SOUTH AFRICA – Beer Association of South Africa (Basa) has issued several proposals to the South African government ahead of the Budget Speech this week, that encompass the amendments to the current excise regime governing the alcohol industry to restore profitability in the beer value chain.

In particular, Basa is calling on the National Treasury to allow for greater consistency within the current excise regime while still differentiating between products through the implementation of two proposals.

It wants the application of an ABV Excise Duty System within all Excisable Alcohol Products, which means products with a lower ABV are taxed proportionally lower than products with a higher ABV.

Additionally, the excise adjustment approach is to be changed to one that is fixed, in line with (forecasted) inflation, thus creating much-needed tax certainty moving forward.

According to the association, the government must focus on enabling policies to encourage the recovery of this sector, which contributes around 1.3% of GDP instead of the continued implementation of ones that prejudice the industry even further.

The beer industry in the country has already suffered enough from the Covid-19 national lockdown, which it is still recovering from, four alcohol sales bans, and the ongoing power outages locally termed “loadshedding”, the association explained.

Basa noted that brewers need at least nine hours of uninterrupted electricity supply to brew beer, which means load shedding above Stage 3 makes it impossible to complete this process.

Power outages have also led to spikes in secondary costs, which include the delivery costs of raw materials to produce beer, as well as the packaging and delivery of beer to customers.

These additional costs are also associated with investments in alternative energy supplies such as generators, inverters, and batteries, to keep their businesses operational, exacerbating the financial strain brought about by the covid-19 pandemic and supply chain disruption in the market.

With the loss of brewery income, Basa said the situation has forced some businesses to lay off workers, with other brewers indicating that they will not be able to continue operating if load shedding continues at current levels.

On average, BizCommunity media says the production across the craft beer sector in South Africa is down by 25% to 40%, while operational costs have increased by 15%.

“By implementing these proposals, we believe a win-win situation could be created when it comes to increased tax revenue and aligning with global standards and public health economics on harmful consumption reduction.”

In particular, the application of an ABV-based excise duty system has been recognized by the World Health Organisation as the best model for improving public health outcomes as it encourages consumers to purchase lower alcohol strength products,” the association said.

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