Speaking on behalf
of the country’s brandy industry, the Foundation’s director, Christelle
Reade-Jahn, said that ironically, the above-inflation hikes had come just as
the industry was seeing the first green shoots of recovery after a succession
of many lean years.



The excise duty for blended brandy will rise by 8,5%, resulting in an increase
from R175,19 per litre to R190,08 per litre. Potstill and vintage brandies,
that have earned widespread international critical acclaim, are to be even
harder hit. The 14,6% excise tariff increase will push the per litre level from
R149,23 to R171,07.

Slow but steady
recovery


“Not only are both these new tariffs significantly above inflation, but
they could impact the trajectory of the industry’s recovery path. The granting
in 2016 of a 10% lower differential excise tariff for potstill brandy compared
with other spirits, has given this premium brandy category a much-needed
boost. 

“Significantly, with the increase in potstill sales, greater awareness and
support have begun to develop, generating exciting new opportunities in craft
brandy. Now, the reduced differentiation for potstill brandies could dent our
initial headway in developing the craft sector and make it more difficult to
bring additional craft players on board. 

“At the same time, our concern is that the 8,5% excise tax could hurt the
nascent recovery of the blended brandy category, which is where the most
significant job multiplier economic impact lies, since it accounts for the
biggest volume of brandies consumed.” 

“It is important to remember that brandy is a highly labour-intensive
industry and thus a key job generator in the Western Cape. We need to protect
and grow those jobs and encourage South Africans to buy local, knowing that our
brandies are internationally regarded as world-class.”

 

Growing consumption


At its peak, she said, South Africa’s total annual brandy consumption was close
to 49 million litres. “Then, with the withdrawal of the brandy tax rebate
in 2006, sales began to plummet year-on-year, eventually falling in 2015 to
just over 30 million litres.

“After extensive lobbying by the industry, in 2016, the Ministry of
Finance introduced the differential relief, stimulating a slow but steady
recovery for the industry. Currently, the consumption level is back up to
almost 33 million litres a year and growing.

“Apart from nudging up sale volumes, the move has really helped to
premiumise brandy. Annual sales value is currently up by 22% on 2016.”

She said that Government intervention, coupled with the support of the retail
and on-premise sectors, as well as active marketing efforts by brandy producers
to promote local tourism and boost cellar-door sales, had all been bearing
fruit. 

Entrepreneurial
support


Buoyed till now by the fledgling recovery, the Foundation had been able to
establish an entrepreneurial hub to develop a craft brandy movement. Through
its producer network it had also been creating training, mentoring and
internship opportunities for new entrants to the industry. 

“Our organisation has been working closely with producers to upskill
talented young people keen to acquire technical production, marketing, sales
and business skills. We are also running an extensive educational drive,
working with upmarket bars, restaurants, hotels and lodges, training sommeliers
and other service staff.”

In addition, the Foundation was engaged in a BBBEE project in the Northern
Cape, established to supply grapes to the brandy industry, she said. The
public/private partnership involving both the national and Northern Cape
departments of agriculture and a community on the Orange River was aimed at
capacitating emergent farmers. 

“We plan to expand this initiative to emergent farmers in the economically
marginalised Eastern Cape and Klein Karoo, contingent upon access to the
necessary water,” Reade-Jahn confirmed.

Source: Bizcommunity