Beer industry pleads for excise certainty ahead of mid-term budget

The beer industry is asking government to keep excise duties for the sector in line with inflation to provide the policy certainty it needs to foster economic growth.

The industry raised its plea at the State of the Beer Economy event hosted by South African Breweries (SAB) in collaboration with the Beer Association of South Africa (Basa) on Wednesday in Cape Town.

The event comes more than a month ahead of National Treasury’s tabling of the Medium-Term Budget Policy Statement (MTBPS) in October.

SAB CEO Richard Rivett-Carnac says the industry does not negate the need for excise taxes or the role they play in supporting revenue for the state but says inconsistencies in policy hinder growth plans for the industry.

“For a tax that represents 40% of the total selling value of a product, to have these huge swings in the amounts of tax you pay, it makes it very difficult to plan for the long term,” he says.

“So regulatory certainty around excise [means] agreeing with government on the role we … play when it comes to partnering with them for responsible trading – and medium to long term excise tax increases certainty.

“If that happens, it will allow us to make the very long-term decisions [like] building new breweries; building new maltings plants and all the other things we invest in. We need to take a 10- to 15-year view on this thing,” he adds.

Read: Godongwana to table medium-term budget on 26 October

Discrimination against beer

Calls for policy certainty around sin taxes are not new for the industry.

Ahead of National Treasury’s tabling of the 2022 budget in February, the industry aired its grievances about government’s decision to tax beer on an excise duty based on LAA (litres absolute alcohol) and/or ABV (alcohol by volume) – unlike wine, which is taxed per litre regardless of its alcohol volume.

Moneyweb previously reported on Basa’s complaints around discriminatory policies in the beer industry, with the association claiming that compared to wine, beer with the same alcohol volume is on average taxed R3.54 more by government.

Read:
Beer association pleads for consistent tax scheme in alcohol industry
SAB calls for tax relief in Godongwana’s budget

According to the association, the industry is further disadvantaged by the fact that the wine industry’s excise duties are on average due 36 months prior to consumption, while the beer industry’s excise taxes are due around four months prior to consumption.

To level the playing field, Basa CEO Patricia Pillay says government should start by taxing the different categories of the alcohol industry – wine, beer and spirits – using the same standards.

“I’m saying at least level the playing fields [where] we are all taxed according to alcohol by volume, then it will make life a little bit fairer.”

Economic impact of beer

An industry-commissioned assessment of the economic impact of the beer industry showed that in 2019, the industry supported a R71 billion gross value added (GVA) contribution to the country’s GDP, roughly 1.3% of the economy.

According to the report compiled by Oxford Economics, the industry supported a total of 249 000 jobs in 2019. It also paid R43 billion in tax to government – 60% of which came from sales taxes and excise duties from beer sales.

However, Covid-19-related lockdown restrictions that imposed various bans on the sale of alcohol muffled the industry’s contribution to the economy over the last two years, hurting smaller craft beer breweries the most.

According to Basa, the industry lost almost 30% of its craft breweries in the last two years.

Although craft brewers make up a small portion of the industry – less than 5% – Pillay says a loss of this magnitude also has a significant impact on the ability for the industry to create jobs.

The association says it will take the industry roughly two more years before it can recover to its pre-pandemic levels.

“The recovery [time] we had estimated was three years, now we are in year one,” says Pillay. “So I’m hoping that in the next two years we can start making a recovery but it has been tough because we did not get any concessions.”

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