The government’s recent proposal to add a new tax to the sale of alcohol has been poorly received by industry stakeholders, who are calling for this idea to be reconsidered.
In a recent discussion on Newzroom Afrika, Deputy Minister of Transport, Mkhuleko Hlengwa suggested that South Africa needs to implement a new levy to raise alcohol prices in an effort to curb widespread cases of drunk driving
The money raised from this levy would be put towards the Road Accident Fund (RAF) to pay for damages and injuries sustained by road users.
Not buying it
The suggestion of a new tax has, naturally, not been a popular idea with the public nor the alcohol industry.
Adding the RAF levy to the pricing calculation of alcohol would raise shelf prices and deal a considerable blow to the local industry.
However, the price hikes are very much an intended consequence of the tax, as South Africa continues to report worrying drunk driving statistics at the end of every quarter.
The alcohol tax proposal was made shortly after Transport Minister Barbara Creecy reported that over 1,500 people were killed on the roads during the 2024 holiday period, and that 3,840 individuals were arrested for driving while under the influence.
The Minister and Deputy Minister pointed out that alcohol consumption plays a major role in these tragic accidents, not just when a driver is drinking, but also when drunk pedestrians put themselves in harm’s way.
Hlengwa said that South Africa needs to talk more about how its citizens treat alcohol, and that one way to curb excessive consumption would be to raise prices.
This is not the first time this idea has been put forward, either, as the National Treasury previously suggested in November 2024 that excise taxes should be raised to limit reckless drinking behaviour.
While the deadline for public comment for this proposal was previously set for December 2024, it has since been extended to February 2025.
Stakeholders in the alcohol industry such as the National Liquor Traders and SA Wine are now arguing that the February deadline is not enough time, and that government needs to do more research before making such an impactful decision.
National Liquor Traders’ Lucky Ntimane argues that, while South Africa does need to do more to make drinking safer, this is not the right approach to do so, and that the industry is often unfairly blamed whenever there is a new story about alcohol abuse.
This sentiment has been echoed by SA Wine, which believes that the proposed hikes would be “premature and unfair.”
Opponents of the new levy argue that it would raise costs for both businesses and consumers without addressing the core underlying problems that drive excessive drinking.
However, proponents have pointed out that raising alcohol prices can lead to the desired effect, citing examples such as Scotland, where a new minimum unit pricing ruling led to a 13.4% decline in alcohol-related deaths.
Similarly, research in Wales found that a 15% price hike resulted in 20% less alcohol being purchased.
It’s unclear whether a similar strategy could bring about meaningful change in South Africa, though, given that the cultural and economic climate is very different here.
The concern is that raising shelf prices will just encourage poorer households to turn to cheap, illegal booze, which is already a massive problem.
A new revenue source
Curbing alcohol consumption is only half the goal of the proposed tax, as it would also create a new revenue stream for the embattled RAF.
The group recorded a R1.5-billion deficit for the 2023/2024 financial year, and is presently funded by a R2.18 per litre levy on the sale of petrol and diesel.
The financial shortfall is partially attributed to the fact that the levy has been frozen at its current rate for the past four years owing to economic relief measures first implemented during the Covid-19 pandemic, meaning that the levy has effectively been reduced to R1.93 per litre in real terms.
An additional tax on the sale of alcohol would therefore go a long way to help the RAF back on its feet, but the idea has not been without criticism.
The RAF has received backlash for its calls to increase its fuel levy, with Hennie Klopper, a practicing attorney since 1973 and former law professor at the University of Pretoria, claiming that its financial troubles are the result of poor budget management, inefficiencies, and expensive litigation.
The concern is that the alcohol tax would merely become a new income stream for another struggling state enterprise, with the costs being passed down to the consumer through higher prices at the pump and at the bar.
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