SAB CEO Richard Rivett-Carnac is upbeat about an upswing in the SA beer industry, saying the positive sentiment towards the government of national unity (GNU) and falling interest rates, coupled with lower fuel prices, are encouraging optimism and easing some of the pressure consumers have been under.
Rivett-Carnac was speaking on the sidelines of SAB’s third annual state of the beer economy event at the Caledon Farm research & development facility in the Western Cape.
Stakeholders including agriculture minister John Steenhuisen discussed the recovery and growth of the sector, financing challenges and the role of players such as SAB in enabling localised production and strengthening the agricultural sector.
The CEO said that while last year was a tough one for the alcohol industry as a whole, this year had been one of recovery.
“The reality is that last year was a perfect storm of high interest rates, high inflation, high fuel prices and high unemployment so really a very squeezed consumer and as a result we saw industry volumes contract,” Rivett-Carnac told Business Day. “This year I’m pleased to say it’s back to growth, which is encouraging and we are looking forward to next year.
“There’s renewed optimism as a result of the GNU, fuelled by the reality that fuel prices are coming down, the rand is strengthening which helps with inflation and putting money into consumers’ pockets so we are quietly optimistic about the future,” he said.
SAB’s local sourcing programme has resulted in 95% of the company’s raw materials being bought locally. This has led to a 60% increase in local barley production since 2017 with 324,000 tonnes produced in 2023. Barley farming now contributes R1.4bn to GDP across the Western Cape, Northern Cape, North West and Limpopo, according to the group.
SAB has developed and cultivated 409ha in the George region for agri-processing of nine hop varieties for local and international markets.
The company operates seven breweries and 42 depots in SA, has a total workforce of about 5,000 and supports a beer economy “from seed to sip” of more than 250,000 jobs.
However, SAB has warned that the present tax rate of 25% is excessive and could lead to damage to the beer industry.
A 2022 study by Oxford Economics Africa titled “Double the pain: The burden of unpredictable excise taxes and high inflation on beer in SA”, which was commissioned by SAB, shows that the present excise tax target is 23% but the actual excise tax burden is 25%. In effect, this means that for every beer bought, 25% of the final price is paid to the government.
The Beer Association of SA (Basa) believes that beer is disproportionately burdened compared with other alcohol groups. The industry body association called for the government to reduce its dependency on the excise tax in SA and to incorporate solutions that will reduce the effect on the industry for small and big players alike.
Rivett-Carnac said while excise taxes formed an important part of the budget, “at times it feels like it’s used to fund certain other initiatives of the government”.
“All we ask of the Treasury when it comes to taxes that there is a clear policy to adhere to. That means increasing excise more or less in line with inflation and balancing it between the different categories. We’ve found previous excise taxes to be very volatile,” he said.
He said SAB continued to engage with the government on firmer policy certainty which allowed the sector to plan better and invest appropriately to grow the economy.
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