New alcohol tax could soon hit South Africa

The National Treasury wants to introduce a minimum price for alcoholic beverages to address alcohol abuse in South Africa.

However, the liquor industry warned that this would impact thousands of jobs, encourage illegal alcohol sales, and lead to a loss of around R6.7 billion.

The National Treasury has invited the public to comment on a discussion paper, which was out from November to 15 February.

The proposal has been met with a lot of controversy, with the National Liquor Traders accusing the government of taking a short-sighted approach to tackling alcohol abuse by increasing prices.

The National Liquor Traders Council’s convener, Lucky Ntimane, explained on Newzroom Afrika that while the organisation agrees that alcohol abuse in South Africa is a problem that needs to be addressed, it disagrees with the approach suggested.

He explained that the industry’s harm also needs to be weighed against its positives.

In South Africa, the industry directly or indirectly supports one in 31 jobs or about 499,000 jobs.

The liquor industry also supports around 1,15 million livelihoods.

According to Ntimane, this recommendation from the Treasury will not yield the financial benefit they think.

At face value, the proposal is expected to generate around R4.6 billion in revenue for the fiscus. However, Ntimane said the actual net contribution to tax revenue will only be about R2.3 billion.

Meanwhile, the expected decline in sales and its impact on the economy could result in a loss of approximately R6.7 billion.

So, while the tax increase may seem beneficial, in reality, it only contributes an additional 0.2% to total tax revenue.

“Do you really want to mess up the economy of the alcohol industry so that you can benefit 0.2% on an approach that is not tested in science? We don’t believe so.”

He added that many anti-alcohol lobbyists fail to consider South Africa’s unique circumstances, which include its high unemployment rate.

Not only does this proposal endanger South African jobs, but it will also push people to buy cheap, illegal alcohol since that is all they will be able to afford.

Illicit and counterfeit alcohol in the country has risen to about R20 billion, Ntimane said.

He noted that other African countries are struggling with high numbers of illegal alcohol sales.

For example, Angola is at about 34%, Zambia is at about 63%, Mozambique is at 71%, and Kenya is also at about 70%.

“South Africa is currently sitting at about 14.5%, but that number is rising rapidly,” Ntimane explained.

“If you are going to then play into the space where you encourage the illicit counterfeit of alcohol to thrive in South Africa, it will be no time that we catch up to our neighbours.”

“That will not be good for our economy, but also it will not be good for the health of our people.”

South Africa’s high alcohol prices are already playing a big role in driving interest towards the illegal industry.

For example, a 750ml bottle of whiskey carries significant tax costs – about 54% of its price is made up of taxes, including VAT and excise duty.

This means that, at a minimum, you are paying over R90 per bottle in excise duty alone, excluding VAT.

Meanwhile, illicit sellers on the street offer the same size bottle for around R90 to R120 at most.

This means they are already making a profit before the product even reaches consumers, whereas legal vendors are being “punished” by being made to pay taxes on products that haven’t even been sold yet.

“We’ve suffered enough for the past four years. I think it’s about time that government level with us and we have proper engagements that are going to support the alcohol industry but ensure that we also tackle the issue of alcohol abuse.”

Additionally, Ntimane explained that section 216(1) of the Constitution outlines the role and mandate of the National Treasury, which does not include addressing social and economic issues like alcohol abuse.

Matters related to alcohol abuse should fall under the Department of Health and the Department of Social Development, not Treasury.

He added that the government’s proposed solution to the problem is emotional when it should be “cool-headed”.

“We feel that the government is not providing leadership in that regard. If we want a sustainable solution, we need to find a way in South Africa where we have a strategy to deal with alcohol abuse. Currently, there isn’t any.”

Ntimane explained that South Africa currently has nine liquor boards, which means that there are also nine different laws governing alcohol usage in the country.

“Once we have a uniform approach, then we might be on the right track or right path to ensure that we address this scourge of alcohol abuse.”

“But if you are saying that you’re going to increase the price of alcohol as a means to fight alcohol abuse, that is a short-sighted approach because it doesn’t take into consideration the societal factors that give rise to people engaging in alcohol as a form of escapism.”