SAB Warns Against Proposed Alcohol Taxes: Threatening Jobs and Fueling Illicit Trade
South Africa's beer industry is pushing back against proposed changes to alcohol excise taxes, which it warns could threaten jobs and boost the illicit industry. The South African Breweries (SAB) has been advocating for a more predictable and inflation-linked excise framework. According to Euromonitor, the cost of illicit alcohol to the fiscus was R16.5 billion in lost VAT and excise revenue in 2024, while illicit volumes have increased by 55% since 2017.
The SAB believes that above-inflation increases could widen the price gap between legal and illicit alcohol. They argue that Treasury's proposal for a 20% increase in the standard rate of beer is not in line with CPI. Fatsani Banda, SAB's senior manager for Excise and Public Policy, points out that there are countries like Canada and the UK where excise hikes are in line with inflation.
The industry is also concerned about the impact on consumers and the sustainability of the legal market. Banda notes that when inflation goes down, South Africa's increases do not decline to match this. The SAB has called for Treasury to think about factors such as the growth of the illicit alcohol market in thinking about above-inflation excise increases.
The industry is pushing for a more rationalized process and a concerted effort to increase tax predictability and certainty, allowing business to plan and invest. Banda highlights that excise policy has not been reviewed in ten years and that Treasury has only increased excise taxes in line with inflation in three instances over the last 12 years.