South Africa Wine, representing the South African wine industry, said on Monday it submitted a comprehensive response to the National Treasury regarding proposed changes to wine excise taxation, expressing serious concerns about the potential impact on the industry’s sustainability and competitiveness.
Following the National Treasury’s publication of the Excise Taxation Policy Paper in November 2024, SA Wine said that the industry was initially given a short time frame to provide input.
“South Africa Wine, its members and industry stakeholders successfully requested an extension, and stakeholders were granted until 14 February 2025 to make submissions. South Africa Wine has officially submitted its response, outlining the severe consequences these proposed changes would have on the sector,” SA Wine said in a statement.
“The timing and scope of these proposed taxation changes could not be more challenging for our industry. We’ve prepared an extensive submission demonstrating these changes' severe implications across our entire value chain,” Rico Basson, CEO of South Africa Wine said.
The submission addressed the immediate changes to excise rates expected in the February 2025 Budget Speech and the broader proposals outlined in the Taxation of Alcohol Beverages policy document.
“What’s particularly concerning is that our current excise tax burden already exceeds the target rate of 11% and is significantly higher than our competitor wine-producing nations,” Basson added.
“The proposed framework would push us further out of alignment with global competitors, seriously compromising our international competitiveness and severely hampering our ability to contribute to economic and socio-economic spheres from rural agriculture to market.”
Some of the key concerns from the industry includes the implementation of above-inflation annual increases in excise rates. The elevation of the target tax incidence from 11% to 16% of the retail selling price. The Introduction of alcohol content-based taxation rather than per-litre pricing. The progressive taxation bands with higher rates for wines with higher alcohol content.
“The progressive taxation proposal is especially problematic,” Basson said.
“With 80% of South African wines having alcohol content above 9%, we’re looking at a staggering 72% weighted average increase in excise rates across the industry. This is unsustainable for many producers, particularly small-scale farmers and cellars.”
SA Wine added that the proposed changes come at a time when the wine industry is already experiencing significant challenges.
“We must emphasise that these proposals are being considered while our industry is under severe financial strain,” says Basson. “We’re seeing an alarming increase in loss-making wine producers, and many of our members are struggling to maintain profitability in the face of rising operational costs and competitive pressures,” Basson said.
The wine industry remains a crucial contributor to South Africa’s economy, contributing a significant R56 bn to the GDP, creating 270 364 jobs across the entire value chain, earning foreign exchange through exports, generating tourism revenue, supporting rural economic development, and supporting local communities.
“Our industry’s contribution extends beyond simple economic metrics,” Basson further added.
“We're often the backbone of rural communities, supporting not just direct employment but entire local economies and tourism sectors.”
South Africa Wine, said it is on behalf of the industry, is requesting the limitation of excise tax increases to CPI for the 2025/26 financial year, noting that the current wine excise tax incidence already exceeds the recommended incidence rate in the 2014 policy framework, and comprehensive engagement with the wine industry regarding the proposed policy changes, considering their potential existential impact on the sector.
“We should focus on strengthening the wine industry’s significant socio-economic contributions through job creation, tourism, and rural development. History shows us that excessive taxation often produces unintended consequences that undermine economic stability and social wellbeing. We’re advocating for a pragmatic policy that supports industry sustainability and responsible consumption. These goals are complementary, not contradictory.
“We remain ready to engage and partner constructively with the National Treasury on the trajectory of excise policy for alcohol in South Africa to find solutions that work for all stakeholders,” Basson said.
BUSINESS REPORT