Minister of Finance, Mr Enoch Godongwana, today announced excise duty increases of 4.9% on wine and brandy during the national budget speech. The increase of only 0.7% on sparkling wine is aligned with the industry’s request that the rate should be kept flat, which enables South African sparkling wine to be aligned with international excise tax benchmarks.
“We are grateful that Government has responded to the plea of our industry,” says Vinpro MD, Rico Basson. “In discussions with Treasury over the past few months, Vinpro and other industry organisations have emphasised the dire position of the South African wine industry and requested that inflation-driven excise taxes be introduced. This together with other interventions as agreed in the Agriculture and Agro-Processing Master Plan (AAMP) will enable the wine industry to fulfil the important role it plays in the economy of the country and in our society.”
South Africa also has a large and growing market for illicit alcohol which provides consumers with access to more affordable alternatives, possibly with more associated harm. “We have already seen in the past that an abnormal increase in excise duty fuels illicit trade (already 22% of the domestic liquor market) instead of serving as a deterrent to those who do not consume wine responsibly,” says Basson. “Policy changes in the absence of law enforcement will therefore have no impact on countering the misuse of alcohol.”
The halo effect of wine and its importance for tourism, wine exports and the brandy industry should not be underestimated either. South Africa is known for our wine and wine farms play a key role in tourism. The wine industry contributes R7.2 billion to the GDP (before Covid) and wine also makes a major contribution to the export market with 50% of South African wine – worth R10.2 billion – being exported to more than 130 international markets.
“In light of the serious financial position our industry is currently in, we now need stability, policy certainty and financial relief and support. The levying of excise duty increases in line with our request contributes to this and offers some relief to many wine businesses who are experiencing major challenges due to the smaller forecasted harvest, the energy crisis, supply stocks which are adversely affected by the ongoing war in Ukraine and double digit increases in input costs.”
Vinpro is grateful for the investment at the Brandvlei Dam and budgeted investment at the Clanwilliam Dam and has also requested that Government implement actions as set out in the AAMP with urgency.