South Africa Wine opposes proposed excise tax hike, warns of industry collapse

SOUTH AFRICA – South Africa Wine (SAW), the national body representing wine grape producers and industry stakeholders, has strongly opposed the government’s proposed excise tax increases on wine, describing the measure as a threat to the sector’s sustainability and its socio-economic contributions. 

The proposed hikes, outlined in the recent Alcohol Taxation discussion document, suggest an excise rate increase of up to 80 percent.  

This includes raising the guideline for tax incidence on wine from 11% to 16%, on beer from 23% to 28%, and on spirits from 36% to 42%.  

SAW has warned that these drastic measures could lead to widespread job losses and financial instability in the sector. 

“These proposals could devastate the industry, leading to significant job losses and driving many producers out of the market,” said Rico Basson, CEO of SAW. 

The wine industry, a cornerstone of South Africa’s rural economy, supports over 270,000 jobs and contributes R56 billion (US$3.1B) to the economy annually. It plays a vital role in rural development and community well-being

SAW has argued that the proposed excise increases will destabilise the sector, harming vulnerable communities already facing economic challenges. 

In addition to higher excise rates, the government has proposed a shift in the taxation structure for wines, taxing them based on absolute alcohol content rather than the total beverage volume.  

This system would introduce a banded taxation framework, where lower-alcohol wines (0.5% to 4.5% abv) remain taxed at the current rate of R4.96 (US$0.27) per litre, mid-strength wines (4.5% to 9% abv) are taxed at 1.4 times the present rate, and higher-alcohol wines (9% to 16.5% abv) face rates 1.8 times higher than the current level. 

While the government has justified the changes as a measure to incentivise reduced ethanol production and consumption, SAW has criticised the short timeline for public consultation.  

The submission deadline of December 13, 2024, was deemed unworkable by the organisation, which is urging the government to extend the timeline to allow for meaningful consultation and comprehensive impact assessments. 

Basson argued that the current excise framework already meets public health and revenue goals without jeopardising the industry’s viability.  

He emphasised the importance of addressing the illicit alcohol trade, which accounts for over 22 percent of alcohol consumption in South Africa, instead of penalising compliant producers. 

“Tackling illicit trade through improved oversight and enforcement would be a far more effective policy strategy,” SAW said in a statement. 

The proposed excise changes, along with the Treasury’s plans to announce the new framework during the Budget Speech in February 2025, have sparked widespread concern among wine producers and stakeholders.  

SAW has called on the government to reconsider the proposals to protect the industry and its critical contributions to South Africa’s economy and society. 

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