Ahead of the tabling of the 2022 budget on Wednesday, South African Breweries (SAB) and beer-industry associations have asked the government for a reduced excise rate.
SAB economist Fatsani Benda told a forum to discuss the state of the beer economy that applying an above-inflation increase in excise duty would hurt the industry and, ultimately, not benefit the government either.
Participants from SAB, the Beer Association of South Africa (Basa) and the National Liquor Traders Association said the Covid-19 pandemic and the subsequent lockdown restrictions had hurt the alcohol industry, particularly small-to-medium businesses. The number of craft brewers dropped significantly, from more than 200 before the pandemic, to fewer than 150 brewers currently.
SAB has been engaging with both the treasury and parliament’s joint standing committee on finance since August last year to amend tax regulations.
“Our main tip is to call for a tax break for smaller businesses to allow them to recover from the Covid-19 impact,” the brewer said on Monday. “Government should consider granting a reduced excise duty. Part of the economic recovery of SMMEs [small, medium and micro enterprises] should come from an excise rate discount that will allow them to recover and grow.”
Both SAB and Basa want the 2014 excise duty regime to be reviewed and adjusted in line with inflation, while the National Liquor Traders Association has suggested a 0% excise rate.
Currently, about 22% of the cost of a 340ml craft beer — taking into account other components such as logistics, packaging, ingredients, staff expenses — goes to excise duty.
Basa chief executive officer Patricia Pillay noted that the sale of alcohol had been banned in South Africa for 161 days in total because Covid-19 lockdown regulations first put in place in March 2020. During these episodes, small-scale craft beer businesses that could not sell their products were often forced to dump the beverages.
“As a beer industry we do not get relief from government,” said Pillay, noting that the alcohol sector was saddled with the “sin industry” label, despite creating jobs across a wide spectrum.
Economist Azar Jammine cautioned that the government was unlikely to respond to SAB’s call for a lower excise rate at this point because “government make their decisions long ahead of time” and that this limited the treasury’s flexibility to make any adjustments.
Jammine noted that the government had recorded R270-billion more in revenue last year than had been anticipated in February 2021, and argued that this should enable the government to continue paying the R350 monthly social relief of distress grant.