The expansion of the alcohol ban is putting an increasing strain on the multi-billion rand liquor industry in South Africa, which wants the consumption tax on alcohol to be further deferred to mitigate the impact on the sector.
Key industry associations including the South African Liquor Brandowners Association (Salba), the Beer Association of SA (Basa) and the wine organization Vinpro have warned of further job losses, the collapse of smaller businesses and billions of Rand in tax losses for the government.
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“President Cyril Ramaphosa’s decision to extend the alcohol ban [on Monday] left the South African alcohol industry with no choice but to request a postponement of excise duty payments until the ban is lifted, ”Salba and Vinpro said in a joint statement on Tuesday.
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They added that the ongoing alcohol ban, in addition to affecting the country’s treasury, is also having a negative impact on the socio-economic country and the viability of the industry.
“The alcohol ban has an impact on the jobs and livelihoods of those who work directly and indirectly in the sector.
“The alcohol industry is paying off [the] SA Revenue Service [Sars] Excise tax contributions for locally produced and imported products averaging 2.5 billion R2 per month, ”the statement said.
The industry pointed out that alcohol excise tax is levied at the point of production, which means alcohol companies are required to pay excise tax on finished products in their warehouses that cannot be sold due to the current perpetual ban on sale.
The alcohol industry was granted a deferral 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. This ban lasted four months. The industry recognized these payments to Sars starting 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.
“In the medium-term budget of the Ministry of Finance from October, a reduction in the consumption tax contribution by 28% from R 47 billion in 2019 to R 34 billion in the current financial year by February 2021 was estimated,” emphasized the industry associations.
“We can expect these losses to worsen with each day and week that the current ban is upheld,” they added.
Kurt Moore, CEO of Salba, commented on the tax deferral request: “The government did not specify when alcohol sales would be allowed again. It is advisable that the industry take all possible cost-saving measures to keep them alive: the delay in excise duty payments is a major factor.
“The industry and its entire value chain are facing a tremendous financial crisis and their ability to make these payments is severely limited.”
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Vinpro, which represents 2,500 South African winemakers, cellars and industry stakeholders, estimated the wine sector lost more than R8 billion in direct sales in the 17 weeks following the March 2020 ban.
Rico Basson, Vinpro CEO, said: “Less than a week before the 2021 harvest begins, the South African wine industry is facing a dire picture of business closings, job losses, downward price pressures, structural damage to subsectors and a decline in production with no investment. Deterioration in quality, loss of treasury and change from wine. ”
Listen: Maryna Calow, communications manager at Wines of SA shares the impact of the expanded alcohol ban on the wine and downstream industries