Industry organisation the South African Liquor Brandowners Association (Salba) says its member companies have started paying their deferred excise tax obligations to the South African Revenue Service (Sars).

After the implementation of the fourth total ban on alcohol sales in June, Salba had requested Sars to provide the industry with extended payment terms on the excise duties of about R2.5-billion owing to Sars for the month of June.

Sars proposed a 90-day deferral for the payment of excise taxes on alcohol which become due in October. Salba announced on October 6 that its members, which include major alcohol manufacturers such as Distell, Heineken, Diageo, Pernod Ricard and DGB, have started honouring their excise tax obligation to Sars.

“The alcohol industry has a liability to pay excise tax on end products that are in warehouses and could not be sold due to the prohibition of alcohol sales. Holding back on accounts payable, which includes the monthly excise tax payments to Sars, was one of the few options we had left to help us weather the short-term liquidity challenge we were facing due to the fourth ban of sales.

“Salba was grateful that Sars granted deferment of excise tax payable and we will begin honouring these payments. What the industry needs now is a degree of stability in the short- to medium-term for the sector to make its contribution to economic recovery of the country. Government equally needs some stability in tax revenue streams, of which tax on alcoholic beverages is a significant part,” said Salba chairperson Sibani Mngadi.

“This is a valuable industry to South Africa that supports around one-million jobs in the value chain, critical export sales and makes a significant contribution to gross domestic product (GDP).”

The alcohol industry pays Sars an average of R2.5-billion a month in excise tax contributions. The alcohol industry contributes R72-billion to the fiscus by way of taxation, value-added tax and excise tax and, in 2019, the alcohol sector contributed 3.4% (R173-billion) of South Africa’s nominal GDP, Mngadi pointed out.

Meanwhile, Salba CEO Kurt Moore said the organisation was committed to working with Sars and other law enforcement agencies to curb the sharp rise in illicit trade as a result of the bans.

“Through collaboration between the industry and law enforcement agencies, there have recently been some good breakthroughs in cracking the operation of syndicates that sell alcohol illegally and robbing government and the country of much needed revenue. We are committed to assisting Sars and the South African Police Service in every way possible to deal with the illicit trade problem,” said Moore.

According to market research firm Euromonitor International, illicit alcohol has grown to 22% of the total volume of alcohol sold following the bans of alcohol sales within South Africa. Spirits constitute 48% of the illicit market, mainly through smuggling, followed by home-brews at 24% and sugar-fermented ales at 22%.