South African Breweries appeals for ‘responsible taxation’ to aid alcohol sector’s recovery

SOUTH AFRICA – South Africa’s biggest beer maker, South African Breweries (SAB), has made an open appeal to the Treasury not to increase excise taxes in the forthcoming budget announcement, citing a need for the industry to recover from Covid-19, which resulted in three sales bans.

“Dear Minister, our farmers are still recovering from the impacts of stopping alcohol trade. That’s why when you #TaxBeerResponsibly, you help our farmers sustain their grains, their livelihoods as well as the beer value chain.

“This is one of the many positive effects of taxing below the inflation. It not only helps us, but it also helps in rebuilding the economy at large,” indicated SAB on a LinkedIn update.

In a series of social media posts, the maker of Castle and Carling Black Label has indicated that it will be sharing some tips for the government on responsible beer taxation that will help stabilize the value chain.

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“As an industry, we are working alongside our partners and suppliers, to recover from a third ban on alcohol sales to ensure a sustainable future for all of us.

“We continue to work with the government and our stakeholders to find sustainable ways to ensure responsible trade,” stated SAB.

The alcohol industry has been affected by three government bans on the sale of alcohol from 2020 to this year, whose aim was to limit hospital trauma cases, keeping Covid-19 patients’ beds free.

SA Revenue Service [Sars] accrues an average of R2.5 billion (US$165m) per month in excise tax contributions for locally-produced and imported products from the industry.

The Mid-term Budget Statement from Treasury in October estimated a 28% reduction in excise tax contribution from R47 billion (US$3.1 billion) in 2019 to R34 billion (US$2.2 billion) in the current financial year ending February 2021.

“Dear Minister, our farmers are still recovering from the impacts of stopping alcohol trade. That’s why when you #TaxBeerResponsibly, you help our farmers sustain their grains, their livelihoods as well as the beer value chain.”

South African Breweries

Prior to the recent call of not increasing taxes in the alcohol industry, the sector players called for another deferment of excise tax duty during the third ban.

The first deferment was during the country’s second alcohol ban in March last year for July and August, amounting to at least R5 billion (US$330 million), which they paid in October when sales were briefly back in operation.

The subsidiary of AB InBev has been forced to undertake a raft of measures within its operation in a bid to survive the current economic headwinds.

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At the end of January, SAB announced the suspension of 550 temporary contract workers prompted by the lack of trade coupled with reduced storage capacity which led to a slowing down of production.

Prior to that, the booze maker pulled the plug on another R2.5bn (US$164m) capital investment slated for the 2021 financial year.

At the height of the second ban in August 2020, the brewer withdrew a R2.5bn (US$164m) capital and infrastructure upgrade expenditure for the year.

It’s barely a week since the government lifted its third ban on sale of alcohol, a move that stakeholders have highly welcomed.

“SAB welcomes the resumption of trade, a positive step towards rebuilding the economy. Together, we can create collaborative solutions for a better, sustainable future, which balances lives and livelihoods. This can only happen when we are #ResponsibleTogether,” highlights SAB.

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