Spirits tax set to smash R100 mark in SA

The South African government’s tax on spirits is poised to breach the significant R100 per 750ml bottle mark if Finance Minister Enoch Godongwana applies the anticipated increase of more than 6% in next week’s 2026 Budget Speech.

Diageo South Africa, the country’s leading spirits company, has warned that such an increase would make government tax the largest single component of the consumer’s cost, accounting for 55% to 65% of the retail price of mainstream spirits.

The doubling of the tax burden

The tax on spirits has risen sharply over the last decade, practically doubling from R52 per bottle in 2016 to a projected R100-plus in 2026. This steep trajectory has occurred despite a major disparity in how different types of alcohol are taxed.

Currently, spirits are taxed at R292.91 per litre of absolute alcohol (LAA), which is more than double the R145.07 per LAA applied to beer and cider.

Wine is taxed even lower, at a flat rate of R5.95 per litre of finished product, regardless of its alcohol content.

Sibani Mngadi, corporate relations director at Diageo South Africa, argues that if the goal of excise tax is to moderate population-level consumption, the tax rate should be consistent per litre of absolute alcohol, whether the beverage is distilled or fermented.

“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,” said Mngadi.

Fueling the R11 billion illicit trade crisis

The heavy tax burden has had the unintended consequence of facilitating a massive growth in illicit trade, which now commands 18% of the total South African alcohol market.

Spirits remain the most frequently smuggled and counterfeited category, with criminal networks offering illegal products at less than half of legitimate market prices.

A 2025 Euromonitor study estimates that this illegal activity costs the South African government R11 billion in lost tax revenue every year.

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Industry leaders warn that further increases in the statutory price component leave no room for consumers to absorb the costs, potentially pushing more buyers towards these unregulated and untaxed alternatives.

A call for a policy freeze

In light of these pressures, Diageo South Africa is calling for a freeze on excise tax increases for spirits while the National Treasury’s broader excise tax policy remains under review.

Read: Illicit tobacco trade costs SA R20bn annually

The company points to Treasury’s own 2024 policy review document, The Taxation of Alcoholic Beverages, which acknowledged the disproportionate taxation on spirits and concluded that “no further adjustments [of excise tax] are proposed for consideration for the spirit category”.

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