OnTap Magazine

South Africa's beer industry is a significant contributor to the economy with 1 in 66 jobs in South Africa related to the industry. The industry has the potential to unlock immense growth and employment, but a complex regulatory framework makes it hard for breweries to plan. At the heart of this challenges lies excise duty, a tax levied on the production and sale of alcoholic beverages including beer. The South African Revenue Service (SARS) levies this tax – also called “sin tax” – on only certain products, such as alcohol. For alcohol, excise duties vary based on the type of alcohol or beer, with traditional African beer and commercial beers attracting different rates. But significantly, SARS does not distinguish between large commercial brewers and small craft brewers – and the same excise duties apply to beer products from both. Small to medium craft brewers often brew in smaller quantities, and they cannot achieve the same economies of scale that larger commercial brewers can. This makes smaller brewers more susceptible to this tax, and to increases that are above inflation. Recent years have seen above inflation increases in excise duty. In February this year, Minister of Finance Enoch Godongwana, announced in his 2024/25 Budget that excise duties, including those on beer, would see an above-inflation increase of between 6.7% and 7.2%. In the case of beer, this meant an increase of 14c per can of beer for 2024. Above-inflation increases stifle growth and innovation – especially in the vital craft beer industry. Excessive tax on alcohol can also potentially lead to forms of illegal and unregulated alcohol consumption. The Beer Association of South Africa (BASA) is invested in the success and sustainability of South Africa’s economy. The association has prioritised participating, through various processes, in pre-budget discussions related to excise duties. With excise duties increasing in unpredictable ways from year to year, the beer industry cannot accurately plan ahead and securely invest in its future. Excise stability can unlock growth and job creation in the beer industry, because businesses are given a clear investment horizon. This is especially critical as the beer industry has the potential to be a real driver of economic growth, job creation, and tourism in South Africa. BEER INDUSTRY CAN BE A KEY ENABLER OF ECONOMIC GROWTH 10 | Spring 2024 | ontapmag.co.za