Vinpro said yesterday that the excise hike introduced by the National Treasury would inflict a final blow to many wine businesses and hamper the economic recovery of the South African wine industry even further. Photo: File
Vinpro said yesterday that the excise hike introduced by the National Treasury would inflict a final blow to many wine businesses and hamper the economic recovery of the South African wine industry even further. Photo: File

Budget 2021: Excise duty hike ‘is final blow to the wine sector’

By Given Majola Time of article published Feb 25, 2021

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DURBAN – VINPRO, a non-profit company that represents about 3 500 South African wine producers, cellars and industry stakeholders, said yesterday the excise hike introduced by the National Treasury would inflict a final blow to many wine businesses and hamper the economic recovery of the South African wine industry even further.

Vinpro managing director Rico Basson said this followed on the back of a 16percent minimum wage increase and a 15 percent electricity increase that was absorbe d at farm level.

“We are extremely disappointed that government has once again not heeded the call of our industry.

“Vinpro and other industry organisations have emphasised the plight of the South African wine industry in discussions with Treasury over the past few months and requested that excise duty be raised by no more than 50 percent of the consumer price index,” said Basson.

Finance Minister Tito Mboweni yesterday announced an excise duty increase of 8 percent on wine, sparkling wine and brandy.

Basson said in light of the serious financial position in which the wine industry finds itself, it needed stability, policy certainty and financial dispensation.

“The higher-than-expected excise increase detracts from this and can inflict a final blow to many businesses that are already on their knees, which will in turn contribute to the already large number of job losses and exacerbate the socio-economic challenges in these communities,” said Basson.

Vinpro said the reality was that the excise increases did not necessarily affect the consumer’s pocket, but was passed on to wine grape producers.

“Of an average bottle of wine sold at R45, government earns R10.04 from excise duty and VAT, compared to wine grape producers earning a net farming income of 77c per bottle,” said Basson.

Meanwhile, the broader South African alcohol industry said it noted with grave concern the excise tax would be increased by 8 percent, which would exceed the targeted excise duties for wine, beer and spirits set by the Treasury itself, at 11 percent, 23 percent and 36 percent, respectively.

South African liquor Brandowners Association (Salba) chief executive Kurt Moore said with thousands of businesses across the value chain looking into the financial abyss due to the three sales bans over the past 12 months totalling R36 billion in revenue losses, there was no contingency for tax increases forcing further drastic action to cut costs.

“We will see tens of thousands of job losses within the sector whose livelihoods cannot be sustained,” said Moore.

Salba said it had made submissions to the Treasury and South African Revenue Service reflecting its assessment of the economic situation currently facing the industry due to the bans of alcohol sales during the lockdowns.

“Treasury itself forecast a 28 percent decline in tax revenue contribution from alcohol excise tax, with a three-year loss of R35bn. This was due to a volume drop ranging from 21 to 24 percent for wine, spirits and beer categories.”

The industry said it held the view that a less than inflation adjustment for 2021 would have delivered a better and quicker recovery to pre-Covid-19 volume and tax contribution numbers of R46.8bn in 2019 versus R33.7bn projected in the Medium Term Budget Policy Statement, excluding the effect of the third ban where there were five additional weeks without sales.

Moore said that this was a valuable industry to South Africa that represented hundreds of thousands of jobs, critical export sales and made a significant contribution to gross domestic product.

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