The Beer Association of SA (Basa) has warned that excise duty hikes on liquor are putting pressure on small businesses in the alcohol industry and contributing to the growth of the illicit market.
In Budget 3.0, finance minister Enoch Godongwana announced a 6.75% increase in excise duties on liquor, well above the inflation rate. Basa said this decision added to the mounting pressure on beer producers and traders, many of whom are still struggling to recover from the economic effect of Covid-19.
“A significant portion of SA’s beer industry is made up of small-scale traders who serve consumers for whom beer is an affordable, occasional indulgence,” said CEO Charlene Louw.
“Year-on-year excise duty increases that outpace inflation reduce consumer affordability even further, negatively affecting the livelihoods of thousands of liquor traders who contribute meaningfully to the SA economy, both directly and through broader value chains,” Louw said.
Ntombikayise Mzamo, owner of SM&T, a tavern in East London, said many small tavern owners had struggled to recover since Covid-19.
“With the rising cost of goods and operating expenses, sustaining and growing our businesses has become increasingly difficult,” Mzamo said.
Basa said the country’s beer producers were facing a combination of rising input costs, weakening consumer demand and infrastructure challenges, all compounded by an “aggressive and unpredictable” excise regime.
The association estimates that the illicit alcohol trade accounts for about 22% of total alcohol consumption, costing the economy more than R11.3bn in lost revenue annually.
Mzamo said the impact of excise hikes was also fuelling illegal alcohol sales.
“We have seen more and more people brewing without licences and we have seen more smokers switching from the regular tobacco brands to cheaper alternatives.
“What is the government trying to achieve by targeting the alcohol industry?” she asked, expressing concern about a 100% increase in tavern licensing fees in the Eastern Cape, rising from R2,500 to R5,000.
Today, excise taxes make up nearly 40% of the retail price of a bottle of beer, placing significant strain on consumers and the broader industry.
— Charlene Louw, Beer Association of SA CEO
Mzamo believes this steep hike will discourage many tavern owners from renewing their licences, leading to a surge in unlicensed, illegal operations.
Mamikie Madlala, owner of Saint M Tavern in Soweto, said most of her customers relied on irregular income and only visited at month-end.
“We rely solely on limited working capital to purchase stock. As profit margins continue to shrink, we are left with no choice but to reduce our stock levels.”
Madlala said liquor traders did not receive support during the pandemic and continued to operate without subsidies or external funding.
“We as liquor traders are contributing to government revenue and we get nothing back. During Covid-19, when other businesses such as taxis received subsidies, we did not receive a cent — even though we suffered the most because we were closed for weeks.”
Due to these and many other grievances from operators of small businesses, Basa has called on the government to reform the excise tax regime for alcohol.
“We urge the government to review the current excise tax framework on alcoholic beverages. In the most recent budget, excise duties on liquor rose by 6.75%, well above the inflation rate. Today, excise taxes make up nearly 40% of the retail price of a bottle of beer, placing significant strain on consumers and the broader industry,” said Louw.
The increase in the fuel levy is also expected to have a knock-on effect on the sector, raising logistics costs and squeezing margins throughout the value chain.
Basa said it would continue to engage with the government to seek a more balanced approach.
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