Budget 2026: Will Higher Alcohol Taxes Push South Africans to the Black Market?
- South Africans are waiting for the 2026 Budget Speech as fears grow that excise tax on spirits could rise above R100 per bottle
- Industry players warn that an above-inflation hike by Finance Minister Enoch Godongwana could push more consumers toward the illicit market
- Both spirits sectors say consumers cannot afford further increases and are calling for a better tax framework
Source: Getty Images
As South Africans gear up for the 2026 Budget Speech, one question is on everyone’s mind: what will happen if the tax on a bottle of spirits climbs past R100? Liquor stores and boardrooms alike are bracing for the impact.
Business Report indicated that industry players warn that another above-inflation excise hike, expected to be announced by Finance Minister Enoch Godongwana, could drive consumers toward the illicit market.
How much is the current tax per bottle?
For a standard 750ml bottle of whisky, vodka, gin, rum or brandy, government duties already make up between 55% and 65% of the retail price. In other words, more than half of what you pay at the till goes to the state.
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The tax per bottle has nearly doubled over the past decade, from R52 in 2016 to around R100 today. Now, producers fear it could climb even higher.
Sibani Mngadi, Corporate Relations Director at Diageo South Africa, says consumers are stretched thin.
“There is no room for consumers to absorb further increases in the statutory component of the price,” he told Business Report.
With food, fuel and electricity prices already squeezing household budgets, even small price hikes can change buying behaviour, especially among middle- and lower-income earners.
Could higher taxes drive consumers to the black market?
According to Diageo, higher taxes are fuelling an unintended consequence: the rapid growth of illicit alcohol.
The company says illegal trade now accounts for about 18% of South Africa’s total alcohol market. Smuggled and counterfeit spirits are often sold at less than half the price of legal products, making them attractive to cash-strapped consumers.
A 2025 study by Euromonitor International estimates that the illicit spirits trade costs the government roughly R11 billion in lost tax revenue each year.
In short, higher taxes may boost revenue on paper, but if consumers switch to untaxed products, the state could end up collecting less, not more.
Call for a tax pause
Diageo is calling for a pause on further excise increases until the National Treasury completes its policy review. The company argues that spirits are already taxed more heavily relative to other alcoholic beverages.
Mngadi suggests that if excise is meant to reduce alcohol consumption, then tax rates should be applied uniformly based on absolute alcohol content, whether the drink is distilled or fermented. That, he argues, would create a fairer and more rational system.
The beer industry pushes back
Charlene Louw, CEO of the Beer Association of South Africa, says the beer industry is also concerned about another above-inflation hike.
Last year’s Budget raised beer excise by 6.75%. Louw says this increase stalls investment and puts smaller brewers under serious pressure.
Between 2000 and 2024, brewers’ input costs rose by 38.2%. At the same time, beer producers carry both corporate income tax and excise duties, which is a double burden in a tough economy.
“Continued price increases on legal beer do not meaningfully curb consumption.They simply shift demand toward cheaper, unregulated and unsafe alternatives,” Louw argues.
What is at stake?
The alcohol industry supports thousands of jobs across farming, packaging, logistics, retail and hospitality. Both spirits and beer producers are calling for a predictable, CPI-linked excise framework that allows businesses to plan, invest and protect employment.
For the government, the challenge is delicate: raise enough revenue to support public finances, without driving consumers underground and eroding the tax base.
Beer giant to cut jobs globally
In related news, Heineken faces layoffs as the brewing giant cuts 6000 jobs over the next two years. The company, which produces brands like Savannah and Amarula, said retrenchments are the cause of a sharp decline in sales, with the sharpest drop in Europe and the Americas. The company employs around 5000 South Africans. Layoffs have caused alarm, considering the country's already high unemployment.
Source: Getty Images
Limpopo men brave floods for beer
In more light-hearted news, Briefly News highlighted that South Africans’ love for their alcohol remains unmatched after two Limpopo men were recorded going to extraordinary lengths for their favourite brew.
Following heavy storms in Limpopo in January 2026, one man was seen walking through a flooded area with a 24-pack crate of beer in hand. Despite the water rising almost to his waist, he pushed forward, carrying a crate in each arm. Not far behind him, another man was also spotted lugging two 24-pack cases of beer through the near waist-deep water.
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Proofreading by Kelly Lippke, copy editor at Briefly.co.za.
Source: Briefly News
