South Africa, Cape Town, February 2015:
THE South African
brandy industry has welcomed the indication from
Government that excise duty
increases are under review,
saying it revealed a greater understanding of the industry and its challenges.
An excise hike of 8.5% on brandy was announced by the Minister of Finance, Nhlanhla
Nene, during the
annual National Budget Speech
on 25 February 2015.
Mr Nene added that other reforms under consideration include
providing excise
duty relief to wine-based spirits (e.g. brandy). The rationale is
that brandy is at a cost disadvantage compared with other forms of alcoholic spirits,
because it takes 4-5 litres of wine to produce a litre of brandy.
“
The above is the result
of continuous open
dialogue between the brandy
industry and various Government departments
around the unique challenges facing wine
producers and cellars,”
says Christelle Reade-Jahn of
the South African Brandy
Foundation.
The South African brandy industry has long played a major role in
the economy.
It is estimated that South Africa is the world’s seventh largest
brandy producer.
While the majority of brandy is consumed within the local market,
this industry
has also achieved
significant export growth although
from a relatively
small
scale.
This product of the vine has significant economic relevance.
“
It takes about
five litres of
wine to produce
one litre of
brandy,” explains
Reade-Jahn. “As such,
the South African
brandy industry has
a symbiotic
relationship with the
wine industry, increasing
local manufacturing value
and stimulating local job creation.”
The market demand for brandy also has a significant impact on the
primary wine
producers in South Africa. Recent research by the Bureau of
Economic Research
(BER) indicated that for every one percent of increase in South
African brandy
sales volumes, the price
of distilling wine
to South Africa’s
grape producers
increases by 0.9%.
“
A growth recovery of the SA brandy industry will therefore
positively influence
the overall profitability of South African wine producers, who are
significant local
employers.
The economic value added multiplier for South African brandy has been estimated
at 1.30, the
government tax multiplier at
1.44 and the employment multiplier at 6.85. This shows
that for every R1-million increase in the demand for brandy, economic value
added in the economy will increase by
R1.3-million, government
tax revenue from
excise and VAT
will increase by
R1.44 million and 6.85 jobs will be gained. The economic growth
potential from
a world class local product such as South Africa’s brandies is
substantial.”
Reade-Jahn also added
that the cost
of producing a brandy to
South Africa’s high standards was
far higher than that of spirits produced from grains or sugar cane. “Grapes are
a more expensive raw material compared to maize or sugar cane. South Africa’s
legal requirements for the production of brandy are superior to most other
brandy-producing countries.
This gives the industry the ability to produce brandies of world
class quality.”
For more information about the SA Brandy Foundation
visit www.sabrandy.co.za or
contact Danie Pretorius, General Manager: SA Brandy Foundation via e-mail
danie@sabrandy.co.za
.
For press assistance contact Monique Roux of Manley
Communications on 0861 MANLEY (626 539), email
monique@publicity.co.za or visit
the Press Room of
Manley Communications at www.manleycommunications.co.za
