South African Breweries (SAB) has appealed to the National Treasury to permanently link the annual increase in alcohol excise duty to the inflation rate. SAB argues that such a predictable mechanism will ensure business stability, protect investments, and support employment across the entire beer production chain.
SAB's submission is part of the National Treasury's consultation on the future structure of excise policy in South Africa, which will determine the methodology for calculating alcohol taxes in the coming years. The National Treasury discussion document proposes abandoning annual excise adjustments in favor of a rules-based system. Under this proposed model, beer with an alcohol content between 2.5% and 9% would be taxed at 1.2 times the current excise rate.
The Beer Association of South Africa (BASA) warned that the proposed changes to excise policy could lead to a 20% increase in taxes on most types of beer. This raises concerns that higher prices might push consumers toward purchasing illicit alcohol rather than reducing harmful consumption.
Instead of regularly increasing taxes above the inflation rate, SAB insists on linking annual adjustments to the Consumer Price Index. The company believes this will preserve the real value of government revenue while providing certainty to both businesses and consumers. SAB relies on industry support for an inflation-linked excise increase, which was approved in the February budget, and now calls for this approach to be implemented in the country's long-term alcohol tax policy, not just annually.
Zoleka Lisa, Vice President of Corporate Affairs at South African Breweries, stated: 'Sustainable economic growth requires a stable and predictable policy environment. Linking annual excise adjustments to inflation is a fair and predictable approach that protects government revenue while giving businesses confidence to invest, create jobs, and plan for the future.'
SAB warned that frequent increases in excise duties above the inflation rate would place additional pressure on consumer purchasing power, reduce their spending, and cause uncertainty throughout the beer value chain, affecting farmers, suppliers, retailers, hospitality businesses, and related jobs. The current unemployment rate stands at 32.7%.
The manufacturer also argued that widening the price gap between legal and illegal alcoholic products risks stimulating the growth of the black market, undermining tax compliance, and reducing government revenue. BASA estimates that illicit alcoholic goods are approximately 37% cheaper than legal counterparts, and the illegal market has grown by more than 55% over the past five years, significantly outpacing the growth of the regulated market. The association calculated that illicit alcohol cost the state around 16.5 billion rand in lost tax revenue in 2024 alone.
In SAB's view, an inflation-linked system would provide a balanced approach, preserving the real value of excise revenue while avoiding excessive tax increases or unintended market distortions.
The company noted that such certainty would aid in long-term planning, stimulate production investment, and strengthen confidence across the entire brewing economy. SAB also cited examples of international markets that have implemented inflation-linked excise adjustment mechanisms, noting that this has contributed to ensuring policy certainty while maintaining government revenue in real terms.
Lisa emphasized: 'South Africa has the opportunity to implement an excise system that balances revenue collection with economic growth.' She added that 'a predictable system aligned with inflation can support consumers, businesses, and the government, helping to create the necessary confidence for investment and sustainable growth.'
SAB declared its commitment to cooperating with the National Treasury and other stakeholders to develop a scientifically sound and economically sustainable excise system that supports the country's long-term goals.
The South African brewing industry is objecting to proposed changes in the country's alcohol excise policy. Producers warn that tax increases could negatively affect consumers, threaten jobs, and stimulate the illegal alcohol market.
South African Breweries (SAB) and the Beer Association of South Africa (BASA) submitted their proposals to the National Treasury during stakeholder consultations on Thursday. They strongly urged the government to adopt a more predictable excise tax system linked to inflation, rather than measures that could significantly increase beer duties.
These consultations are part of the National Treasury's review of alcohol excise policy in South Africa, aimed at determining the future structure of alcohol taxation.
SAB argued that annual excise increases should be tied to the Consumer Price Index (CPI). The company believes this approach would maintain state revenue in real terms while providing greater certainty to businesses and consumers.
Joleka Lisa, SAB's Vice President of Corporate Affairs, stated: 'Sustainable economic growth requires a stable and predictable policy environment.' She added that 'linking annual excise adjustments to inflation is a fair and predictable approach that protects state revenue while giving businesses confidence to invest, create jobs, and plan for the future.'
The producer warned against the harm of regular tax increases above the inflation rate, as this would reduce consumer purchasing power and place additional pressure on the entire beer value chain—from farmers and suppliers to retailers, taverns, and hospitality businesses.
SAB also cautioned that widening the price gap between legal and illegal alcohol could prompt more consumers to turn to illicit products. This, in turn, would lead to reduced tax compliance and lower government revenue, putting legal producers at a competitive disadvantage.
