Increase in excise taxes will drive consumers to black market, alcohol industry warns

JOHANNESBURG - The alcohol industry has warned that an increase in excise taxes will drive financially pressured consumers towards the black market.

The concerns follow an increase in prices for alcohol and tobacco products after Treasury imposed average excise duties of 6.75% during the tabling of Wednesday’s national budget.

In addition, households are now also set to pay more for items on the shelves when the standard value-added tax (VAT) rate increases to 15.5% in May.

Brewing company Heineken said that rather than reducing consumption and increasing tax revenue, the additional costs would fuel illicit trade.

The growth in illicit trade grew from 13% of the total alcohol market in 2012 to 14.5% in 2017 and then 22% in 2020.

In addition to above inflationary excise increases imposed on legal businesses, both the alcohol and tobacco industries have battled to recover fully after a jump in illicit trade during the COVID lockdown when sales were banned.

Illicit alcohol already accounts for over R20 billion annually in sales.

Heineken’s Millicent Maroga said the impact of above-inflation taxes was crippling industries that drive economic activity across multiple sectors, including agriculture and hospitality.

Convenor of the National Liquor Traders, Lucky Ntimane agreed: "We further plead with government to direct its resources towards eliminating the illicit and counterfeit trade in the country."

The industry said better controls could unlock necessary revenue for government and keep producers and distributors afloat.