SARS scores R4.5 billion settlement
South African Breweries-owner (SAB) AB InBev is set to pay R4.5 billion to the South African Revenue Service (SARS) after the brewer settled its tax dispute.
The dispute relates to the sale of the company’s stake in Coca-Cola Beverages Africa (CCBA) in 2017 following its purchase of rival brewer SABMiller.
SARS initially demanded R17.7 billion from SAB, which was ultimately disputed.
AB InBev said that the disputes have now been resolved, and “SAB will pay R4.5 billion in respect of these South African tax matters to SARS, of which R3.5 billion has been paid as of June 30 2024.”
The background
Until 2014, SAB held a significant portion of Coca-Cola’s South African bottling operations.
In 2014, they, alongside The Coca-Cola Company and Coca-Cola SABCO, merged to form Coca-Cola Beverages Africa (CCBA), becoming a leading global Coke bottler.
SAB owned a 57% share of CCBA.
Following AB InBev and SABMiller’s merger announcement in October 2016 (which ultimately established the largest beer manufacturing entity globally), the Coca-Cola Company expressed its intention to acquire control of CCBA.
In 2017, Coca-Cola and AB InBev reached an agreement for Coca-Cola’s acquisition of InBev’s 54.5% share in CCBA, in a transaction valued at $3.1 billion.
Coke’s deal to acquire SAB’s stake was concluded in October 2017, with the company now owning 66.5% of CCBA.
However, this transaction was investigated by SARS, with preliminary findings released in March 2023 showing SAB owed them R6.4 billion in tax in addition to any penalties and interest.
“The assessment from SARS claimed that SAB owed R6.4 billion in taxes plus penalties and interest, which at the time of assessment totalled R17.7 billion. The repurchase transaction also included an indemnity for certain tax liabilities of CCBA,” said AB InBev.
CCBA notified SAB that they had received an assessment from SARS for R8.9 billion.
Both of these assessments were contested and according to AB InBev, the dispute has been resolved, agreeing to pay SARS R4.5 billion.
AB InBev said that R3.5 billion of this has already been paid.
While this is set to take a good chunk of their revenue, the company has seen its volumes grow by mid-single digits.
In 2024’s second quarter, SAB significantly outperformed industry averages by achieving record production volumes, particularly in South Africa’s beer and non-beer markets.
AB InBev, SAB’s parent company, highlighted the sustained business growth and increased market share within the total alcohol sector.
“The momentum of our business continued, with our portfolio delivering record high volumes and gaining share of both beer and total alcohol, according to our estimate,” said AB InBev.
“Our performance in the first half of 2024 was led by our above core beer brands, which grew volumes by mid-teens driven by Corona and Stella Artois, and the continued volume growth of our core portfolio,” it added.
AB’s commitment to the South African economy is substantial. It includes a R920 million investment as part of its broader R4.5 billion investment aimed at creating 10,000 jobs.
With 5,657 direct employees, SAB’s operations, which span breweries, malt plants, and farms, have a vast economic impact. They support over 140,000 jobs and have 97% of their beer ingredients sourced locally.
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