South Africa: Brewers call for 4.9% increase in excise duties to cushion them against projected inflation increase

South African beer brewers are cautioning against an escalation in sin taxes for beer and have called for a 4.9% increase in excise duties for alcoholic beverages manufactured by Heineken, South African Breweries and craft brewers as a way of cushioning them against a projected increase in inflation this year, msn.com reported on February 14.

The beer industry is a key employment creator and a major revenue earner for the government. It fears that higher sin taxes will take a toll on the industry, resulting in job and revenue losses.

But with the government squeezed for revenue and faced with ballooning debt, the beer industry is concerned that Finance Minister Enoch Godongwana may be forced to hit the industry with sin taxes when he announces South Africa’s Budget statement next week.
The South African beer manufacturers also want the government to raise the excise duty on beer products to levels that are in line with inflation movements.

“Ahead of the Budget Speech, the Beer Association of South Africa (BASA) has called for greater certainty around the excise adjustment, asking for an excise increase of 4.9% for beer, in line with projected inflation for this year,” the organisation said in a statement yesterday.

An increase in the excise on beer would also aid craft beer manufacturers in South Africa who are being affected by electricity load shedding under Eskom. A raise in the beer excise will cushion them against rising costs related to their operations.

In 2024, the beer market in South Africa is projected to generate revenue of $6.7 billion (R126bn), according to data from Statista, while the average beer consumption volume per person is expected to top 40.1 litres this year.

South Africa’s current total consumption tax burden (excise duties plus VAT) as a percentage of the weighted average retail selling price for wine, clear beer and spirits is set at 23%, 35%, and 48%, respectively.

Beer brewers have been raising their investments in the South African economy. South African Breweries says it has invested more than R920 million into the Prospecton and Ibhayi breweries in the past two years.

The two breweries are expected to “provide additional tax revenue and more than 24 000 jobs” in the country. “This is part of a total investment of R4.5bn into the South African economy,” the company said.

Heineken has also been growing market share for some products in South Africa. However, challenges for the industry include economic factors such as fluctuations in disposable income, price inflation and higher interest rates that have an impact on disposable incomes, say experts.

“Additionally, regulatory changes, taxation policies, and the availability of alternative alcoholic beverages can impact the overall beer market dynamics.”

14 February, 2024