo just struck down. Before South Africa passed its own sugar tax last year, a top Coca-Cola executive had the audacity to describe the life-saving duty as “murderous”.

Kenya misses healthcare open goal

Justice Mativo’s puzzling ruling may ultimately have far reaching impact on public health. The excise duty could have been an opportunity to benefit general well-being and public coffers in one fell swoop: the KRA would have seen sizable receipts from the tax itself, while reduced sales of sugary drinks would have translated to fewer medical expenses for the average Kenyan over the long term.

Instead, the Kenyan state finds itself needing to fill an unexpected budgetary hole in the short term – not to mention the far steeper medical bills Kenya will collectively have to handle down the road.

Featured image: By Mike Mozart/Flickr – CC BY 2.0 – https://www.flickr.com/photos/jeepersmedia/12766804353