South Africa’s National Treasury is considering a substantial increase in the excise tax on alcoholic beverages, with the aim of both boosting revenue and curbing alcohol consumption. The proposal follows the release of a discussion paper which outlines the potential for higher taxes across various categories of alcohol, including beer, wine, and spirits. The original deadline for public comment was set for December 13, but Treasury has extended this until February 14, 2025, to allow more time for input from industry stakeholders. While the government views the move as a necessary step to reduce the harmful effects of alcohol, critics warn that the decision may push more consumers towards illicit alcohol markets.
In South Africa, alcohol consumption is a significant concern. According to Treasury’s report, the nation consumed a staggering 4.5 billion litres of alcohol in 2022 alone, with beer being the most consumed at 3.1 billion litres. Other popular products include wine (453 million litres), spirits (153 million litres), and ready-to-drink (RTD) beverages like premixed brandy and Coke (697 million litres). The statistics show a sharp rise in the consumption of RTD products, which grew by nearly 49% between 2013 and 2022, and a notable shift in spirit preferences, with gin overtaking whiskey as the dominant spirit. Despite this, local beer products lead the market, with imported beer accounting for just 127.2 million litres.
The proposal to raise excise taxes would increase the rates for beer, wine, and spirits across the board. Currently, the excise tax on beer stands at 23%, while wine is taxed at a relatively low 11%, and spirits carry the highest rate at 36%. The Treasury’s discussion paper recommends raising these rates to 28% for beer, 16% for wine, and 42% for spirits. This increase is part of a broader strategy to discourage excessive alcohol consumption, which has been linked to violence, health problems, and social instability. The aim is to reduce alcohol-related harm by making these products more expensive, thus deterring overconsumption.
However, the National Liquor Traders Council (NLTC) has expressed strong opposition to the proposal, arguing that higher taxes will hurt legitimate traders while benefiting illegal alcohol producers. Lucky Ntimane, Convenor of the NLTC, criticized the proposed tax hikes as a short-sighted and emotional response to the complex issues surrounding alcohol abuse. He suggested that the focus should be on scientific solutions to address the root causes of alcohol-related harm rather than simply raising taxes. The NLTC also warned that the tax increases could drive consumers to seek cheaper, unregulated alternatives, which are often produced and sold by illicit traders.
Marius Swart, a specialist in addiction treatment, echoed concerns about the unintended consequences of higher alcohol prices. He argued that while increased taxes might reduce consumption of some products, many habitual drinkers would simply switch to cheaper brands or illegal alcohol. Swart highlighted the dangers of these alternatives, pointing out that illicit alcohol can be far more harmful and even fatal. The issue of illegal alcohol trade is already widespread in South Africa, and traders fear that the tax hikes will only exacerbate this problem, as consumers will turn to backdoor sellers who avoid the official tax system.
The debate over alcohol excise tax increases reflects the broader tension between the government’s desire to curb alcohol-related harm and the economic interests of the liquor industry. While the government argues that higher taxes will lead to better public health outcomes, critics believe that it will only push more people into the informal and illegal alcohol market, undermining the effectiveness of the policy. As the deadline for public comment approaches, it is clear that this issue will continue to provoke strong opinions and could have significant implications for both the liquor industry and public health in South Africa.
