SAB warns South Africa's proposed new booze taxes put jobs at risk

South Africa’s beer industry has strongly opposed proposed changes to the country’s alcohol excise policy, warning that increased taxes could lead to higher prices, job losses and a surge in illicit alcohol consumption. The South African Breweries (SAB) and the Beer Association of South Africa (BASA) submitted their positions to National Treasury during recent stakeholder consultations, calling for a more stable and predictable tax framework. They argue that the proposed reforms, which include annual excise increases beyond inflation rates, could undermine both economic growth and government revenue. The consultation process is part of National Treasury’s ongoing review of South Africa’s alcohol excise policy, aimed at determining how alcohol taxes should be structured in the future. Under the current proposal, beers with an alcohol content between 2.5% and 9%, which make up the bulk of beer sales in the country, would face excise rates 1.2 times the current level. This change could potentially raise excise taxes on most beers by up to 20%. BASA has expressed concern that such steep increases might drive consumers toward illicit alcohol, which is already significantly cheaper than legal alternatives. SAB has urged the government to tie annual excise adjustments to the Consumer Price Index (CPI), arguing that this approach would maintain the real value of government revenue while offering businesses and consumers greater certainty. Zoleka Lisa, SAB’s vice-president of corporate affairs, emphasized that a stable policy environment is crucial for sustainable economic growth. She stated that linking excise adjustments to inflation would allow companies to plan for the future, invest in operations and create jobs. “This approach ensures that government revenue is preserved in real terms while supporting business confidence,” she said. SAB also warned that repeated above-inflation tax hikes could erode consumer purchasing power and create financial strain across the entire beer value chain. Farmers, suppliers, retailers, and hospitality businesses all rely on consistent pricing structures to operate effectively. The brewer noted that higher costs could ripple through the economy, affecting everything from raw material sourcing to final product pricing. Additionally, SAB highlighted that an inflation-linked framework would help prevent the illicit alcohol market from expanding further, as the price gap between legal and illegal products could otherwise widen. BASA echoed similar concerns, noting that illicit alcohol is approximately 37% cheaper than its legal counterpart. Over the past five years, the illegal market has expanded by more than 55%, growing faster than the regulated sector. The association estimated that illicit alcohol cost the government nearly R16.5 billion in lost tax revenue in 2024 alone. BASA argued that the proposed tax increases might inadvertently worsen this situation by making legal alcohol less affordable, thereby incentivizing consumers to seek out unregulated options. Both organizations stressed that the current proposals could have serious implications for employment, investment and the overall economic contribution of the beer industry. The legal beer sector plays a vital role in South Africa’s economy, contributing to manufacturing, agriculture, retail and hospitality sectors. It also generates substantial tax revenue for the state. A stable and predictable tax regime is seen as essential for long-term planning, especially given the high levels of investment required in production facilities, supply chains and distribution networks. As National Treasury continues its review, the outcome of the consultation could shape the future of alcohol taxation in South Africa. The debate highlights the complex balance between public health goals and economic stability, with industry leaders advocating for policies that ensure both government revenue and consumer affordability. The discussions underscore the importance of aligning tax frameworks with broader economic priorities, ensuring that regulatory changes do not inadvertently harm the very industries they aim to regulate.