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S. Africa Alcohol Makers Seek Tax Deferral Amid Sales Ban

By Joseph Boris · January 12, 2021, 4:04 PM EST

Alcohol producers in South Africa will apply to have their payment of excise taxes deferred until a pandemic-related ban on the sale of liquor is lifted, the leading domestic industry group said Tuesday.

The ban is harmful to government finances, the country's citizens and the viability of the alcohol industry, according to a statement from the South African Liquor Brand Owners Association. Its members include producers and distributors such as Distell, Diageo, Pernod Ricard, DGB, KWV and RGBC.

As an excise tax, the alcohol levy is imposed at the point of production, which means companies are liable for paying it on end products in their warehouses, even though these can't legally be sold due to the current indefinite prohibition.

Because the government hasn't indicated when it will allow alcohol sales again, the industry must apply "all possible cost-preservation measures to keep it afloat," and delaying excise tax payments is a significant factor, said the association's CEO, Kurt Moore.

"The industry and its entire value chain face an enormous financial crisis, and its capacity to make these payments is severely constrained," he said.

President Cyril Ramaphosa on Dec. 28 reinstated and on Monday extended the alcohol ban — first imposed last summer — along with the closure of all bars as part of restrictions to help South Africa battle a resurgence of the novel coronavirus, including a new variant.

Ramaphosa has said the added restrictions were needed because of a surge in infections that recently pushed the country's confirmed caseload past 1 million. The measures would be reviewed, but no letup would be considered unless numbers of new cases and hospitalizations decreased, he said.

During South Africa's earlier total ban on liquor sales, trauma cases in hospitals dropped by as much as 60%, according to government statistics. When the ban on alcohol sales was lifted, trauma cases returned to previous levels. Amid a resurgence of COVID-19 in early December, the country restricted sales of alcohol to Monday through Thursday between 10 a.m. and 6 p.m.

Alcohol sellers had pleaded with the government to avoid a total sales ban, citing the economic damage it would cause. The industry had been granted deferral of at least 5 billion rand ($328 million) in excise tax payments for July and August 2020 when the government banned alcohol sales with immediate effect. Companies had been making these payments to the country's revenue service as of October, after sales were allowed again.

A South African government representative didn't immediately respond to a request for comment.

--Editing by Joyce Laskowski.

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