Budget 2023: 'Save our beer makers'

A call for an excise regime that provides a lifeline to craft brewers devastated by load-shedding has been made by the Beer Association of South Africa (Basa).

Finance minister Enoch Godongwana is due to deliver the government's budget on Wednesday.

Basa said the effects of prolonged load-shedding come as thousands of businesses in the beer industry are still trying to recover from the Covid-19 lockdown and four alcohol bans.

“Ongoing power outages has impacted the entire beer value chain, with craft brewers — who barely managed to keep their doors open during the Covid-19 pandemic — most acutely affected. 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 disrupted the delivery of raw materials to produce beer, as well as the packaging and delivery of beer to customers. Some craft brewers have invested in alternative energy supplies to keep their businesses operational, including generators, inverters and batteries. However, this has added major financial strain on these businesses who were still trying to recover from the Covid-19 lockdown.”

On average, production across the craft beer sector is down by 25 to 40%, while operational costs have increased by 15%. This loss of brewery income has forced some businesses to lay off workers, with many craft brewers indicating they will not be able to continue operating if load-shedding continues at current levels.

The beer industry, as a whole, provides one in every 66 jobs in the country, said Basa.

“It is critical that these craft breweries as well as other businesses across the beer value chain are provided with a lifeline to protect the thousands of livelihoods they support.”

It is asking Godongwana to provide this lifeline by addressing disparities in the application of excise duties within the alcohol industry. It is requesting:

• the application of an alcohol by volume (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; and
• that the excise adjustment approach be changed to one that is fixed, in line with forecasted inflation, thus creating much-needed tax certainty moving forward.

“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,” it said.

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

This taxation model, Basa added, has been adopted by a number of countries, including Australia, Canada, Denmark, Finland, France, Iceland, Ireland, Israel, Mexico, the Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland and the UK.

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