Alcohol industry resumes paying monthly R2.5bn in excise tax

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Alcohol producers were given a 90-day excise duty reprieve.
Alcohol producers were given a 90-day excise duty reprieve.
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South Africa’s liquor industry has begun paying its monthly R2.5 billion excise duties after a 90-day payment deferral following the fourth alcohol sales ban.

On Wednesday, the South African Liquor Brand Owners' Association (Salba) announced that its members, made up of producers like Distell, Heineken, Diageo, Pernod Ricard and DGB began paying their excise tax this month. 

The industry makes a monthly excise duty payment of about R2.5 billion to the South African Revenue Service (SARS). But government’s imposition of a fourth sales ban in June meant that producers could not pay the tax on their products.

Government had put the bans in place to limit the number of alcohol-related trauma cases at hospitals to ensure that beds were available for Covid-19 patients. Since they couldn’t trade, liquor producers asked SARS for a payment holiday, which resulted in the tax collector granting the industry a 90-day deferment, which ended this month.

"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," said Salba chairperson Sibani Mngadi. 

Mngadi said that the association was grateful for the deferment. South Africa’s alcohol industry’s value chain employs about one million people and contributes R72 billion in tax, as well as R173 billion to the GDP.

The sale of alcohol is now permitted from Monday to Sunday as SA moved to lockdown level 1 at the end of September

In the meantime, the industry says it is also fighting against the illicit trade of alcohol that took place as a result of the bans.

"Through collaboration between the industry and law enforcement agencies, there have recently been some good breakthrough in cracking the operation of syndicates that sell alcohol illegally ... robbing government and the country of much-needed revenue," said Salba CEO Kurt Moore.

"We are committed to assist SARS and the SA Police Service in every way possible to deal with the illicit trade problem."

Data from market research organisation Euromonitor International shows that illicit alcohol sales have increased to 22% of the total volume of alcohol sold, due to the bans.

This article has been corrected to reflect that illicit alcohol sales have increased by 22%, not 2%.

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