Sandton, known for its vibrant hospitality scene, faces new challenges as recent reports reveal that above-inflation excise tax adjustments are squeezing the local beer industry.
A report, titled Double the Pain: The Burden of Unpredictable Excise Taxes and High Inflation on Beer in South Africa, discussed at the Beer Tax Indaba event at the Johannesburg Stock Exchange on September 16, underscores the significant impact on local businesses.
The report highlighted how the unpredictable beer taxes impacted the industry and the country’s economy.
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The government’s excise tax target is set at 23%, but the actual burden has surged to 25%, meaning one-quarter of every beer’s price goes directly to taxes.
In a macroeconomic environment of low growth and rising costs for essentials such as electricity and water, businesses such as SAB have had to endure even tougher trading conditions.
The report also emphasised how the beer industry disproportionately contributes to excise revenues, with beer accounting for 34.7% of the government’s total excise tax in 2023/24.
Locally, this issue affects Sandton’s hospitality sector, including restaurants, bars, and event venues that rely on beer sales for a significant portion of their revenue.
Local businesses such as Morningside Country Club and other popular bars could face challenges as customers may start feeling the pinch of rising beer prices.
Special beer events in Sandton such as Local Craft Beer Tasting Events, Oktoberfest-style festivals and The Capital Craft Beer Festivals, are also likely to suffer as consumer spending tightens.
Richard Rivett-Carnac, CEO of SAB, noted the negative impact of erratic excise increases.
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“For 10 years we have seen inflated excise tax increases when compared with inflation. That is contrary to policy and impacts the industry, an industry that is very important for job creation and economic growth. At the end of the day, this harms an industry that is inherently local and inclusive, supporting nearly 250 000 livelihoods.”
The report drew comparisons to countries such as Australia, Canada, and the UK, which have maintained excise duties in line with inflation.
Deon Fourie, lead economist at Oxford Economics Africa, suggested an automated Consumer Price Index (CPI)-indexed excise mechanism to ensure policy certainty.
He explained, “Reliable and predictable changes in duties avert real duty erosion, create policy certainty, and minimise market disruptions.”
For Sandton residents, this could mean higher beer prices at their favourite hangouts unless changes are made to stabilise the tax regime.
With local businesses already dealing with increased operational costs, predictable excise duties would give them room to plan more confidently.
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