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South Africa’s alcohol industry could face the same fate as the country’s tobacco sector if the growth of illicit alcohol is not brought under control, says Heineken Beverages. The warning comes as alcohol producers prepare for the outcome of the National Treasury’s excise policy review, with concerns that higher taxes could widen the gap between legal and illicit products and further strengthen criminal networks. As the Treasury’s review continues, producers are calling for what they describe as a balanced approach that supports enforcement efforts while avoiding measures they believe could unintentionally accelerate the growth of the illicit alcohol market. The outcome could affect alcohol prices, tax revenue, jobs and consumer behaviour. The alcohol industry supports more than 500,000 jobs and contributes to South Africa’s economy, according to industry research cited by Heineken. Heineken Beverages South Africa MD Jordi Borrut said excise policy should balance fiscal objectives, responsible consumption, economic sustainability and efforts to limit the growth of illicit trade. “In our view, the inflation-linked excise increase announced by finance minister Enoch Godongwana in the 2026 budget was an appropriate response in the current socioeconomic context,” the company said. “We believe there is value in exploring how excise policy can better support product innovation in beer and cider, particularly by encouraging the development and uptake of low- and no-alcohol alternatives where consumer transition is most feasible and technological capability is already well established.“Importantly, this shift should be underpinned by a philosophy of incentivisation rather than punitive measures, with such incentivisation grounded in the need to support the extensive agricultural value chains linked to beer and cider.”Borrut expressed concern about proposals that could substantially increase excise rates in certain alcohol categories, arguing that policymakers should consider the broader impact on consumers, agricultural value chains, employment and the legal market. Importantly, this shift should be underpinned by a philosophy of incentivisation rather than punitive measures, with such incentivisation grounded in the need to support the extensive agricultural value chains linked to beer and cider.— Heineken Beverages South Africa He said legal alcohol volumes are growing broadly in line with adult population growth, while illicit alcohol is expanding much faster. He also argued that enforcement alone will not solve the problem if policy decisions make legal products much more expensive than illicit alternatives. Heineken supports findings from a recent Euromonitor International study commissioned by the Drinks Federation South Africa (DF-SA), which estimates that illicit alcohol now accounts for 18% of the country’s total alcohol market. The problem is particularly severe in spirits. According to the research, spirits account for more than half of the illicit alcohol market and illicit products make up almost 30% of the total spirits category, meaning about one in every three spirits drinks sold in South Africa is illicit. The study estimates that illicit alcohol cost the fiscus R16.5bn in lost tax revenue in 2024. Illicit alcohol volumes have grown from 498,290 hectolitres of liquid alcohol equivalent in 2017 to 773,424 hectolitres in 2024, while the value of the illicit market has nearly doubled from R12.8bn to R25bn over the same period. Borrut said organised criminal syndicates have become increasingly sophisticated, shifting from smuggled products to large-scale counterfeiting and local manufacturing operations. The most affected category, according to Heineken, is white spirits. The company expressed concern that adding the high excise burden on spirits creates a strong incentive for illicit operators because they can avoid paying taxes and sell products at lower prices while still making substantial profits. Already counterfeit alcohol is increasingly difficult to distinguish from legitimate products, according to Borrut, who said that criminal syndicates are infiltrating informal and formal retail channels. He drew parallels with the tobacco industry where illicit trade expanded dramatically over the past decade. According to information provided by Heineken, illicit tobacco grew from about 23% of the market to around 75%, while legal manufacturers repeatedly warned the government about the consequences of illicit trade. Heineken said South Africa’s alcohol market is approaching a critical point if enforcement and policy measures do not work together to contain the problem. The concerns are not limited to Heineken. South African Breweries (SAB) recently warned that proposed excise changes could increase the risk of consumers turning to cheaper illicit alcohol products, Business Day reported. Kashifa Ancer, project lead for the Rethink Your Drink campaign, an alcohol harms reduction initiative supported by the DG Murray Trust, said South Africa faces a substantial burden from alcohol-related harms, including road traffic injuries, violence, gender-based violence, child neglect and pressure on healthcare and emergency services.“The suggestion that stronger alcohol control measures will inevitably fuel illicit trade overlooks the fact that many countries have successfully implemented taxation and other evidence-based alcohol policies while simultaneously strengthening enforcement against illegal products,” Ancer said.“The alcohol industry frequently argues that regulation will drive consumers towards illicit alternatives. Yet this perspective assumes that the government is incapable of enforcing the law and ignores the substantial evidence showing that pricing, availability and marketing regulations can reduce alcohol-related harm.“The appropriate response to illicit alcohol is stronger enforcement, improved border controls, better intelligence-led investigations and more effective prosecution of criminal operators. It is not abandoning or weakening policies that are designed to protect public health.”
