The South African Liquor Brandowners Association (Salba) has bemoaned excessive excise increases over the last two decades, saying the increases form part of ineffective red tape that needs to be cut.

While excise rates have quadrupled since 2000, World Bank data shows that, over the same period, the total alcohol per capita consumption in South Africa has remained virtually unchanged.

This means that increasing taxes has not impacted how much South Africans drink, but merely shifted it to the illicit market.

Continued above-inflationary excise increases have contributed to a situation where legal alcohol prices now exceed those of illicit alternatives by 43% on average.

Illicit traders have seized the opportunity by stepping into the void and providing cash-strapped consumers with easy access to cheaper alternatives, while legal traders battle surging input costs (including excise) and crippling supply chain constraints.

Salba points out that illicit trade, by volume, currently represents 22% of the South African alcohol market, making it the second largest “player” in the local industry. 

Almost doubling its market share in less than a decade, the illicit trade is a formidable force and one that cannot be ignored, states Salba. 

Illicit trade does not comply with regulations, nor does it pay tax. 

In contrast, the legal alcohol industry value chain in 2019 supported almost a million livelihoods, contributed R173-million at market prices to gross domestic product, including the payment of R72-billion to the fiscus in indirect taxes.

“Increasing excise at rates above inflation will continue to provide a competitive advantage to illicit traders at the cost of the legal market and society at large,” the association states.

At present, the industry enables an estimated 100 000 licensed independent small, medium-sized and microenterprise alcohol traders to continue trading, earning a livelihood and providing much-needed jobs. 

“Excessive taxation is just another form of red tape hindering economic growth. Our sector is committed to playing a significant role in the country’s economic recovery, but you cannot simply tax the country into economic growth,” says Salba CEO Kurt Moore.

Salba’s statement comes less than a week after President Cyril Ramaphosa announced in his State of the Nation Address that business personality Sipho Nkosi had been appointed to lead a task team to cut red tape. His appointment is aimed at improving the trading environment for business in the country.