Time to beer up: UCT researchers demand stronger taxes to tackle alcohol harm

Hold onto your pint! Researchers at the University of Cape Town (UCT) are sounding the alarm that South Africa's alcohol excise tax system is in desperate need of a makeover. 

With the nation facing a staggering burden of alcohol-related harm, experts argue that the National Treasury's proposed tax reforms simply don't cut it—especially when it comes to beer. 

In an analysis by the university’s Research Unit on the Economics of Excisable Products (REEP), experts argue that National Treasury’s proposed alcohol tax reforms do not go far enough, particularly when it comes to beer.

They recommend narrower excise tax tiers, higher uplift factors and predictable above-inflation tax increases to meaningfully reduce alcohol consumption while still boosting government revenue.

On November 13, 2024, National Treasury published its decadal discussion paper, The Taxation of Alcoholic Beverages. Treasury proposed introducing alcohol-content-based tax tiers for beer and wine so that higher-strength products are taxed more heavily, encouraging consumers to shift to lower-alcohol alternatives and incentivising manufacturers to reformulate products.

“While we agree with the principle that higher-alcohol-content beverages should be taxed at a higher rate, we propose an alternative placement of the tiers,” said Dr Nicole Vellios, chief research officer at REEP. “We focus primarily on the beer proposal and briefly assess Treasury’s remaining recommendations.”

Alcohol remains a major public health concern in South Africa, contributing to violence, trauma, mental illness, infectious diseases, non-communicable diseases and premature death.

More than 37 000 deaths each year — about 7% of all deaths — are attributable to alcohol consumption. South Africa also has the highest prevalence of foetal alcohol syndrome globally, estimated at nearly 600 cases per 10 000 people.

Research consistently shows that higher prices reduce harmful drinking. According to the 2022 National Dietary Intake Survey, half of South African adults consume alcohol. Among drinkers, 47% engage in heavy episodic drinking. Beer dominates the local alcohol market and plays a central role in heavy consumption patterns, yet it is currently taxed at about half the rate applied to spirits.

In the 2025/26 financial year, beer is taxed at a flat rate of R145.07 per litre of absolute alcohol. Treasury’s proposal introduces three beer tax tiers, with progressively higher excise rates for products with higher alcohol content. However, REEP researchers argue that the thresholds are poorly aligned with the market.

“These thresholds are poorly aligned with AA levels in the beer market because most beers — more than 95% of market share by sales volume — have an alcohol content between 4% and 6% AA,” said Vellios. “As a result, Treasury’s proposal is unlikely to incentivise meaningful reformulation or reductions in alcohol content.”

REEP proposes narrower tiers and higher uplift factors, arguing this would strengthen incentives for producers to reduce alcohol levels. Their modelling assumes the beer industry can expand the lower-alcohol segment, citing the long-term success of Castle Lite.

“Results from our modelling indicate that Treasury’s proposal will reduce AA consumption by only 2%, while increasing revenue by 18%; the REEP proposal will reduce AA consumption by 16%, while still increasing revenue by 13%,” said Mxolisi Zondi, a junior research officer at REEP.

Zondi said the unit supports Treasury’s proposal to increase alcohol excise taxes by four percentage points above inflation for five to ten years to curb affordability. He also called for the abolition of guideline excise tax burdens, which rely on industry-supplied price data.

“A dedicated tax category is also needed for instant beer powder, with rates aligned with those for malt beer,” he said. Zondi added that strong enforcement was critical, urging the South African Revenue Service to investigate compliance among sugar-fermented beverage producers.

Although revenue data show no evidence of a significant or growing illicit alcohol trade, Zondi said coordinated action among regulators, law enforcement, businesses and communities remained essential.

Professor Corné van Walbeek, director of REEP, said excise taxes were among the most effective tools available to reduce alcohol harm.

“Treasury’s review presents a critical opportunity to strengthen South Africa’s response to harmful alcohol consumption,” he said. “More targeted beer tax tiers, predictable above-inflation increases and the removal of industry-linked tax benchmarks are essential to reduce preventable deaths, lower healthcare costs, curb violence and improve population health.”

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