The extension of the alcohol ban is causing increasing distress for South Africa’s multi-billion-rand liquor industry, which wants another deferment of excise tax duty on alcohol to mitigate the impact on the sector.
Major industry bodies, including the South African Liquor Brandowners Association (Salba), Beer Association of SA (Basa) and wine organisation Vinpro, have warned of further job losses, the collapse of smaller players and billions of rands in lost tax revenue for government.
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“President Cyril Ramaphosa’s decision to extend the alcohol ban (on Monday) has left the South African alcohol industry with no choice but to apply for a deferment of the payment of excise duties until the ban is lifted,” Salba and Vinpro said in a joint statement on Tuesday.
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They added that besides the impact on the country’s fiscus, the ongoing alcohol ban has a negative impact on the country socio-economically as well as on the industry’s viability.
“The alcohol ban impacts the jobs and livelihoods of those directly and indirectly involved in the sector …
“The alcohol industry pays (the) SA Revenue Service (Sars) an average of R2.5 billion per month in excise tax contributions for locally-produced and imported products,” the statement noted.
The industry pointed out that alcohol excise tax is imposed at the point of production, which means that alcohol companies have a liability to pay the excise tax on end products in their warehouses, which cannot be sold due to the current indefinite prohibition of sales.
The alcohol industry was granted deferment of at least R5 billion in excise tax payments for July and August 2020 after the government banned alcohol sales with immediate effect in March. That ban lasted four months. The industry has honoured these payments to Sars from October 2020 when sales were back in operation.
According to Salba and Vinpro, the alcohol sector contributes R172 billion (3% of GDP) to the South African economy every year.
“The Mid-term Budget Statement from Treasury in October estimated a 28% reduction in excise tax contribution from R47 billion in 2019 to R34 billion in the current financial year ending February 2021,” the industry associations pointed out.
“We can expect those losses to deteriorate with every day and week that the current ban is maintained,” they added.
Commenting on the tax deferment request, Salba CEO Kurt Moore said: “The government did not indicate when alcohol sales will be allowed again. It is prudent that the industry applies all possible cost-preservation measures to keep it afloat: delaying excise tax payments is a significant factor.
“The industry and its entire value chain face an enormous financial crisis, and its capacity to make these payments is severely constrained.”
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Vinpro, which represents 2 500 South African wine producers, cellars and industry stakeholders, said it estimated that in the 17 weeks following the prohibition in March 2020, the wine sector lost more than R8 billion in direct sales revenue.
Vinpro CEO Rico Basson said: “With less than a week before the 2021 harvest commences, the South African wine industry faces a grim picture of business closures, job losses, downward price pressure, structural damage to subsectors, a decline in production without investment, quality deteriorating, a loss to the fiscus and diversification away from wine.”
Listen: Wines of SA communications manager Maryna Calow shares the effect of the extended alcohol sales ban on the wine and downstream industries