The South African alcohol industry notes with great concern that Finance Minister Tito Mboweni announced in his budget speech in 2021 that it would increase the excise tax by eight percent, which exceeds the target excise taxes on wine, beer and spirits set by the Treasury Department itself 11, 23 and 36 respectively Percent.
Kurt Moore, CEO of the South African Liquor Brandowners Association (SALBA) said: “With thousands of companies along the value chain looking into the financial abyss due to the three sales bans in the past 12 months and lost sales totaling R36 billion achieve. There is no way for tax hikes to force further drastic cost-cutting measures. We will see tens of thousands of job losses in the industry whose livelihoods cannot be sustained. “
SALBA filed filings with Treasury and SARS, reflecting its assessment of the economic situation the industry is currently facing due to the alcohol sales bans during the lockdowns.
The Treasury itself predicted a 28 percent decrease in the tax revenue contribution from alcohol consumption tax, with a three-year loss of R 35 billion. This was due to a 21-24 percent drop in volume in the wine, spirits and beer categories.
According to the industry, adjusting inflation for 2021 would have resulted in a better and faster rebound in pre-COVID-19 volume and tax contribution numbers – R46.8 billion in 2019 versus R33.7 billion forecast in the medium-term statement with the exception of the effect of the third ban, where there were five additional weeks with no sales.
Moore added, “Tax adjustments were needed to accommodate a significant increase in the size and efficiency of the illegal market that grew during the sales bans, and we note that the SARS commissioner is addressing the challenges these syndicates are facing in worsening tax losses acknowledges. The eight percent tax increase on legal alcohol offers the opportunity to further increase the competitiveness of the illicit trade as more consumers can afford less legal, taxable alcohol products. “
This is a valuable industry for South Africa, representing hundreds of thousands of jobs, critical export sales and a significant contributor to GDP. In fact, the alcohol industry pays SA Revenue Services an average of R2 5 billion per month in excise duties.
South Africa’s GDP fell minus eight percent in 2020, and the alcohol industry contributes R172 billion, or three percent of GDP, to the South African economy, according to StatsSA.
The alcohol industry released data to show the disastrous socio-economic impact of the three alcohol bans. This study found a loss of sales of R36.3 billion and a loss of GDP of more than R51.9 billion, 1.0 percent of total GDP measured at market prices.
The three bans put more than 200, 200 jobs at risk, putting 1.22 percent of national jobs in the informal and formal sectors at risk.
“We therefore urge the government not to impose future alcohol bans, as these will lead to contributions falling further, which will not only cause catastrophic damage to the tax authorities, but also to the socio-economic situation of the country and the long-term survival of the industry,” added Moore.
Vinpro MD, Rico Basson, said they were extremely disappointed that the government had once again failed to heed the reputation of the industry.
“In discussions with the Treasury Department over the past few months, we have highlighted the plight of the South African wine industry and demanded that the excise tax should not be raised by more than 50 percent of the consumer price index (CPI). The above-mentioned increase in excise duty on inflation results from a 16 percent increase in wages and a 15 percent increase in electricity, which must be absorbed at the company level, ”said Basson.
He noted that given the serious financial condition it is in, the industry now needs stability, political security and financial dispensation.
“The higher than expected excise tax hikes are affecting this and could deal a final blow to many companies already on their knees, which in turn will add to the already large job losses and exacerbate socio-economic challenges in these communities. Added Basson.
Moore stated that while the industry is extremely disappointed with the excise tax hike, it remains committed to working with the government to be a valuable economic growth partner and doing its part in support of the South African recovery plan against the coronavirus pandemic.
“We continue to seek a social pact with the government and civil society to continue the important role of the sector in the economic future of South Africa. That includes generating income for the economy while creating long-term sustainability that will secure the livelihoods of a million people whose jobs depend on the industry, ”he concluded.