Manuel’s sinful deed
Friday, 20 February, 2004
Arnold Kirkby
The impact on the industry will be significant
Comment by Arnold Kirkby
A 30,5% increase in excise duty on natural wine is absolutely sinful in the eyes of wine lovers. If any winery had increased its mark-ups by that amount, the government would have been the first to raise objections, let alone trade unions and the poor punter who is looking for a little light relief at the end of a difficult week.
Chatting to people in the industry after Finance Minister, Trevor Manuel’s almost gleeful announcement in parliament, it was obvious the impact on the industry would be significant. The wine industry has suffered the brunt of the minister’s punitive actions, with a 13,5% increase on spirits, and working up with 16% for fortified wines, and 28% for sparkling wines.
The government had given notice last year that it was going to introduce a new excise model that would raise the tax on a bottle of wine to 23% to the average retail-selling price. Some major industry players say government has not found a way of establishing that average in this highly differentiated product. Until this model has been sorted out the government should be more cautious and less aggressive about these high tariffs.
What will, however, only become evident later is the extent of the impact that it will have on job development in the primary and manufacturing segments of the industry. The primary sector will be particularly hard hit because it is labour intensive and this is probably where costs will be cut first, particularly with casual personnel. The Western Cape and, to a lesser extent, the Northern Cape will bear the brunt in this regard because that is where the majority of the grapes for wine are grown.
Again this might just be another way of telling this region to get in line and vote for it in the up-coming elections. If the object of the exercise was to get punters to stop drinking by taxing people out of their drinking habits the answer can be traced back through history - it will not!
All that will happen is that people will start to buy down, or switch to illegal brands which come onto the market cheaper. Alternatively they will resort to making their own concoctions, some of them lethal. It will also start looking attractive to people who want to circumvent the law and produce counterfeit products. This would in turn have a negative impact on the industry and government. This added burden would again probably fall on the shoulders of the industry, which in the past has carried the burden of having to bring wrong doers to book.
The only citizens who probably won’t think this a major issue, are the fat cats who probably went out to celebrate the budget with a bottle of bubbly or two in anticipation of the R660 million which will be put in the government cookie jar.