The company noted that several international markets have implemented inflation-linked excise systems, which provide policy certainty while maintaining tax revenue. According to SAB, South Africa has the opportunity to implement such an excise system that balances fiscal goals with economic growth, ensuring long-term confidence for producers and investors.
Meanwhile, BASA warned that the Treasury's proposed reforms could lead to excise taxes increasing up to 20% on most beer sold in South Africa. Under the proposed scheme, beer with an alcohol content between 2.5% and 9% would be taxed 1.2 times higher than the current excise rate. BASA pointed out that this category constitutes the vast majority of beer consumed in the country.
The association argued that while reducing the harm associated with alcohol consumption is a legitimate policy goal, sharp tax increases may not achieve this if consumers simply switch to illegal alcohol. Instead, BASA stated that the proposed changes could have unintended consequences for government revenue, employment, and investment across the entire brewing industry.
Nirishi Trikamji, BASA's interim CEO, emphasized: 'This is an important discussion because excise policy affects much more than just the price of beer. It affects consumer behavior, investment, employment, government revenue, and the sustainability of an industry that supports thousands of livelihoods across the country.'
The beer industry asserts that a stable and predictable tax regime is necessary for long-term planning, especially for producers who invest heavily in production facilities, agricultural supply chains, and distribution networks. Brewers also insist that the legal brewing industry contributes significantly to the South African economy through manufacturing, agriculture, retail, and hospitality, generating substantial tax revenue for the state.
The industry's advocacy comes amid the National Treasury's consideration of changes to the country's alcohol excise system as part of broader efforts to improve public health outcomes while maintaining revenue collection. The outcome of the review will determine future excise policy and how alcohol taxes will be adjusted in the coming years. Although the Treasury has not yet announced its preferred approach, the consultation process has highlighted tension between public health goals and the economic concerns raised by producers, who argue that excessive tax increases risk undermining legitimate business without necessarily reducing harmful alcohol consumption.
The Beer Association of South Africa (BASA) has warned that proposed adjustments to alcohol excise policy could lead to a 20% increase in taxes on most beers. There is also concern that the price hike might push more consumers toward purchasing illicit alcohol instead of promoting reduced harmful consumption.
The industry association submitted its comments to the National Treasury Department as part of the review of alcohol excise policy. BASA asserts that while reducing the harm associated with alcohol consumption remains a common goal, the proposed tax structure could have unforeseen economic and social consequences.
Under the proposed scheme, beer with an alcohol content between 2.5% and 9% will be taxed at 1.2 times the current excise rate. BASA noted that this will affect the vast majority of beer sold in South Africa.
Nirishi Trikamji, Acting CEO of the Beer Association of South Africa, emphasized that the review provides an opportunity to balance the government's revenue goals with the long-term sustainability of the industry. She stated that excise policy affects much more than just the price of beer, as it shapes consumer behavior, investment, employment, government revenue, and the viability of an industry supporting thousands of livelihoods across the country.
Trikamji agreed that the government, industry, and communities are interested in reducing alcohol harm, but she questioned whether the proposed excise structure would achieve this goal. She reminded that the Treasury itself acknowledged that excise duty is not a panacea for solving the problem of alcohol harm.
The industry believes that financially pressured consumers are unlikely to stop drinking due to price increases; instead, they will start looking for cheaper options. BASA points out that South African households are already under pressure from rising costs of food, fuel, electricity tariffs, and increasing interest rates. Faced with another significant increase in the price of legal beer, many consumers are likely to prefer seeking more affordable alternatives rather than completely giving up, which was observed during alcohol bans during the Covid-19 period.
The association warned that the illegal alcohol market has been rapidly expanding in recent years and poses a growing threat to both public finances and consumer safety. According to BASA, products on the illegal market cost approximately 37% less than legal counterparts, and the illegal market itself has grown by over 55% in the last five years, significantly outpacing the growth of the regulated market.
BASA estimates that illegal alcohol has cost the state around 16.5 billion rand in lost tax revenue in 2024 alone. Trikamji added that goods sold through illegal channels evade excise duties, quality standards, and other consumer protection measures.
She warned that widening the price gap between legal and illegal alcohol could strengthen the illicit economy. The wider the price gap, the more consumers are motivated to switch to the illegal market. Thus, excessive excise increases risk strengthening an illegal economy that yields neither tax revenue nor consumer protection, instead of advancing public health goals.
BASA supports efforts to reduce alcohol harm but strongly urges the National Treasury Department to adopt an excise system that balances public health objectives with economic sustainability, protects government revenue, and prevents further growth of the illegal alcohol market.
