Activists welcome Treasury’s proposed minimum alcohol price
National Treasury has proposed tax increases to reduce harmful drinking
The National Treasury has proposed raising excise taxes and introducing minimum unit pricing on alcohol to help curb harmful drinking. Image: Stable Diffusion (public domain)
- The National Treasury has proposed raising excise taxes and introducing minimum unit pricing for alcohol to help curb harmful drinking.
- Alcohol policy activists support the proposal, citing its potential to reduce alcohol-related harms.
- Liquor companies say they need more time to comment on the proposal.
National Treasury has released a policy review proposing changes to alcohol tax and considering the implementation of minimum unit pricing to curb harmful drinking. The public has until 13 December to comment.
The move has been welcomed by alcohol policy activists who have been advocating for stricter controls on liquor sales, but members of the liquor industry want the deadline for comments to be extended.
Treasury’s proposal follows recommendations from the World Health Organisation (WHO) for raising alcohol taxes to make drinks less affordable and reduce consumption. The WHO says that 5.1% of the global burden of disease and injury is attributable to alcohol.
Alcohol harm is significant in South Africa. A WHO report in 2018 found that 59% of South African drinkers aged 15 and older binge drink. A 2014 study published in the South African Medical Journal estimated that alcohol costs the country up to 12% of its GDP.
During the Covid-19 alcohol bans, trauma cases in hospital dramatically dropped, highlighting the link between alcohol and violence. South Africa also has the world’s highest reported rate of Foetal Alcohol Syndrome Disorder (FASD).
Treasury says the current excise tax structure “may no longer be fit for purpose”. Excise taxes have in recent years risen faster than inflation, while alcohol prices have not kept pace. Treasury says this has caused taxes to rise above the current guidelines, and created a widening gap between taxes on spirits and other alcoholic beverages.
To fix this, Treasury proposes adjusting taxes annually based on inflation rather than average retail prices, and taxing drinks by their alcohol content instead of their total volume.
This system could increase taxes on wine and beer, but lower taxes for low-alcohol alternatives, encouraging their production over higher-alcohol products. Treasury also supports introducing minimum unit pricing – setting a floor price below which alcohol cannot be sold.
Alcohol policy activists have welcomed the proposals.
“We commend Treasury for including an alcohol harms lens in their proposal,” said Aadielah Maker Diedericks, secretary general of the Southern African Alcohol Policy Alliance (SAAPA).
Diedericks believes minimum pricing could reduce binge drinking and discourage bulk promotions and “2-for-the-price-of-3” specials.
The DG Murray Trust (DGMT) has also welcomed Treasury’s proposal. A 2018 research report it commissioned, authored by UCT economists Prof Corné van Walbeek and Dr Grieve Chelwa, found that a minimum price of R6 per drink could cut consumption among binge drinkers by 6.2%.
Both SAAPA and DGMT want the stalled Liquor Amendment Bill to be reintroduced to Parliament, which would tighten controls on alcohol sales and advertising.
Liquor industry reacts
Members of the liquor industry say the 30-day public consultation period is too short to respond to Treasury’s proposal.
“While we acknowledge the need for policy updates, we have serious concerns about the document in its current form and the limited timeframe allocated for public consultation,” Heineken Beverages said in a statement.
Heineken believes the policy will have a wide-ranging impact on the agricultural sector and may increase illicit alcohol trade. “The proposals, albeit vague, are expected to drive up the cost of legal alcohol, pushing more consumers towards unregulated products,” the statement reads.
South African Breweries (SAB) had not responded to GroundUp at the time of publication, but told Daily Maverick last week that it agrees the current excise tax structure needs to be reviewed.
SAB told Daily Maverick that it is engaging with government “to see the tax framework become fair, equitable and predictable”.
The company also published a sponsored article in Moneyweb last week, citing a report it commissioned from economic advisory firm Oxford Economics. The research report discusses how “unpredictable” excise taxes affect beer producers.
Next: Johannesburg Water: tales of woe
Previous: Stilfontein’s dangerous and desperate illegal mining industry
Letters
Dear Editor
In the midst of increased input prices, Treasury wants to increase duties on alcohol producing industries such as the wine industry, which contributes to a huge income base for the Western Cape wine region. There has been a decline in wine production already due to increased input costs, and now Treasury wants to further cripple this industry.
To cripple an industry based on the general public's consumption data is a farce. If Treasury wants to increase alcohol awareness, it needs to start at a social level by possibly trying to increase the drinking age. Test that theory out first, and then try the strategy of implementing a bigger excise duty.
Furthermore, the identity of a region will be impacted severely due to this increase – an identity that promotes tourism and increase foreign expenditure in South Africa.
There are economic theories that explain a displacement of one good for another only if the affected group of people are compensated. Here there is no compensation to producers who are trying to make a living and trying to keep jobs for those they employ.
© 2024 GroundUp. This article is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License.
You may republish this article, so long as you credit the authors and GroundUp, and do not change the text. Please include a link back to the original article.
We put an invisible pixel in the article so that we can count traffic to republishers. All analytics tools are solely on our servers. We do not give our logs to any third party. Logs are deleted after two weeks. We do not use any IP address identifying information except to count regional traffic. We are solely interested in counting hits, not tracking users. If you republish, please do not delete the invisible pixel.