Rédaction Africa Links 24 with Georgina Crouth
Published on 2024-02-22 19:03:34
Budget time in South Africa is often met with dread by consumers, as it usually means tax hikes on items like alcohol and tobacco. These are seen as discretionary items and easy targets for the tax collector. This year was no different, with Finance Minister Enoch Godongwana announcing tax increases on alcohol and tobacco to ease pressure on public finances. The wine industry, in particular, has been hit hard by above-inflationary tax hikes, exacerbating the challenges it has faced in recent years.
Since the onset of the Covid-19 pandemic, the wine industry has been dealing with a series of crises, including lockdowns, port disruptions, rolling blackouts, crime, and drought. The excise hikes introduced by the National Treasury are expected to further strain wine businesses and hinder the industry’s economic recovery. Industry body South Africa Wine has expressed disappointment in the Treasury’s decision, highlighting the vital role of the wine and brandy industry in job creation and economic growth, especially in rural communities.
The increase in excise taxes has led to a thriving black market for alcohol, as legal consumption remains flat while illicit trade booms. Despite the tax hikes on wine, sparkling wine, and brandy outpacing inflation since 2013, per capita alcohol consumption in South Africa has stayed relatively stagnant. The industry is calling for a more balanced approach to taxation to ensure economic stability and fairness in the system.
Rico Basson, CEO of South Africa Wine, has urged the government to align excise taxes with inflation rates and consider the impact on the industry. With the legal alcohol industry contributing significantly to the economy, the above-inflation tax increases pose a threat to its sustainability. The industry believes that focusing on other pressing matters, such as exports, energy supply, and policy certainty, will help foster growth and improve the wellbeing of those working in the sector.
Dennis Matsane from Heineken Beverages expressed disappointment in the excise decision, noting that taxes on alcohol have increased significantly above inflation since 2019. The legal alcohol industry plays a vital role in supporting jobs and livelihoods in South Africa, and the tax hikes could jeopardize its ability to sustain these contributions. Other industry stakeholders, like Peter Pentz of Groote Post wines, emphasize the importance of keeping tax increases in line with inflation to support transformation efforts and job creation.
Overall, the wine industry in South Africa faces numerous challenges, including declining exports, load shedding, and port disruptions. The industry believes that investing in research, development, technology, and export promotion could have a more significant impact on its growth and sustainability than punitive tax hikes. As the industry grapples with these challenges, stakeholders continue to advocate for a balanced and fair approach to taxation that supports economic stability and job creation in the sector.
Read the original article on Daily Maverick
