Taxing year for beer: Minister, it’s time to roll up our sleeves and recover this economy

15 November 2021 - 11:38 By ZOLEKA LISA
The beer industry is grappling with the economic impact of the Covid-19 pandemic that led to 161 days of no trade and multiple restrictions. Stock photo.
The beer industry is grappling with the economic impact of the Covid-19 pandemic that led to 161 days of no trade and multiple restrictions. Stock photo.
Image: 123rf/Jakub Godja

With less than two months left of a year dominated by the Covid-19 pandemic, we can conclude with certainty that it has been a tough year across many fronts.

The beer industry is still grappling with the economic impact of the pandemic that led to 161 of days of no trade and multiple restrictions.

Despite the challenging business environment we have been faced with, SA Breweries (SAB) is determined to be part of the country’s economic recovery story via the growth of the beer value chain and overall improvement in the job and investment landscape. 

There are few companies that have committed to making a capital investment into the country in the way we have. In particular, we have dedicated R2bn in 2022 to be used for upgrades of operating facilities, product innovation and the installation of new equipment at selected plants.

As part of the largest brewer in the world, the SAB value chain supports more than 250,000 livelihoods in SA and has linkages with 3,700 suppliers and 5,700 employees. Between manufacturing, packaging, marketing and distributing our beer from our seven breweries and 42 depots, we continue to oil the wheels of the economy through our industry. And yet we strive to do more.

The high levels of unemployment, poverty and inequality require the collaborative efforts of the government and the private sector to draw out the economic multipliers SA desperately needs to get on a growth path and improve its macroeconomic indicators.

For us to make a meaningful change to the economy, a seat at the table of collaboration and engagement with the government is what we are striving for.

The medium-term budget policy statement (MTBPS) is important for our country, given that our macro-fiscal position remains constrained and vulnerable. We believe prudential fiscal and tax policy, supported by a stable macroeconomic environment, is fundamental to enabling economic recovery.

The government must therefore continue to deliberately support business growth, encourage investment and accelerate structural reforms that include addressing the unreliable electricity supply and excessive red tape, and a reduction in the cost of doing business.

We are particularly interested in the tax outlook for the medium-term in the tabled MTBPS. The nature and shape of excise taxes have been muddied with uncertainty since SA’s revised alcohol excise tax regime was announced in 2002. Excise duties have risen consistently above inflation and outside the current excise policy principles.

Every year on Budget Day, our industry holds its breath as we wait to find out the annual excise adjustment. Every year, excise duties are increased by more than the inflation rate of that year, stimulating growth in the illicit alcohol market and stifling the legal alcohol market. In February, for instance, the excise tax increase of 8% was almost double that of inflation (4.2%). This approach needs to be urgently addressed and resolved.

Our sleeves are rolled up, along with our value chain. Let’s get to work. This can be done, but only if we do it together.

In all honesty, we had hoped the government would apply greater policy certainty as it relates to excise, and act within the current policy framework. It remains unnerving when a legal industry — which contributes more than R17bn in taxes to the state and supports hundreds and thousands of farmers, farm workers, malters, brewers, glassmakers, truck companies, shops, restaurants and taverns — has received no recourse regarding the lack of transparency and certainty in the implementation of excise adjustments.

As we look for guidance on the medium-term outlook, we appeal to the government to be guided by the key principles of taxation. These include but are not limited to:

  • the principle of equity and fairness in application that will ensure that taxes imposed would present an equal burden on all alcohol categories in the same economic condition;
  • the principle of predictability and certainty, essential for business planning, which provides the industry with a clear basis on which to plan and make investment decisions;
  • simplicity that allows the alcohol sector to comply easily with tax payment requirements; and
  • economic growth and efficiency, based on the idea that a tax system should raise revenue and promote or support the growth of investments in a country.

This is also a time to reset and refresh. It has been seven years since the framework governing alcohol industry taxes has been reviewed and we look forward to collaborating with the government in identifying and resolving issues in the current excise system.

As deliberations take place on the budget, our request is simple, especially during a time when the economy has suffered, and the beer industry has been particularly hard hit.

Finance minister Enoch Godongwana, excise policy certainty is critical to our business. When you decide to keep excise adjustments at or below inflation, in line with policy, the beer value chain can start to grow again, business by business, allowing green shoots to spread throughout the economy.

When we rebuild our beer value chain business by business, we can continue to contribute to the fiscus through taxes.

By contributing billions towards the economy, we help thousands of people to hold on to their jobs and support their families. We help households to secure their incomes, allowing communities to grow and thrive.

An agreeable excise policy can help shape the future of SA for the better of our society, our consumers, supply chain partners, farmers, retail, tavern and restaurant partners — all of whom form part of a strong and vibrant beer value chain.

Our sleeves are rolled up, along with our value chain. Let’s get to work. This can be done, but only if we do it together.

  • Lisa is vice-president, corporate affairs at SAB.

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