A new report by Oxford Economics Africa has found that South Africa’s beer industry is burdened with excise taxes above the government’s policy target, exacerbating challenges in an already tough economic environment. According to the report, titled “Double the Pain: The burden of unpredictable excise taxes and high inflation on beer in South Africa,” beer taxes have risen beyond inflation, impacting both consumers and producers.
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Above-policy tax burden affecting beer industry
The government’s current excise tax policy for beer sets a target of 23% of the final price. However, the actual excise burden has now reached 25%, meaning for every beer purchased, 25% of the price is directed to excise taxes. The report highlights that this deviation from the policy target has placed additional strain on the beer industry.
“Reliable and predictable changes in duties avert real duty erosion, create policy certainty, promote trust, aid consumer and firm budgeting, and minimise market disruptions,” said Deon Fourie, Lead Economist at Oxford Economics Africa. He suggested an automated Consumer Price Index (CPI)-indexed mechanism for adjusting excise duties, which would ensure consistency with inflation.
Industry calls for stronger policy certainty
At the Beer Tax Indaba, where the report was presented, industry leaders expressed concerns about the impact of inconsistent tax hikes. Richard Rivett-Carnac, CEO of SAB, emphasised the need for stability in excise tax policies, stating, “For ten years, we have seen inflated excise tax increases when compared with inflation. That is contrary to the policy and really impacts the industry.”
In 2023/24, the beer sector contributed 34.7% of total excise revenues, making it the largest contributor among excisable products in South Africa. Keith Engel, CEO of the SA Institute of Taxation, added, “The unpredictability of excise tax increases threatens the principle of fair taxation. A more predictable, multi-year excise tax plan could foster greater tax certainty, providing the beer industry with the stability it needs to business plan confidently.”
The Oxford Economics Africa report also called on the government to align future excise tax increases with actual CPI outcomes rather than relying on projected inflation. This approach would provide the beer sector with a stable tax environment, supporting its growth and its role in creating jobs in South Africa.
