Proposed beer excise changes could raise tax on most beers by 20%, industry warns

Proposed changes to South Africa’s alcohol excise policy could see taxes on most beers rise by up to 20%, according to warnings from the Beer Association of South Africa (BASA). The industry body has submitted its response to National Treasury as part of the government’s ongoing review of alcohol taxation, expressing concerns that such hikes could drive more consumers toward the illicit alcohol market, undermining public health goals and increasing risks to consumer safety. The proposed tax adjustments would apply to beer with an alcohol content ranging from 2.5% to 9%, which constitutes the vast majority of beers available in the country. Under the new framework, these products would be taxed at 1.2 times their current excise rate. Nirishi Trikamjee, interim chief executive of BASA, emphasized that while reducing alcohol-related harm is a shared goal among government, industry, and communities, the proposed tax structure might not achieve that aim and could lead to unintended consequences. Trikamjee noted that excise policy impacts more than just the price of beer, it influences consumer behavior, investment, employment, government revenue, and the long-term viability of an industry that sustains numerous livelihoods. She pointed out that the current review offers an opportunity to align government revenue goals with the industry’s sustainability, but questioned whether the proposed tax structure represents the most effective approach. BASA highlighted that South African households are already grappling with rising living costs, including increased food prices, fuel expenses, electricity tariffs, and higher interest rates. With additional pressure from higher legal beer prices, many consumers may turn to cheaper alternatives rather than abstain from drinking entirely. This concern was echoed during the alcohol restrictions imposed during the pandemic, when consumption shifted toward unregulated sources. Illicit alcohol has been expanding rapidly in recent years, posing a growing threat to both public safety and state coffers. According to BASA, illegal alcohol products are approximately 37% cheaper than their legal counterparts, and the illicit market has grown by over 55% in the last five years, far outpacing the regulated sector. In 2024 alone, the loss of tax revenue due to illicit sales is estimated at R16.5 billion. Products sold through illegal channels bypass excise duties, quality control standards, and other consumer protections. These items are often produced in unsafe conditions and can pose serious health risks to users. BASA warned that increasing the price disparity between legal and illegal alcohol could exacerbate the problem, encouraging more consumers to shift to the illicit market. Trikamjee stressed that while BASA supports initiatives aimed at reducing alcohol-related harm, it urges National Treasury to consider an excise framework that balances public health objectives with economic sustainability. The association called for policies that protect government revenue, ensure consumer safety, and discourage the expansion of the illicit alcohol trade. The debate over alcohol taxation reflects broader tensions between fiscal responsibility and public health. While the government seeks to generate revenue and curb harmful consumption, industry representatives argue that punitive measures risk pushing consumers into even greater danger. As discussions continue, stakeholders will need to find a middle ground that addresses both economic and health concerns without compromising either.