Excise Tax Hikes Will Fuel South African Black Market, Industry Warns

The alcohol industry has warned that an increase in South Africa’s excise taxes will drive even more financially pressured consumers towards the already substantial black market.

The warning comes after Finance Minister Enoch Godongwana announced above- inflation excise duty increases on alcohol, pipe tobacco, and cigars (by 6.75%), and on cigarettes, cigarette tobacco, and vapes (by 4.75%).

The increases, which form part of the country’s 2025 budget, are expected to generate ZAR 1 billion ($55 million) additional revenue in 2025/26, ZAR 1.06 billion in 2026/27 and ZAR 1.13 billion in 2027/28.

In the meantime, however, illicit trade continues unabated in the country, with Euromonitor estimating illicit alcohol to be costing the state ZAR 11.3 billion per year in (mostly) lost excise duties. Furthermore, a study by Vellios and Van Walbeek1 estimates that excise tax losses from illicit cigarettes amounted to ZAR 15 billion ($824 million) in 2022, with illicit products comprising 58% of the total market.