Diageo SA pleads with Godongwana for no tax hike on alcohol at next Budget

Alcohol producer, Diageo SA, has called on Finance Minister Enoch Godongwana to consider a stay of the annual 6%-plus increase in excise duty on spirits when he tables the 2026 Budget Speech in Parliament next week.

Sibani Mngadi, corporate relations director at Diageo SA, said the government tax on spirits was expected to pass the R100 per 750ml bottle mark if Minister Godongwana applies the usual annual increase in excise during the Budget Speech.

“At R100 per bottle, government tax becomes the biggest component of the cost to the consumer, ranging between 55-65% of the retail selling price of mainstream spirits products. We believe there is no room for consumers to absorb further increases in the statutory component of the price.”

Minister Godongwana is set to table the Budget Speech next Wednesday in Parliament. The alcohol industry is already on edge about a potential new alcohol tax being introduced in SA to curb excessive drinking.

Business Times reported last month that the National Treasury held consultation meetings with the industry in November on the duties adjustment proposal, which could raise the beer excise by 20%.

Mngadi said tax on spirits has doubled from R52 per bottle in 2016 to most likely over R100, and the 750ml mark is the main unit size offered to the market for all subcategories of spirits, such as brandy, gin, vodka, whisky and rum.

“If the excise tax is intended to moderate the overall volume consumption of alcohol in the population, a similar rate per litre of absolute alcohol should apply, irrespective of whether that alcohol is from a distilled or fermented alcoholic beverage.”

He said tax-evading illicit traders turn tax hikes into an opportunity to extend their criminal networks, selling counterfeit spirits at less than 50% of market prices. Tax increases on spirits over time facilitated the growth of illicit trade, which now stands at 18% of the alcohol market, he said.

According to a study by Euromonitor released last year, spirits are the most smuggled and counterfeited category of alcohol, with illicit trade causing an estimated R11bn loss in tax revenue for the government annually.

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