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Beer adds a lot of fizz to economy, says report

Wounded by the massive prohibition blows govt inflicted on the booze sector during the pandemic, the beer industry has commissioned a research study to prove just how important brewing is to the SA economy.

Beer manufacturing, distribution and sales contributes to more than 1% of GDP and R43bn in annual taxes, according to the report commissioned by SAB, owned by the world’s largest brewer, AB InBev, and the beer industry to give a “holistic view” of its economic effect in SA.

The industry wants to be able to give data to the government to prove its role in job creation and tax collection, as it calls for more regulatory certainty and a better partnership.

The industry felt sidelined in lockdowns when alcohol sales and production were repeatedly banned and it heard about the bans at the same time as the public, midway through the production of liquor or while trucks were on the road delivering.

Oxford Economics, a consultancy linked to Oxford university, used data from 2015 to 2019 to conclude that the beer industry contributed R71bn annually directly to GDP.

It found the manufacturing beer sector spends R33bn a year on inputs and buys 97% of its supplies, including agricultural ingredients such as barley, from local suppliers, playing a large role in the economy.

It said R1 from every R79 spent in SA was linked to beer, and included spend on downstream industries such as buying beer in stores, pubs, taverns and restaurants. The hashtag in the graphic above – #Iam1of66 – refers to the fact that one in every 66 South Africans is hired by the beer industry.

In the report, SAB CEO Richard Rivett-Carnac said it was the first research of its kind in SA. “Beer matters for the economy, job creation and the success of a wide array of partners up and down the value chain.”

The Oxford Economics report did not take into account the costs to the economy of alcohol abuse and incidents such as car accidents caused by drunk drivers.

The costs of alcohol abuse are usually complex to estimate but include healthcare costs of those with alcohol-related diseases and injury, costs to prevent and investigate crime, damage to property, premature mortality and reduced productivity.

At the launch, the beer industry reiterated its call to work more closely with the government and have more reliable and predictable regulation.

“We want to be a partner with government and we want to be part of the solution. But doors do not get opened.”

Beer Association of SA CEO Patricia Pillay

The beer industry again asked for excise sin tax hikes to be set in line with inflation and to be given a better sense of what increases will be over a five-year period. Excise increases are announced by the Treasury annually.

Of the R43bn in taxes estimated to be paid by the beer industry, 60% comes from sin taxes and VAT on beer.

Rivett-Carnac said swings in excise taxes made it difficult to predict the costs of beer over the long term and thus predict the volumes it would sell in future. This made long-term investment decisions about upgrading the supply chain or manufacturing facilities difficult.

Rivett-Carnac said: “I’m not talking about reducing excise taxes, … I believe the alcohol industry should be regulated.”

Some years, sin taxes rise in line with inflation and other years, the taxes rise at double the rate of inflation.

“For a tax that represents 40% of the total selling value of the product, huge swings make it very difficult to plan for the long term. So we would like certainty about excise.”

Source: BusinessLive.co.za

Visit https://bit.ly/3BxuRNj to read the full Oxford Economic Report.

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