An excise tax increase of 8.5% for wine (including sparkling wine) and brandy and 6% on fortified wine was announced by Finance Minister Malusi Gigaba during the annual National Budget Speech on 21 February 2018.
“The above inflation excise tax is extremely disappointing especially given the fact that the industry reached, and even exceeded the tax incidence targets agreed upon in 2014,” says Rico Basson, Vinpro MD.
South African grape producers have been under financial pressure for some time due to the prevailing drought and other economic challenges. Production costs have doubled in the past decade and costs are expected to rise by 9% in 2018, along with a 17% increase in the minimum wage which takes effect on 1 May.
With the wine industry supporting approximately 290 000 jobs, the fact that the average wine grape producer does not function at sustainable profit margins and more than a third operate at a loss, is great cause for concern. The considerably lower 2018 wine harvest projection as a result of the drought not only has significant economic impact, but also leads to social welfare challenges due to job losses.
“It is of utmost importance that the wine industry works closely together with Government and organised agriculture to find solutions and garner support for the current socioeconomic situation, especially in rural communities,” says Basson
“We call on Government to provide further support and assistance to SA wine and brandy’s strategic plan which includes improved market access, investment in infrastructure, and research. Along with financial assistance for transformation, the development of dam and channel infrastructure, and the elimination of red tape around processes in this regard, this is crucial for enabling the wine industry to increase its contribution to the economy.
The South African wine and brandy industry makes a substantial contribution to the country’s GDP, to the tune of R36.1 billion.
“Vinpro continually strives to foster an environment where wine businesses can grow and serves as a catalyst to steer the South African wine industry to become an adaptable, robust, globally competitive and profitable industry that everyone can benefit from,” says Basson.