South Africa has a drinking problem, which the National Treasury hopes to address through new taxes on alcoholic beverages. On Wednesday, the Treasury issued a call for written comments and proposals to assist the government in developing “an appropriate excise policy framework to reduce the harmful use of alcohol”, giving the public just a month in which to respond.
The liquor sector has objected to the 30-day notice, saying it cannot respond comprehensively to the policy document within such a short timeframe.
The period for public comments closes on 13 December.
Once that is concluded, the Treasury plans to revise the draft proposals to announce new tax hikes during the 2025 Budget in February.
The discussion document is premised on the World Health Organization’s (WHO’s) absolutist view that alcohol is harmful to health and that there is no safe level of consumption, outlined in a report published in January last year, “No level of alcohol consumption is safe for our health”, which linked even low alcohol consumption with an increased risk of premature death and disability.
The WHO reported that alcohol caused more than 3.3 million deaths (or 5.3% of all deaths) globally every year and was linked to more than 200 diseases and injuries.
WHO studies show that alcohol can affect health at lower levels than previously understood, emphasising that the safest approach is to minimise consumption or avoid alcohol altogether.
Harmful alcohol use is a major risk factor for health globally, affecting numerous health-related Sustainable Development Goals (SDGs), which is why the WHO is accelerating its global strategy to reduce alcohol-related harm as a public health policy, adopted in 2010 by its 193 member states.
South Africa, as a WHO member, is obliged and committed to adopting and executing those WHO guidelines and recommendations to address alcohol-related harm within its borders by working to prevent alcohol misuse and promote awareness.
A 2018 WHO report showed that about 59% of South African alcohol consumers over the age of 15 engaged in heavy episodic drinking.
The Treasury has highlighted the affordability of alcoholic beverages as a critical factor affecting alcohol consumption. It believes higher alcohol taxes and strategic pricing policies are effective ways to reduce affordability and address the social costs of alcohol abuse.
The WHO recommends that excise tax increases focus on reducing alcohol affordability, with South Africa’s current excise taxes at 11% for wine, 23% for beer, and 36% for spirits.
Annual duty adjustments have generally exceeded inflation, but price increases have not kept pace, resulting in higher excise duties. This discrepancy has led to concerns from the alcohol industry and advocates of reducing excessive alcohol consumption.
Over time, South Africa’s excise structure has widened the differential between duty per litre of absolute alcohol across beverage types. The duty gap between beer and spirits grew by 148%, and that between wine and spirits by 136% between 2012/13 and 2023/24. The widening disparities have raised questions about fairness in competition, with some stakeholders, especially the beer industry, advocating for uniform taxation based on alcohol content across all types of beverages.
The illicit alcohol trade remains a serious challenge, undermining revenue and health objectives. Studies estimate that 14-22% of South Africa’s alcohol market involves illicit — counterfeit, smuggled or unregulated — products. Industry insiders believe the number to be closer to 50%.
The WHO also recommends minimum unit pricing (MUP), a policy that sets a price floor below which no alcohol unit can be sold. MUP aims to reduce the availability of cheap alcohol and alcohol-related harm by preventing retailers from absorbing tax hikes. The Treasury is considering MUP in South Africa as part of a broader policy intervention.
The department believes South Africa’s excise duty adjustments could benefit from linking to inflation, with a suggested cap of 10%, ensuring stability in tax increases and addressing current reliance on industry price changes. Alternatively, a minimum inflationary adjustment plus a 4% upper limit above inflation could further stabilise adjustments, reducing discretionary fluctuations in tax policy.
The proposals
Wine: Recent changes to the Liquor Products Act and wine sector regulations have prompted a review of the current excise tax framework for wine. With the new category of low-alcohol wine (0.5–4.5% alcohol by volume), concerns have arisen about using tax to address alcohol-related harms.
Without adjustments, low-alcohol wine could face the same excise rate as wine with 16.5% alcohol. The proposal is that low-alcohol wines would be taxed at the current rate (R4.96 per litre), wines with 4.5-9% alcohol at 1.4 times the rate (R6.94) and wines with 9-16.5% at 1.8 times the rate (R8.93). The Treasury also wants to adjust the rate for fortified wines (currently R8.36).
Beer and fermented products: Since the 2016/17 fiscal year, excise duties on beer and fermented beverages have been standardised per litre of absolute alcohol content, with a current rate of R121.41/litre.
The proposal calls for a tiered excise duty structure for low-alcohol beers and fermented beverages based on alcohol content, as follows:
- Beverages with 0.5-2.5% alcohol would retain the current rate (R121.41 per litre of absolute alcohol);
- Beverages with 2.5-9% alcohol would be taxed at 1.2 times the rate (R145.69); and
- Beverages with 9-15% alcohol at 1.4 times (R169.97).
