Industry body South Africa Wine has expressed strong condemnation towards Finance Minister Enoch Gogongwana’s decision to implement “excessive” excise tax increases on wine.

The organisation says government has ignored the industry’s urgent warnings and the devastating impact this will have on jobs, exports and rural economies.

Instead of fostering economic growth and industry sustainability, the government has further burdened an already struggling sector with an “unworkable” tax regime, South Africa Wine states.

During the national Budget speech presented on March 12, the Minister announced an excise increase of 6.75% on all alcoholic beverages.

“We made it clear that the above-inflation excise hikes would cripple South Africa’s wine industry. The government has failed to recognise that our excise burden exceeds the 11% incidence guideline set in the 2014 policy framework and is significantly higher than competitor wine-producing nations,” South Africa Wine explains.  

It argues that, by pushing forward with these destructive policies, the National Treasury is undermining the sustainability of a sector that contributes R56-billion to GDP and sustains more than 270 000 jobs.

The organisation states that this decision will accelerate job losses; drive producers, especially small-scale farmers, out of business; and make South African wine uncompetitive in global markets.

Higher excise rates will fuel illicit trade, eroding government revenue rather than increasing it.

Instead of implementing existing laws to curb alcohol-related harm effectively, the State continues to unfairly target the legal alcohol sector, which operates within strict compliance frameworks, while failing to address widespread enforcement failures that allow illegal trade to thrive, the organisation explains.

South Africa Wine CEO Rico Basson describes the excise tax increase as irresponsible and short-sighted decision on Treasury and Godongwana’s part.

“The government has ignored economic realities and chosen a path to stifle investment, growth, and employment in one of South Africa’s most vital agricultural sectors. The wine industry is unfairly penalised while the government fails to enforce existing laws against illicit alcohol trade and harmful consumption,” Basson states.

South Africa Wine will continue to challenge this “unfair taxation approach” and hopes to engage with Treasury on the proposed taxation of alcoholic beverages.