Budget 2026: alcohol tax hike looms as industry warns of illicit trade

South Africans could soon pay more for alcohol if the National Treasury proceeds with a planned increase in excise duties in this week’s Budget speech.

The government is expected to announce a 6.7% rise in alcohol excise taxes for the 2025/26 financial year. Officials say the move could generate more than R1 billion in additional revenue.

Treasury insists the increase is not primarily about boosting state income, but rather about curbing harmful drinking, particularly binge and heavy alcohol consumption.

Spirits taxes could pass R100 per bottle

One proposal under discussion could see the tax component on a standard 750ml bottle of spirits exceed R100.

Industry representatives warn that taxes already account for more than half the retail price of many spirits products.

They argue that further increases risk pushing legal alcohol beyond the reach of many consumers, creating space for illicit traders to undercut formal retailers.

According to industry estimates, illegal sellers often price their products just below the legal market threshold, making them more attractive to price-sensitive buyers.

Industry calls for a pause on excise increases

The spirits industry is calling for the government to pause further tax hikes, arguing that the current system disproportionately targets spirits compared with beer and wine.

Industry leaders say spirits are taxed at roughly double the rate of beer when measured by pure alcohol content.

They are urging Treasury to consider a more uniform system that taxes alcohol based on the amount of pure alcohol in each product, rather than the category.

Minimum pricing policy adds pressure

The debate comes as the Treasury is also considering a minimum unit pricing policy.

This would effectively set a floor price for alcohol, aimed at making the cheapest and most harmful products less accessible.

Industry representatives argue that continued tax increases combined with minimum pricing could push the base price of a 750ml spirits bottle to about R100 or more, which they say is high relative to other alcohol categories.

Public health concerns remain central

Public health research cited in the discussion suggests alcohol-related deaths are significantly higher in poorer communities, strengthening the case for pricing interventions.

But industry figures maintain that tax policy alone cannot solve alcohol-related harm.

They argue that enforcement, awareness campaigns and stronger action against illegal alcohol are equally important.

Industry highlights prevention programmes

Alcohol companies say they are already involved in programmes aimed at reducing alcohol harm.

These include school awareness initiatives focused on underage drinking and partnerships with municipalities and metro police to support campaigns against drinking and driving.

Industry bodies say such interventions, combined with enforcement, are more effective than tax increases alone.

Budget announcement likely to intensify debate

The final decision on alcohol excise duties will be revealed when the finance minister delivers the Budget speech on Wednesday.

If the increase is confirmed, it is likely to intensify the ongoing debate between Treasury, public health advocates and the alcohol industry over how best to reduce alcohol-related harm in South Africa.

For more detailed information, listen to Sibani Mngadi of Diageo South Africa using the audio player below: