‘Sin’ industries place more pressure on finance minister

Photo used for illustration purposes only. PHOTO: Gulshan Khan/AFP via Getty Images

The sugar and beer industries are again pleading with Finance Minister Enoch Godongwana to hold off on tax increases in their sectors, claiming they are still reeling from the economic blows dealt by the Covid-19 pandemic and recurring floods as well as the high inflationary environment and load shedding.

Their pleas come just ahead of National Treasury’s tabling of the 2023 National Budget on Wednesday (22 February).

In its list of asks of the finance minister, the battered sugar industry – via industry body the SA Canegrowers – has proposed the scrapping of the sugar tax in an effort to save the thousands of jobs that it believes will be lost if the sugar tax continues to be implemented, or worse, increased.

The Beer Association of South Africa (Basa) meanwhile, in what seems to have become a tradition, has asked for the implementation of an alcohol by volume (ABV) excise duty system that will see alcohol producers taxed in proportionality to the alcohol content of their products. It also asks for greater consistency in the implementation of current excise regime.

Sugar tax
The SA Canegrowers association has categorised the government’s implementation of the health promotion levy as destructive and unsubstantial, and has moved to get the attention of the chair of parliament’s Standing Committee on Finance, requesting increased scrutiny of Treasury’s policymaking regarding the sugar tax.

The tax – first implemented in 2017 and in effect since April 2018 – was introduced by the government to support the health department’s goals of lowering diabetes, obesity and other related diseases in the country.

According to a South African Revenue Service (Sars) explainer, the levy on sugary beverages is “fixed at 2.1 cent per gram of the sugar content that exceeds 4 grams per 100ml,” with the first four grams in each 100ml being levy-free.

The industry describes the rationale behind the sugar tax as baseless.

In a statement on Monday, the association reiterated its concerns that the levy exists with “no evidence whatsoever” to support its stated aim of reducing diabetes, obesity and related diseases.

Instead, it believes that should the levy continue to exist or even worse be increased in the finance minister’s budget speech, 6 000 jobs will be lost and the businesses of almost 3 000 small-scale growers will be put at risk.

“This adds to the total of more than 16 000 jobs and R2 billion lost because of the levy in the first year of its implementation alone.”

There is also the scourge of load shedding – with Stage 6 rolling blackouts set to continue until further notice and a recent study conducted by the association showing that six to 10 hours of power cuts a day threatens to rob growers of R700 million in 2023.

This could rise to R1.8 billion should load shedding be escalated, it says.

“Our Constitutional framework envisions transparent and accountable governance, and Parliament’s committees play a critical role in this regard,” says SA Canegrowers.

“The failure of National Treasury to comply with legislation, and to deal transparently with the sugar industry, is disappointing and requires the intervention of the Standing Committee on Finance.

“SA Canegrowers continues to urge Minister Godongwana to help us save vital livelihoods in South Africa’s rural economies by scrapping the sugar tax, and to work with the industry and other social partners to devise less destructive ways to promote health in South [Africa] than the job-killing Health Promotion Levy.”

Beer industry
Calls from the beer industry relate to the “fair” implementation of excise tax on taxable alcohol products.

Basa is unhappy with the government’s policy of taxing beer on an excise duty based on LAA (litres absolute alcohol) and/or ABV (alcohol by volume) – unlike wine, which is taxed per litre regardless of its alcohol volume.

A further demand is for the excise adjustment approach to be changed to one that is fixed so as to align with forecasted inflation. This, Basa believes, will provide sector participants with much greater tax certainty.

“By implementing these proposals, we believe a win-win situation could be created when it comes to increased tax revenue and aligning with global standards and public health economics on harmful consumption reduction,” it says.

“In particular, the application of an ABV-based excise duty system has been recognised by the World Health Organisation as the best model for improving public health outcomes as it encourages consumers to purchase lower alcohol strength products.”

According to Basa, the industry, which is still recovering from the impacts of the Covid-19 pandemic and is now being battered by the impacts of load shedding, has seen a drop in production of between 25% and 40% – while facing rising costs of at least 15%.

“This loss of brewery income has forced some businesses to lay off workers, with many craft brewers indicating that they will not be able to continue operating if load shedding continues at current levels.”

It adds: “It is critical that these craft breweries as well as other businesses across the beer value chain are provided with a lifeline in order to protect the thousands of livelihoods they support.”

The Citizen