A 2020 study found that the cost incurred by provincial and national governments from alcohol abuse was R17 billion
The treasury has proposed setting a minimum price for alcoholic beverages to reduce harmful consumption which is a drain on the country’s health resources.
The South African Medical Research Council reported in a 2020 study that 27 000 to 103 000 people in South Africa died because of alcohol — which translates to 74 to 282 adults a day. The cost incurred by the provincial and national governments from alcohol abuse was found to be R17 billion.
According to a recently released treasury policy analysis document, the proposed minimum unit price would prevent producers and retailers from absorbing some of the tax increases and offering large discounts on the prices of alcoholic products.
In other words, a minimum unit pricing mechanism would set the price floor below which no unit of alcohol should be sold.
“The price has to be set at a place where very few people can afford it so that there is a reduced number of people who consume it,” said independent analyst Khaya Sithole.
“Products that are on the cheaper end of the scale are the ones that are likely to lead to binge drinking because if it’s cheaper people can acquire volumes of it and that leads to a dependency and addiction.”
The treasury has invited public comment on the document and the deadline for written submissions is 13 December.
Sithole said one of the key considerations for the department was the fact that taxation has become a blunt instrument in terms of dealing with the hazardous use of alcohol.
Excise taxes aim to reduce the use of products that have negative effects on society and people’s health, such as tobacco, alcohol, and sugary drinks, and are also necessary for revenue generation to fund public services and infrastructure.
In the case of alcohol, the treasury has had to raise taxes higher than the recommended proportion to try to discourage harmful consumption, but this has led to a disparity in excise taxes between different types of alcohol, particularly for spirits.
“Over recent years, excise duties on alcoholic beverages in South Africa have been increasing above the rate of inflation, whilst the weighted average retail prices of specific categories of alcoholic beverages have not kept pace. This has resulted in the excise incidence exceeding the guideline percentage,” the treasury document says.
In the Customs Act the guidelines for wine, beer and spirits say the tax is 11%, 23% and 36% respectively for each alcohol category.
The treasury said from a policy perspective, the main issue is not necessarily that excise duties are increasing above the inflation rate, considering that excise duties are meant to reduce affordability and consumption of alcoholic beverages over time. Rather, consideration should be given to whether the current framework is still relevant and fit for purpose.
“Therefore, an option for consideration is to either increase the guideline tax burden for all the alcohol categories or to do away with it completely,” the policy document says.
Sithole said tax instruments aren’t effective when people can either afford to absorb them, or avoid them altogether on the black market.
Beer producer Heineken said it was concerned about how the potential tax changes may affect consumers, especially given the alarming growth of illicit alcohol trade.
“The proposals, albeit vague, are expected to drive up the cost of legal alcohol, pushing more consumers towards unregulated products — a lesson underscored by the Covid-19 pandemic and associated alcohol bans,” Heineken said.
“These illicit alternatives often pose very serious health risks. Notably, sales of low-cost plastic sachets and 100ml bottles containing spirits have surged, with some being sold for as little as R14, and ‘spirit sachets’ for even less.”
Sithole said there may be economic casualties from the implementation of these proposals, including job losses for people who work in the alcohol value chain.
South African Breweries told the Mail & Guardian that it was reviewing the paper and would continue holding discussions with the government to ensure that the excise system is fair, balanced and based on empirical evidence.
“Our objective in these engagements remains to see the tax framework become fair, equitable and predictable,” it said.