SA’s liquor producers have welcomed the end to a fourth liquor ban and about R7.5bn in excise tax deferment but warn they are still not out of the woods as they battle to recover in a market where more than a fifth of sales are estimated to be illicit.
Liquor makers have now received the three-month break in excise payments they have long sought in the midst of a series of alcohol bans but called on the government to provide reassurance that another ban won’t be “arbitrarily” implemented.
President Cyril Ramaphosa announced the excise tax break on Sunday night, also unveiling a series of measures aimed at supporting businesses hit by social unrest in KwaZulu-Natal and Gauteng earlier in July. This violence put an estimated R500m of illicit liquor onto a black market already estimated to be worth R20.5bn, or 22% of the industry.
There had been widespread calls for an easing of restrictions as SA’s Covid-19 numbers declined last week, with industry bodies in the alcohol sector warning of a potential collapse as members grappled with the twin blows of social unrest and a sales ban.
The sale of alcohol was banned three times in 2020 for a total of 20 weeks, with the industry estimating it came at a cost of R38bn in lost liquor sales, R27bn less tax revenue, job losses and billions of rand in cancelled investment. The industry pays an average R2.5bn in excise taxes a month.
The SA Liquor Brand Owners Association (Salba) estimates all four bans have affected SA’s GDP by R64.4bn — or 1.3%. Though welcoming the end of the fourth ban, Salba said businesses needed to be allowed to trade without the continual risk of another.
“The government’s use of prohibition in response to the Covid-19 pandemic has had devastating consequences,” said Salba chair Sibani Mngadi in a statement.
“There was no justification for the prohibition — implemented with no warning, no consultation and poor empirical justification — that prevented legitimate businesses, supporting more than 1-million livelihoods across SA, from operating,” he said.
The Beer Association of SA likewise welcomed the relief measures but noted that the announcement of a fourth ban on June 27 occurred without any warning.
“To ensure the long-term sustainability of the alcohol industry, it is also crucial that the sector is properly consulted by government when it is considering new regulations to stop the spread of Covid-19,” the association said.
Ramaphosa announced on Sunday that the government will be extending the payment of unemployment benefits from the Unemployment Insurance Fund (UIF) to businesses closed by recent violence, and the government’s employment tax incentive scheme will be extended for four months.
Shares in JSE-listed firms that depend on tourism and hospitality showed a muted reaction on Monday to the news of a return to level 3 lockdown.
In afternoon trade SA’s largest liquor maker, Distell, was unchanged at R170, while hotel operator City Lodge was up 1.28% to R3.97. Tsogo Sun Hotels was trading 0.67% higher at R3, while Sun International added 0.56% to R19.58. Restaurant group Famous Brands was 1.38% lower at R55.55.
Update: July 26 2021
This article has been updated with additional information and comment throughout.
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