Why South African Breweries Wants Tax Tied to Inflation
South African Breweries (SAB) is asking the Treasury to make yearly alcohol tax increases follow the consumer price index (inflation). They say a predictable system would help businesses plan, protect jobs, and keep government revenue steady.
What the Treasury Is Considering
The National Treasury is reviewing how alcohol taxes should be set in the future. Their discussion paper suggests moving away from ad‑hoc yearly hikes and creating a rules‑based framework. Under that idea, beer with 2.5%‑9% alcohol would be taxed at 1.2 times today’s excise duty.
Current Practice
Right now, the government can raise alcohol taxes more than inflation each year. This has been welcomed in the short term, but SAB worries that repeating big jumps creates uncertainty for everyone involved—from barley farmers to bar staff.
Risks of Repeated Above‑Inflation Increases
SAB warns that frequent tax hikes above inflation:
- Shrink consumers’ buying power.
- Make it harder for breweries to invest and hire.
- Add pressure on the whole beer value chain, including farms, suppliers, retailers, and hospitality venues.
With unemployment already at 32.7 %, the brewery says stable taxes are important for job creation.
Illicit Alcohol Concerns
The Beer Association of South Africa (BASA) has warned that the proposed tax changes could lift taxes on most beers by about 20 %. Higher legal prices might push drinkers toward cheaper, illegal alcohol.
Why the Illegal Market Matters
- Illicit drinks are estimated to be roughly 37 % cheaper than legal ones.
- The illegal market has grown more than 55 % in the last five years, far outpacing the legal sector.
- BASA estimates that lost tax revenue from illicit alcohol was around R16.5 billion in 2024.
SAB argues that linking tax increases to inflation would keep the price gap between legal and illegal alcohol from widening too much, helping to curb the black market.
How an Inflation‑Linked System Would Work
Under SAB’s proposal:
- Each year, the excise duty on beer would rise by the same percentage as inflation.
- This preserves the real value of government revenue while giving businesses a clear, predictable cost.
- It mirrors approaches used in other countries where inflation‑tied taxes have supported steady revenue and investment.
Benefits Highlighted by SAB
- More confidence for long‑term planning and investment in breweries.
- Support for jobs across farming, production, distribution, and retail.
- A fairer balance between raising needed funds and not overburdening consumers.
Conclusion
South African Breweries believes that tying yearly alcohol tax adjustments to inflation offers a win‑win: it protects government income in real terms, gives businesses the stability they need to grow and hire, and reduces the incentive for consumers to turn to illegal drinks. As the Treasury shapes South Africa’s future alcohol tax policy, SAB hopes its inflation‑linked approach will be adopted to support both economic growth and public health.
