The sin tax rise imposed by the National Treasury would do further damage to numerous wine firms, impeding the South African wine industry’s economic recovery.
This is according to the communications and brand manager of South African Wine, Wanda Augustyn.
During Wednesday’s national Budget speech, Minister of Finance Enoch Godongwana announced a sin tax increase of 7.17% on wine (28 cents up a bottle), 7.17% on sparkling wine (89 cents increase) and R5.53 per bottle of spirits.
Christo Conradie, a stakeholder engagement manager of South Africa Wine added that following significant engagement and suggestions from South Africa Wine, the National Treasury did not listen to its call to maintain excise rates.
Conradie expressed disappointment that the government did not heed the industry’s plea.
“So this is ignoring the vital role of the wine and brandy industry in the larger economy and its significant contributions to job creation across the value chain, particularly in rural communities, as well as the continued pressure for this industry to remain sustainable.
“In a time when growth and recovery are desperately needed, various crises, including the energy crunch, disruptions at the Port of Cape Town, and increases in input costs, to name but a few, are worsening the financial position the industry is currently in,” Conradie said.
He added that South Africa has a sizeable and expanding illegal alcohol industry, giving consumers access to more inexpensive options, potentially with more harm, without being taxed.
Conradie cited historical statistics that revealed that, despite ongoing above-inflationary tax rises, legal alcohol consumption in South Africa stays essentially steady, while the illicit alcohol trade expands.
Excise rates have more than doubled since 2010, although South Africa’s per capita alcohol consumption has remained largely stable. The main problem, however, is that the illicit part of the market has nearly quadrupled in less than a decade.
“When prices rise faster than incomes, people can afford fewer goods and services. Cheaper goods, including illicit and black-market products, become more tempting.
“Without improved law enforcement, more regulations (including higher excise taxes) in the legal market are unlikely to have any impact. Considering the local context is crucial in designing policy regulations,” said Conradie.
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