SA's beer industry warns against above-inflation excise hikes threatening growth

Charlene Louw, CEO, Beer Association of South Africa. Image supplied

Above-inflation increases place further pressure on already thin margins, stall investment, and undermine long-term planning across the beer value chain.

Beer is a mainstream, socially embedded beverage enjoyed responsibly by millions of adults, and the sector accepts its tax obligations.

What we are calling for is simple: fairness, reasonableness, and predictability — a CPI-linked excise framework that gives producers certainty, protects jobs, and enables investment.

The consequences of over-taxing

In the May 2025 Budget, excise tax on beer increased by 6.75% — more than double the new CPI inflation target of 3% (as per the Medium-Term Budget Policy Statement in November 2025).

This places further strain on an industry that makes a significant contribution to South Africa’s economy and, at the same time, fuels the growth of the illicit alcohol trade.

National Treasury itself acknowledged this danger in the Medium-Term Budget Policy Statement in November, noting: “South Africa faces a problem of illicit trade that threatens our economy, endangers consumers, and robs the fiscus of billions in revenue. The growing market for illicit cigarettes and alcohol poses serious risk to public health and undermines legitimate businesses.”

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Meanwhile, beer producers’ input costs have risen faster than inflation for several years. Between 2000 and 2024, brewers’ total cost inflation was 38.2%, compared with CPI of 25.1%. This margin compression limits expansion, delays recovery, and places small brewers under particular pressure.

The reality is that beer companies — large and small — already carry a double tax burden: corporate income tax and excise duty. While government may argue that excise is meant to influence consumption, the data shows a more troubling outcome.

Beer is largely consumed by middle- and lower-income South Africans who are already under severe financial pressure. Continued price increases on legal beer do not meaningfully curb consumption — they simply shift demand toward cheaper, unregulated, and unsafe alternatives.

The economic contribution of the beer industry

South Africa’s beer industry is one of the most job-intensive in the economy due to its strong downstream linkages. In total, it supported 210,000 jobs and contributed R98 billion — or 1.4% of GDP — in 2023.

Downstream industries that benefit from beer include agriculture, construction, finance and insurance, business services, real estate, transport and storage, wholesale and retail trade, and hospitality.

Small businesses such as taverns and craft brewers are a vital part of this ecosystem and of local communities. They make a substantial contribution to job creation, as well as municipal and national tax collection.

According to the National Development Plan, 90% of the 11 million jobs expected to be created by 2030 will come from small businesses. Yet to sustain sales, brewers and traders are increasingly forced to absorb above-inflation excise increases — squeezing already fragile margins year after year.

Rather than further burdening these businesses, National Treasury has a clear opportunity to implement a CPI-linked excise regime that supports small enterprises, stabilises the sector, and enables job creation.

A call for certainty in excise policy

Certainty in excise policy allows companies to plan ahead, invest with confidence, and continue driving employment across agriculture, packaging, logistics, retail, and hospitality.

South Africa needs investment, competitiveness, and inclusive growth. A predictable, CPI-aligned excise framework is a practical and immediate step the state can take to support these objectives.

Our call to government is clear:

• Maintain CPI as the benchmark for annual excise adjustments, restoring fairness and predictability.
  
• Adopt a predictable, multi-year excise framework aligned to CPI, to give brewers and investors certainty, support planning, and protect jobs.

Beer is part of South Africa’s social fabric and economic engine. A stable and fair excise policy will help protect livelihoods, encourage investment, and keep consumers in the legal market.

It is time to put a cap on ever-rising beer excise and adopt a balanced, forward-looking approach that supports growth rather than constrains it.