Spirits: Spirits are taxed at much higher rates than other alcohol types due to a long-standing practice of taxing “hard liquor” more heavily. At this time, no further rate changes for spirits are under consideration.
Reactions
SA Wine, which supports the wine and brandy industry, has asked for an extension to 28 February, saying allowing only 30 days for commentary is unfair. It said the policy document needed to be thoroughly reviewed, including the options presented for consideration, as well as the minimum price per alcohol unit mechanism.
Christo Conradie, the policy manager at SA Wine, said they wanted to be allowed to respond optimally and support any arguments or counterarguments with scientific, evidence-based results.
“The usual period for public commentary is 60 days, but considering the traditional December/January holiday season, it would be reasonable to extend this period to mid-February 2025 or even the end of February 2025,” said Conradie.
He said announcing these tax hikes at the 2025 Budget was “premature and unfair.
“From a wine industry perspective, these proposals do not necessarily align with international practices in notable wine-producing countries (eg, France, Spain, Italy as well as the US and Argentina).”
Conradie said shelf prices would rise for consumers, affecting affordability, and probably prompting a reassessment of purchasing patterns.
“Whether this will reduce consumption or address the primary policy goal of curbing ‘misuse/abuse’, especially in vulnerable communities, remains an open question,” he said.
The potential effects of the proposals on the wine industry’s sustainability, new vineyard planting (a long-term crop with a ±20-year productive lifespan), job retention, economic contribution, foreign exchange earnings and employment along the entire wine value chain — including wine tourism — could be highly adverse.
The effect of the tax hikes on the illicit market is also uncertain, but Conradie said studies had shown that if legal market prices (including excise duties) rose too sharply, they could exceed an optimal point and have the opposite effect, driving consumers toward the illegal market.
“During Covid-19, we saw how illicit trade gained momentum, as happened with tobacco, which escalated out of control. This is a serious risk that should be avoided. Only a well-considered submission and consultation process can address this, enabling responsible action through interactive dialogue.”
Call for consultation
Heineken Beverages, which produces Heineken beer, Savanna Premium Cider, Amarula Cream Liqueur, Bain’s Whisky and Nederburg, has called for structured consultation around the proposed taxation policy. A spokesperson told Daily Maverick that they had reviewed the policy paper and while they acknowledge the need for policy updates, they had serious concerns about the document in its current form and the limited timeframe allocated for public consultation.
“The document lacks clarity on several critical details, creating significant uncertainty for both industry stakeholders and consumers,” said the spokesperson.
“Moreover, the timing of the document’s release aligns with the industry’s peak production and sales period, yet allows only a 30-day window for technical submissions by 13 December 2024. This period overlaps with the festive season and the typical December holiday break, limiting opportunities for meaningful engagement and input.”
Given the potentially wide-reaching impact of the policy on the country’s agricultural sector, Heineken has urged the government to extend the consultation period.
“A longer timeframe would enable constructive input and thorough engagement from stakeholders across the industry value chain.
“We are also concerned about how these tax changes may affect consumers, especially given the alarming growth of the illicit alcohol trade. The proposals, albeit vague, are expected to drive up the cost of legal alcohol, pushing more consumers towards unregulated products — a lesson underscored by the Covid-19 pandemic and associated alcohol bans. These illicit alternatives often pose very serious health risks.”
The spokesperson said sales of low-cost plastic sachets and 100ml bottles containing spirits had surged, with some being sold for as little as R14, and “spirit sachets” for even less.
“Heineken Beverages is fully committed to engaging constructively with the government. We believe that South Africa’s public health, consumer access, and industry stability must be safeguarded to support broader economic growth.
“To achieve this, we urge the government to allow a more extended consultation period outside of the peak season, enabling meaningful dialogue with all stakeholders to find a balanced, fair and transparent solution that meets these critical needs.”
South African Breweries, which published a sponsored article on Thursday in Moneyweb titled “SA beer duties are unpredictable and consistently exceed inflation”, based on research it had commissioned Oxford Economics to do, told Daily Maverick that it had noted the release of the discussion paper.
“The current policy has been in existence for 10 years, and it’s been a much-needed review.
“As a business, we are reviewing the paper and will continue with engagements with government partners to ensure that the excise system is fair, balanced and based on empirical evidence. Our objective in these engagements remains to see the tax framework become fair, equitable and predictable.”
Email your comments to [email protected] by close of business on Friday, 13 December. DM