SAB has estimated the loss of sales for the entire sector at more than R30 billion and has canceled planned investments of R5 billion. (Photo: Waldo Swiegers / Bloomberg via Getty Images)
South African Breweries made the plea on its Twitter feed. We will know on February 24th whether the finance minister has listened.
“Dear Minister, The beer value chain supports 22,300 jobs in the agricultural sector,” SAB said on its Twitter handle @SABreweries. “SAB buys from more than 1,000 local farmers, the majority are up-and-coming black women farmers. Using #TaxBeerResponsibly supports jobs in rural communities. #TipsForMoF #ResponsibleTogether. ”
Embedded in the tweet is the following message: “Dear Minister, The increase in excise taxes is affecting the recovery of our farmers. Please tax beer responsibly … ”This is a game with the SAB slogan“ Enjoy responsibly ”. Alcohol manufacturers are a bit like Eskom in this regard, encouraging their customers not to consume too much of their product.
The sector wavered from three bans on the sale of alcohol, a blunt tool used to prevent trauma units from becoming overwhelmed by Covid-19 patients and abused drunkards or abused by drunkards at the same time.
SAB has estimated the loss of sales for the entire sector at more than R30 billion and has canceled planned investments of R5 billion. Brewer Heineken has cut 70 jobs and frozen planned investments. President Cyril Ramaphosa has made attracting investment a core part of his economic agenda and that hurts.
In another tweet, SAB says:
“With the third alcohol ban behind us, we are faced with the challenge of stabilizing the beer value chain. Before the budget speech on February 24th, we have #TipsForMoF to #TaxBeerResponsibly. Any increase in excise tax affects the sustainability of the industry and economy. #ResponsibleTogether. “
In South Africa it has become an annual ritual for interested parties and ordinary people to submit tips for the finance minister before Tito Mboweni’s budget speech on February 24th. The SAB campaign can perhaps be seen as a tip from the provider by tipsters. But its appeal comes in part from its impact on aspiring black peasant women, a group that the ANC is trying to promote. It’s a clever campaign.
Mboweni has a lot on his plate as he flips through his pilchards, perhaps while inspecting the dagga plants that mysteriously appear to be sprouting on his limpopo farm. Taxes on sin are always an easy target and tend to be increased every February, with the exception of traditional beer, which also says something about the politics of the matter.
The subject is now far better known than ever. The pandemic and lockdown to contain it has shaken the economy and SARS has lost an estimated more than R300 billion in income this fiscal year. Additional revenue is urgently needed and the government wants to curb alcohol and tobacco use, which was also banned in 2020 when the dysfunctional state of South Africa tried to take on a nanny role.
It is not always clear that tax increases on this front will produce the intended results, and as a regressive tax, poorer households will bear the burden. It can also create demand for untaxed or illegal products – just look at the tobacco industry. Still, a tax hike would be preferable to another round of bans, and politically it might be a compromise to keep the socially conservative wing of the ANC from imposing another ban.
And while SAB has obvious reasons to oppose a tax hike on its products, he points out that the sector is recovering from its forced drying up. South Africa will have an ongoing debate about the social and health consequences of its ongoing love affair with the bottle.
There are critics who argue that its negative effects ultimately affect GDP rather than increase it. The fact remains, however, that it makes an economic contribution and the bans may have cost more than 100,000 jobs and billions of rand in investment, which is the lifeblood of any economy.
Reaching the industry’s products with a big tax hike at the moment can cost more jobs and investments, which could also take the burden off the treasury. It’s a balancing act – and one that wobbles like a sailor on a bend. DM / BM