South Africa's Treasury proposes lower excise duty for brandy

JOHANNESBURG (Reuters) - South Africa's Treasury proposed a 10 percent cut in excise duties on brandy on Thursday, saying the alcoholic spirit was at a cost disadvantage to competitors due to stringent regulations on how it should be produced. Producers of "Brandewyn", or burnt wine, have been angling for state support as the drink, once the spirit of choice for white South Africans, has lost ground to other spirits such as whisky, vodka and gin. The industry argues that brandy's falling market share has hurt wine farmers and communities in Western Cape and Northern Cape provinces. The National Treasury, which increased excise duty rate on spirits to 8.5 percent in February, proposed 10 percent lower duties for brandy, to be phased in over the next two years. "It is proposed that a 10 per cent lower excise duty rate (based on a litre of absolute alcohol) be introduced for brandy, to be phased in over the next two years," the Treasury said in a statement, requesting public comment. "The proposed excise duty relief for brandy aims to level the playing field within the broader spirits." Sales have fallen to about a third of South Africa's $1.5 billion spirit market from more than half in 1994 when trade sanctions against the country during apartheid were lifted. "Brandewyn" was first distilled on a Dutch ship in Cape Town harbour in 1672. Under South African rules, brandy makers, who include Distell and KMV Ltd, should use about 5 litres of the highest quality wine to produce one litre of brandy, which is then distilled twice in copper potstills and left to age in oaks for at least three years. "In the absence of similarly stringent regulatory requirements for other spirits products, it is argued that brandy is currently at a regulatory and cost disadvantage compared to other spirits," the Treasury said. (Reporting by Tiisetso Motsoeneng; Editing by Susan Fenton)