Excise duty hikes – greater understanding of wine industry challenges
Thursday, 28 February, 2013
Vinpro
The latest hike in excise duties is a welcome concession, as it reveals a
greater understanding from Government of the unique challenges
affecting the sustainability of the wine industry.
However, the fact that the increases are still higher than inflation is not conducive to relieving the cost pressure on wine producers of more than 20%year on year, which is largely driven by wage amendments.
Excise hikes of 8% on wine and 10% on brandy were announced by the Minister of Finance, PravinGordhan, during the annual National Budget Speech on 27 February 2013.
An increase in excise on these products will, given resistance from retailers to raise their prices, probably be trickled down to the primary producer of wine grapes, as he is from the nature of his business a price taker. Brandy, an important cornerstone of the industry, is currently experiencing an unprecedented low in sales, which is felt throughout the industry value-chain.
Government already earned R4.7 billion from the industry before the announcement of the new excise duties, compared to a total producer income of R3.7 billion. This calls for a greater urgency for Government support within the policy framework than ever before, in order to address the imbalance between economic realities and socio-economic pressure.
According to Rico Basson, executive director of VinPro, this representative organisation for close to 3 600 wine producers actively works with other wine industry organisations towards strengthening the industry’spartnership with Government and partakes in annual discussions with Treasury regarding excise duties on liquor products. The wine industry submitted a plea to Treasury for closer to inflationary hikes, in light of research indicating that the excise level on especially brandy was already higher than the international norm.
The wine industry is the second largest exporter of agricultural products and its contribution to the gross domestic product amounts to more than R26 billion. Close to 279 000 people are currently employed in this industry.
The wine industry needs the support, involvement and partnership of Government.
Rico Basson, executive director of VinPro.
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