Budget 2021/22: Liquor and tobacco industries bemoan sin tax increases

South Africas liquor industry has expressed grave concern after Finance Minister Tito Mboweni on day increased taxes on alcohol during his 2021 Budget Speech.

Announcing an increase in sin taxes, Mboweni said that South Africans must expect to pay more for alcohol and cigarettes with immediate effect.

Mboweni said that a 340ml can of beer or cider would cost an extra 14 cents, with a 750ml bottle of wine now costing an extra 26 cents, a 750ml bottle of sparkling wine will now be setting back customers an extra 86 cents, while a bottle of 750 ml spirits, including whisky, gin or vodka has increased by R5.50.

Mboweni added that a packet of 20 cigarettes would cost an extra R1.39 cents, 25 grams of piped tobacco will cost an extra 47 cents and a 23 gram cigar will now cost R7.71 more.

It is clear that the excessive alcohol consumption in our country can lead to negative social and health outcomes. Consumers do react to price increases, and higher prices should lead to lower consumption of alcohol products with positive spin offs, Mboweni said.

However, Kurt Moore, CEO of the South African liquor Brand owners Association (SALBA), said that with thousands of businesses across the value chain looking into the financial abyss due to the three sales bans over the past 12 months totalling R36 billion in revenue losses, there was no contingency for tax increases forcing further drastic action to cut costs.

We will see tens of thousands of job losses within the sector whose livelihoods cannot be sustained. Tax adjustments needed to take into consideration a significant increase in the size and efficiency of the illicit market that has grown during the sales bans.

The 8% tax increase on legal alcohol gives an opportunity for further growth in illicit trade competitiveness as more consumers are less able to afford legal, tax paying alcohol products, Moore said.

Rico Basson, Managing Director of Vinpro which represents 3 500 South African wine producers, said that they were extremely disappointed that the government has, once again, not heeded the call of our industry.

We have emphasised the plight of the South African wine industry in discussions with Treasury over the past few months and requested that excise duty be raised by no more than 50% of the consumer price index, Basson said.

He added that the above inflation excise tax increase followed on the back of a 16% wage and 15% electricity increase that would have to be absorbed at farm level.

In light of the serious financial position in which our industry finds itself, we now need stability, policy certainty and financial dispensation.

The higher than expected excise increases detract from this and could inflict a final blow to many businesses that are already on their knees, which will, in turn, contribute to the already large number of job losses and exacerbate the socio-economic challenges in these communities, Basson added.

Sinenhlanhla Mnguni, Chairperson of the Fair-Trade Independent Tobacco Association (FITA), said the impact on legitimate players and the fiscus of this increase will be considerable.

samkelo.mtshali@inl.co.za

Political Bureau