National Treasury is hatching a plan to increase the rate at which beer and wine are taxed – a move that could see the price of these popular alcoholic beverages skyrocket.
However, alcohol traders and producers have warned that excessive excise duty hikes will harm formal businesses and boost the illicit market.
Last year, Treasury held consultations with industry stakeholders on the taxation of alcoholic beverages. This, after it published a public consultation document in 2024, which flagged huge disparities in the taxation of spirits versus beer and wine. In the document, it said the differential in the excise duty per litre of absolute alcohol content between spirits and beers, and spirits and wines, was widening over time.
“The beer and spirits excise duty differential has widened by 148%, while for wine and spirits, it has widened by 136%.
“There is some concern that the widening tax differentials may be distorting competition in the alcohol industry and have raised questions for those that argue for all alcoholic beverages to be taxed at the same rate based on alcohol content,” the Treasury said.
The discussion with industry comes as Treasury puts final touches on the 2026 national budget, to be tabled in Parliament in February, where Minister of Finance Enoch Gongongwana will announce annual adjustments to sin taxes.
Beer represents 55% of the alcohol market in SA, spirits 18.9% and wines 15.8%.
But liquor association representatives who spoke to Sunday World pleaded for lower excise duty increases for beer and wine, which they said should be linked to the current inflation rate, hovering at just below 4%.
The Beer Association of SA (Basa) said in 2025 the Treasury slapped the industry with a 6.75% excise tax increase.
“As budget 2026/2027 approaches, National Treasury may again be considering another above-inflation increase in excise duties – an issue of growing concern to South Africa’s beer industry,” said Basa chief executive Charlene Louw.
“Above-inflation increases place further pressure on already thin margins, stall investment, and undermine long-term planning across the beer value chain.”
Louw said the anticipated increase in beer-related sin taxes could fuel the trade in illicit alcohol.
The Treasury refused to comment, saying it announces excise duty rate adjustments on budget day.
In a recent study on the Economics of Excisable Products, academics at the University of Cape Town argued that the shortcomings in the country’s excise tax policy resulted in wine and beer being taxed too low. “There are currently very large differences in the estimated excise duty rates, based on absolute alcohol, for the various alcoholic beverages. The relative differential rates have been widening in South Africa in recent years,” the research found.
It recommended a convergence in the excise tax rates between alcohol categories.
“In the past there has been a divergence, and this is bad for public health as consumers can trade down to cheaper alcoholic beverages,” said Corne van Walbeek, one of the authors.
Lucky Ntimane, the convener of the National Liquor Traders Council, said increasing excise duties on beer and wine at rates above inflation was a blunt policy instrument unlikely to achieve its intended outcomes.
“Instead, it risks driving consumers away from regulated, legal products towards cheaper illicit and counterfeit alcohol,” he said.
SA Wine head of communications Wanda Augustyn said the primary concern was the sustainability of wine production. “Given the industry’s fragile financial position, excise increases above inflation would accelerate farm exits, job losses, and further vineyard decline.”
