Estimating the cost of not setting the Health Promotion Levy at 20% in South Africa: an extended cost-effectiveness analysis

Abstract

Introduction: Taxes on sugar-sweetened beverages are recommended by the WHO to reduce consumption and improve population health. In South Africa, the Health Promotion Levy (HPL) was introduced at an effective rate of approximately 11% but has declined to about 8% in real terms due to inflation, remaining below the WHO-recommended 20% threshold. This study evaluates the health and fiscal implications of maintaining the HPL below this level, focusing on type 2 diabetes outcomes. Methods: We conducted an extended cost-effectiveness analysis using a proportional multistate life table model to simulate the impact of increasing the HPL from its current level to an effective 20% over a 20-year period (2022-2042). Data were drawn from the National Income Dynamics Survey, All Media and Products Survey and the Global Burden of Disease Study. Outcomes included diabetes incidence, prevalence, mortality, healthcare costs and tax revenue across income quintiles. Results: Increasing the HPL to 20% could avert 619 000 incident cases of type 2 diabetes, 285 000 prevalent cases and 26 000 deaths over 20 years, while saving ZAR23.9 billion in healthcare costs compared with maintaining the current rate. Sensitivity analyses (80%-120% passthrough) yielded 514 000-659 000 cases averted. Maintaining the current HPL resulted in ZAR15.1 billion in forgone revenue. Health gains were greatest in absolute terms among females and higher-income groups, but benefits were observed across all quintiles. Conclusions: Maintaining the HPL below the WHO-recommended level represents a missed opportunity to reduce the burden of type 2 diabetes and generate additional healthcare savings and revenue in South Africa. Increasing the HPL to 20% could deliver substantial health and fiscal benefits and should be considered as part of broader strategies to address the growing burden of non-communicable diseases.