Alcohol sales ban costs fiscus billions

By Dineo Faku Time of article published May 17, 2020

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JOHANNESBURG - The South African Breweries (SAB) has warned that losses to the fiscus as a result of illicit alcohol sales in the country could be worse than previously estimated. 

SAB, which was bought by the world’s largest brewer AnheuserBusch for R1.4 trillion in 2018, said the sale of illicit alcohol cost the taxman at least R1 billion a month. 

SAB head of regulatory and public affairs Hellen Ndlovu said that the group could have paid more than R14bn in excise taxes had the sale of alcohol not been prohibited under lockdown regulations to contain the spread of coronavirus (Covid-19) in the country. “With no production in April, an entire month’s excise on beer is lost and probably won’t be able to be made up in this year,” said Ndlovu, adding that before the lockdown which began towards the end of March, the estimated excise tax losses due to illicit trade represented roughly 30 percent of the total excise contributions to the SA Revenue Service. 

“With the lockdown and ban under way, 100 percent of this revenue is lost to criminal enterprises. This goes way beyond lost excise tax. We are also talking about the loss of subsequent VAT and income tax, which would have otherwise gone to the country’s fiscus.” SAB’s local rival, Distell, whose brands include Savanna, 4th Street and Viceroy, also said that it had been unable to sell its beers, spirits, ciders and wines because of the Covid-19 pandemic lockdown. The company generated R8 million worth of revenue from the sales of alcohol and sanitisers since the lockdown to a range of businesses to support their own hygiene practices and for resale. “As a result of the short-term success and order pipeline the group is investigating this as a sustainable business opportunity going forward,” said the group. 

Distell said that it expected a staggering 80 percent fall in headline earnings a share during the financial year ended June 2020 compared to a year earlier due to the Covid-19 disruptions. 

Basic earnings share for the period would likely fall by up to 65 percent, the company said. “The Covid-19 pandemic, and in particular the South African government’s restrictions on the trading of alcoholic beverages, has had a significant impact on the trading of the group over the past six weeks since the start of the lockdown on 26 March, 2020,” said the group. 

On Monday SAB said it had reached an agreement with the government to transport its packaged inventory from the breweries to depots in order to save millions of litres of beer from being dumped. “SAB has collaborated with government and reached an agreement which will enable the company to transport its beer inventory over the course of the next few weeks and to avoid losses in excise tax for the government to the value of R500m,” the company said in a statement. Without this agreement being reached, 132m litres of beer would have had to be poured down the drain. 

BUSINESS REPORT 

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