JOHANNESBURG - South Africa’s wine industry has warned that increases in sin taxes could place pressure on producers, potentially threatening jobs and encouraging illicit alcohol trade.
Sin taxes are partly intended to discourage excessive alcohol and tobacco consumption, while also helping government generate additional revenue.
However, the South African wine sector says continued tax increases are making it harder for producers to remain profitable.
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South African Wine spokesperson Christo Conradie said annual tax increases are unlikely to reduce alcohol consumption as intended.
“National Treasury is convinced that annual increases, more than the prevailing CPI, will indeed discourage consumption and/or may even alienate consumers from the formal sector, to then investigate the 'illicit trade'," he said.
“Any increase more than CPI can therefore have the opposite effect and also be seen as ‘fuelling illicit trade’.”
He warned that higher taxes place pressure on already thin profit margins in the wine production sector.
“It is extremely difficult. The margins are already extremely thin, and the cumulative impact of above CPI-increases makes long-term feasibility/sustainability very difficult," he said.
Conradie said vineyards are long-term agricultural investments, meaning producers cannot quickly switch to other crops if profitability declines.
He warned that sustained pressure on the industry could force some farmers to reduce production, switch crops, or leave the sector entirely, which could negatively affect rural communities and employment in wine-producing regions.
The South African Revenue Service is expected to benefit from increased tax revenue, but industry stakeholders say the long-term economic impact on producers must also be considered.