Every year South Africans brace for rising costs. Families adjust household budgets, businesses revisit investment plans and government balances difficult fiscal priorities. Yet one ingredient often receives too little attention in these discussions: predictability.
Strong economies are built on confidence. Businesses invest when they have certainty about the future. Consumers spend when they feel secure and governments collect sustainable revenue when policy is stable, transparent and consistent.
As National Treasury reviews South Africa’s alcohol excise framework, we have an important opportunity to place predictability at the centre of the conversation.
Excise taxes play an important role. They generate revenue for government and support public policy objectives, including reducing the harmful use of alcohol. The question is not whether excise taxes should exist. Rather, it is whether the framework achieves the objectives while encouraging investment, protecting jobs and supporting long-term economic growth.
For more than a decade, beer excise duties have risen every year, often by more than inflation. The size of the increases has been determined through annual budget decisions rather than a clear, fixed rule.
This has created uncertainty for businesses trying to make long-term decisions about investment, production capacity and supply chains.
The challenge with repeated above-inflation increases is that tax policy does not operate in a vacuum. There is a common assumption that higher excise taxes automatically translate into higher government revenue. In reality, the outcome is often more complex.
When legal products become increasingly expensive, consumers facing financial pressure do not always stop buying. Many simply look for cheaper alternatives. That creates opportunities for illicit trade to grow, reducing compliance, disadvantaging legitimate businesses and undermining the revenue the tax system is intended to collect.
The rise of illicit alcohol is not only an industry concern. It is a national economic and regulatory challenge. Illegal products evade taxation, operate outside South Africa’s regulatory framework and expose consumers to additional risks. At the same time, they place law-abiding businesses at a disadvantage.
Any discussion about the future of excise policy should therefore consider the intended and unintended consequences of taxation.
This matters because the beer industry supports a much broader economic ecosystem. Behind every legally sold beer are farmers growing barley, manufacturers, transport operators, retailers, restaurants, township taverns and thousands of
small businesses.
Collectively, South Africa’s beer value chain supports more than 250 000 jobs. Predictable policy helps every participant in that chain plan, invest and
create opportunities with greater confidence.
This is why SAB has proposed that annual alcohol excise adjustments be linked directly to inflation. An inflation-linked framework would preserve the real value of government revenue while providing businesses and consumers with greater certainty.
It would replace annual uncertainty with a transparent and consistent approach that everyone can plan around.
Importantly, this is not a radical idea. Several countries have adopted inflation-linked excise systems because they recognise that stable policy supports investment, compliance and sustainable revenue collection. Others have introduced multiyear tax roadmaps that provide businesses with clear indications of future adjustments.
By contrast, some of the options being considered would continue to allow significant
discretion in determining annual increases. While they differ in structure, they largely preserve the uncertainty that businesses have experienced over the past decade.
South Africa does not need to choose between responsible alcohol regulation and economic growth. Effective policy can achieve both. A well-designed excise framework can continue supporting public health objectives while encouraging investment, protecting jobs, preserving government revenue and limiting the expansion of illicit trade.
The debate before us should therefore not be reduced to whether taxes should simply rise or fall. The more important question is whether our excise system creates the conditions for economic resilience and sustainable fiscal outcomes.
If we get the framework right, everyone stands to benefit.
Government secures more predictable revenue. Businesses gain the confidence to invest. Workers enjoy greater economic security. Consumers participate in a stronger, better-regulated market.
Predictability is not about shielding industry from taxation. It is about providing one of the most important foundations for economic growth: the confidence to plan for the future.
•Banda is senior manager: excise tax and public policy, South African Breweries (SAB)
- South Africa’s annual above-inflation increases in beer excise taxes have created uncertainty for businesses, hindering long-term investment and planning.
- Higher excise taxes often lead consumers to seek cheaper, illicit alcohol alternatives, which harms legitimate businesses, reduces tax revenue, and poses health risks.
- The beer industry supports over 250,000 jobs across a broad value chain, emphasizing the need for predictable tax policies to sustain economic stability and growth.
- SAB proposes linking annual excise tax adjustments to inflation, creating a transparent, consistent framework that balances government revenue with business confidence.
- A well-designed excise policy can simultaneously support public health goals, encourage investment, protect jobs, and reduce illicit trade, benefiting government, industry, workers, and consumers.
Every year
As National Treasury reviews
Excise taxes play an important role.
For more than a decade, beer excise duties have risen every year, often by more than inflation.
When legal products become increasingly expensive, consumers facing financial pressure do not always stop buying.
small businesses.
Collectively,
create opportunities with greater confidence.
It would replace annual uncertainty with a transparent and consistent approach that everyone can plan around.
Importantly, this is not a radical idea. Several countries have adopted inflation-linked excise systems because they recognise that stable policy supports investment, compliance and sustainable revenue collection.
By contrast, some of the options being considered would continue to allow significant
discretion in determining annual increases. While they differ in structure, they largely preserve the uncertainty that businesses have experienced over the past decade.
If we get the framework right, everyone stands to benefit.
Government secures more predictable revenue. Businesses gain the confidence to invest. Workers enjoy greater economic security. Consumers participate in a stronger, better-regulated market.
Predictability is not about shielding industry from taxation. It is about providing one of the most important foundations for economic growth: the confidence to plan for the future.
•
