SAB wants excise tax relief – otherwise it may invest in African countries other than SA

South African Breweries (SAB) is calling on government to adjust the excise tax rate in line with inflation in this week’s budget, saying it may have to look to other African countries for investment if it doesn’t get the relief and certainty it seeks. 

Fatsani Banda, economic and excise specialist at SAB, said having a clear excise policy and an adjustment that is not above inflation is the best move for the industry. 

“This creates the sort of certainty that allows us to plan our investments and allows us to stay as a viable business. 

“We are for tax compliance, we are in principle encouraged by the fact that there is a call for an excise framework, but we are worried about the inconsistencies and the uncertainty it creates when excise is increased by above inflation,” Banda said. 

She was speaking at SAB’s discussion on the state of South Africa’s beer industry on Monday.

SAB’s discussion came ahead of Finance Minister Enoch Godongwana’s tabling of the national budget on Wednesday.

South Africa’s current annual inflation rate is 5.7%, according to the latest figures from Stats SA. Last year, the liquor industry, which pays SARS about R2.5 billion per month in excise tax for domestic and imported products, saw an excise hike of 8%.

The AB InBev-owned brewer has previously said the pandemic has resulted in more than 150 000 job losses and the country’s beer and craft brewery value chain has declined by 30% since 2020. The industry lost 161 trading days due to alcohol sales bans since the country implemented the Covid-19 lockdown in March 2020.

Banda said if SAB doesn’t get the relief and certainty it seeks, then it will have to think about whether the South African government is giving it an investment-enabling environment.  

“And if not, are there other countries that are willing to give us a business enabling environment. Mozambique for instance, has been open to setting up a brewery, by way of giving a tax reprieve and reducing the regulatory red tape for establishing business,” she said.

In 2020, SAB cancelled R5 billion capital expenditure, but has since made a new R2 billion allocation.

Apart from taking its investments elsewhere, as part of diversifying its costs, the Carling Black Label and Castle brewer may look at strategies like increasing the imports of hops, a key ingredient in the beer making process. She explained that sourcing it from other countries, and not local farmers, would keep cost pressures down.

But this would be counter-intuitive to the country’s efforts to increase local investment and create jobs.

Banda was also joined by the CEO of the Beer Association of South Africa, Patricia Pillay, the national convenor of the National Liquor Traders, Lucky Ntimane, and Azar Jammine, director and chief economist at Econometrix. 

Pillay said South Africa’s craft beer industry will be decimated without an excise tax concession.

“Over and above that … people will not stop drinking, that’s the reality and we should not kid ourselves about that. People will find alcohol, those with a problem with drinking … will continue drinking,” she said.

She further said taxing the industry above inflation is not going to solve South Africa’s drinking problem. And will instead lead to unemployment and fuel the crime rate.

South Africa’s liquor traders have asked for a zero increase in excise duties and Ntimane said it was “unthinkable” that the government would not consider its request.

However, if it does happen the traders have to deal with an increase then their profitability will be eroded.

“And once you do that, it means that our liquor traders have to bump up the price, so that they can remain competitive and they can stay in business.

“But then indirectly, you are then propping up illicit trade, which has already taken hold in the township space,” he said.

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