The Beer Association of South Africa has warned that proposed changes to alcohol excise policy could increase taxes on most beers by 20% while driving more consumers towards illicit alcohol.
Image: AI Generated
The Beer Association of South Africa (BASA) has warned that proposed changes to the country's alcohol excise policy could increase taxes on most beers by 20%, raising concerns that higher prices may push more consumers towards the illicit alcohol market rather than reducing harmful drinking.
The industry body made its submission to National Treasury as part of the government's review of alcohol excise policy, arguing that while reducing alcohol related harm remains a shared objective, the proposed tax structure could have unintended economic and social consequences.
Under the proposed framework, beer with an alcohol content of between 2.5% and 9% would be taxed at 1.2 times the current excise rate.
BASA said this would affect the overwhelming majority of beers sold in South Africa.
Nirishi Trikamjee, interim chief executive of the Beer Association of South Africa, said the review presented an opportunity to balance government revenue objectives with the long term sustainability of the industry.
"It is an important discussion because excise policy affects far more than the price of a beer. It influences consumer behaviour, investment, employment, government revenue and the sustainability of an industry that supports thousands of livelihoods across the country."
Nirishi Trikamjee, interim chief executive of the Beer Association of South Africa.
Image: Supplied.
Trikamjee said government, industry and communities all shared an interest in reducing alcohol related harm, but questioned whether the proposed excise structure would achieve that objective.
"Treasury itself acknowledged that excise is not a silver bullet to address alcohol harm. The current review of alcoholic excise presents an opportunity to achieve both. The question is whether the proposed structure is the most effective way of doing it."
She said the proposed changes would effectively increase excise duties on most beers by 20%.
BASA argued that consumers facing ongoing financial pressure were unlikely to stop drinking because of higher prices and would instead seek cheaper alternatives.
"South African households are already under pressure from rising food prices, fuel costs, electricity tariffs and higher interest rates. Faced with another significant increase in the price of legal beer, many consumers are more likely to seek cheaper alternatives than stop drinking altogether as evidenced during the alcohol bans in Covid 19."
The association warned that the illicit alcohol market has expanded rapidly in recent years and now poses a growing threat to both public finances and consumer safety.
According to BASA, illicit alcohol products are estimated to be around 37% cheaper than legal alternatives and the illegal market has grown by more than 55% over the past five years, significantly outpacing growth in the regulated market.
The association estimates that illicit alcohol cost the fiscus about R16.5 billion in lost tax revenue during 2024 alone.
Trikamjee said products sold through illegal channels avoid excise duties, quality standards and other consumer protection measures.
"These products are sold outside the regulated market, avoiding excise duties, quality standards and consumer safeguards."
She warned that widening the price gap between legal and illegal alcohol could further strengthen the illicit economy.
"As the price gap between legal and illegal products widens, more consumers are incentivised to move into the illicit market. Rather than advancing public health objectives, excessive excise increases risk strengthening an illegal economy that contributes neither tax revenue nor consumer protection."
BASA said it supports efforts to reduce alcohol related harm but urged National Treasury to adopt an excise framework that balances public health objectives with economic sustainability, protects government revenue and discourages the continued growth of the illicit alcohol market.
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