Salba requests excise duties deferment to offset liquor prohibition implications

6th July 2021 By: Donna Slater - Creamer Media Contributing Editor and Photographer

The South African Liquor Brandowners Association (Salba) states that the current 14-day ban on alcohol sales declared by government on June 27 has left it with “no choice” but to request that the South African Revenue Service (Sars) provide extended payment terms on the excise duties currently owing to it.

Salba chairperson Sibani Mngadi says the government’s nationwide ban on the sale of alcohol has far-reaching repercussions for the economy.

He explains that alcohol excise tax is imposed at the point of production, which means that the industry has a liability to pay excise tax on end products that are in warehouses and cannot be sold owing to the prohibition of sales.

Salba represents major alcohol manufacturers, including Distell, Heineken, Diageo, Pernod Ricard and DGB.

In addition, Salba is also requesting that, in the case of government extending the current alcohol sales ban beyond the initial 14 days, which is due to end on July 11, the deferment be applicable for the entire period until the ban is lifted.

Salba estimates that the liquor industry will lose retail sales revenue of R6.1-billion as a direct result of the current two-week ban, which is equivalent to 4.1% of projected sales values for this year.

“The potential direct loss in gross domestic product [GDP] is estimated to be R3.8-billion, equivalent to 0.1% of national GDP at market prices for 2020. Government will lose an estimated R3.6-billion in direct tax revenue [excluding excise tax] for the two weeks,” says Mngadi.

Further, he says the potential direct excise tax income lost is estimated to be R1.5-billion, which is equivalent to 2.7% of excise revenue this year.

“One of the few survival options to avoid a short-term liquidity challenge is to hold back on accounts payable of which monthly excise tax payments to Sars are a big chunk. We hope Sars will be understanding and grant us deferment of excise tax payable for the whole duration of the ban,” says Mngadi. 

FINANCIAL AND JOBS CRISIS

In a statement, Salba says the industry and its entire value chain are facing an “enormous financial crisis”, and its capacity to make these excise tax payments is severely constrained. Current market conditions have also made it difficult for members to secure short-term funding.

The sustainability of the sector, now and in the post-Covid-19 era, is dependent on this deferment if further job losses are to be avoided, Salba argues.

The current 14-day ban puts an estimated 4 604 jobs at risk. This is equivalent to 0.03% of the national total formal and informal employment for 2020.

To date, this brings the total jobs at risk for all bans to 233 547 jobs, which is equivalent to 1.49% of the national total for formal and informal employment for 2020.

Salba says the alcohol industry will play an invaluable role in helping South Africa’s economy recover post-Cocid-19.

Currently, the industry supports more than 35 000 township-based businesses (such as taverns), more than 10 000 off-site consumption retailers, and more than 22 500 labour-intensive firms (such as restaurants, hotels and wine estates).

“With no economic measures having been put in place to mitigate the devastating impact lockdown will have on livelihoods, the hospitality, tourism and alcohol industries will continue to bear the brunt of the cycle of lockdowns and alcohol bans which looks likely to continue until we have sufficient numbers of the population vaccinated.

“The industry has appealed to the government to enter into discussions on reasonable and viable alternatives,” he says.

Nonetheless, in a statement, Salba says the alcohol industry shares the concerns about the sharp rise in Covid-19 infections and the threat to life that this poses for the people of South Africa.

As such, Salba requests government to reassess its response to the pandemic by implementing more effective measures, including addressing its handling of the vaccine rollout.