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Government is disproportionately reliant on the beer-making industry for excise duties, which accounted for 34.7% of total excise revenues in the 2023/24 financial year, JSE-listed beer maker South African Breweries (SAB) has said.

Over the past few years, the company has made repeated appeals to government to reconsider its approach to beer taxation policies.

In a report on the burden of unpredictable excise taxes and high inflation on beer producers and consumers in South Africa, of which the key findings were published on September 16, it was pointed out that the trajectory in excise duties on beer had evolved significantly, often increasing above projected inflation, consumer price index (CPI) inflation outcomes and retail prices, which had led to higher prices for consumers, elevated production expenses and unpredictability for producers.

The full report, compiled for SAB by Oxford Economics Africa, will be published later this month.

The key findings indicate that a 1% increase in beer prices above inflation consistently results in a 0.9% decline in demand for the beverage.

"Sharp increases in excise duties during periods of high inflation and weak economic growth can dampen consumption, productive potential and fiscal receipts," Oxford Economics Africa lead economist: Africa consulting Deon Fourie said at the release of the key findings at the JSE, in Sandton.

The key findings showed that for every 1% increase in economic growth, excise tax receipts on beer rose by an average of 1.8%.

Higher production costs, excise duties and inflation in South Africa have increased beer prices substantially, with a 500 ml bottle having more than doubled in both price and taxes over the past decade.

"What [government is] effectively doing is taxing low-income people disproportionately. Beer is being hit more, and maybe because the volumes are large and a larger portion of the population consumes the product.

"However, [government is] hitting the masses and not the rich, so it doesn't really make a lot of sense," South African Institute of Taxation CEO Keith Engel said at the event.

Fourie criticised government's approach, saying that the over-taxation was beginning to show diminishing returns, noting that, while nominal excise receipts increased by an average of 9% a year from 2012/13 to 2023/24, real excise revenues have grown more slowly by 3.5% a year, with rate-adjusted collections rising by only 1.7% a year.

He said nominal excise revenues from beer managed to increase by only 2.4% year-on-year in 2023/24, implying that expectations for higher tax receipts from beer may not materialise.

"This indicates that persistent above-inflation duty hikes have become less effective over time, leading to reduced responsiveness in fiscal income.

"Ongoing sharp escalations in duties can adversely affect revenue collections and consumer behaviour driving some people towards other excisable products or the illicit alcohol market," Fourie explained.

The key findings show that South Africa's overall tax burden on beer, made up of excise duties plus value-added tax (VAT), has risen acutely since 2012/13 by 161.3% to R33.4-billion in 2023/24.

Although beer excise revenues accounted for only 1.1% of South Africa's aggregate fiscal income between 2012/13 and 2023/24 on average, elevated duties on the beverage had an outsized adverse influence on the sustainability of the beer value chain, the people employed therein, and the economic activity it supported, Fourie pointed out.

The country's excise regime and overall tax burden target for beer have been altered four times since 1994/95. The previous overall tax burden target for beer was 35% in excise plus Vat, which was last changed in 2015/16 to 23% of the beverage's weighted average retail selling price (Warsp) in excise duties only.

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