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Sandton businesses brace for double the pain of rising beer taxes
Sandton, known for its vibrant hospitality scene, is facing new challenges as recent reports indicate that above-inflation excise tax adjustments are putting pressure on 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, highlights the significant impact on local businesses and the economy. The report underscores how unpredictable beer taxes have affected the industry and the country’s economic landscape.
The government’s excise tax target is 23%, but the actual burden has increased to 25%, meaning a quarter of every beer’s price is directed towards taxes. In a macroeconomic environment of low growth and escalating costs for essentials like electricity and water, businesses such as SAB have faced even more challenging trading conditions. The report also points out that the beer industry disproportionately contributes to excise revenues, with beer contributing 34.7% to the government’s total excise tax in 2023/24. Locally, this issue impacts Sandton’s hospitality sector, including restaurants, bars, and event venues that heavily rely on beer sales for a significant portion of their revenue.
Local businesses in Sandton, such as Morningside Country Club and popular bars, may encounter difficulties as customers start to feel the impact of rising beer prices. Special beer events in Sandton, like Local Craft Beer Tasting Events, Oktoberfest-style festivals, and The Capital Craft Beer Festivals, are also expected to suffer as consumer spending tightens.
Richard Rivett-Carnac, CEO of SAB, has highlighted the negative effects of erratic excise increases. He expressed concern over the impact on an industry crucial for job creation and economic growth, supporting nearly 250,000 livelihoods.
The report compares South Africa’s excise duties with countries like Australia, Canada, and the UK, which have maintained excise duties in line with inflation. Deon Fourie, lead economist at Oxford Economics Africa, suggests an automated Consumer Price Index (CPI)-indexed excise mechanism to ensure policy certainty. This mechanism would help avert real duty erosion, create policy certainty, and reduce market disruptions.
For residents of Sandton, this could mean higher beer prices at their favorite hangouts unless changes are made to stabilize the tax regime. Predictable excise duties would provide local businesses with the ability to plan more confidently amidst the backdrop of increased operational costs.
