Industry body South Africa Wine has expressed serious concerns about the potential impact on the wine industry’s sustainability and competitiveness, of National Treasury’s proposed changes to wine excise taxation.

Following Treasury’s publication of the Excise Taxation Policy Paper in November last year, the industry was initially given a short timeframe to provide input.

South Africa Wine, its members and industry stakeholders, successfully requested an extension, and stakeholders were granted until February 14 this year to make submissions.

South Africa Wine has officially submitted its response, outlining the severe consequences these proposed changes would have on the sector.

“The timing and scope of these proposed taxation changes could not be more challenging for our industry,” says South Africa Wine CEO Rico Basson, adding that the proposed changes will have severe implications across the wine value chain.

The excise rate changes are expected to be announced during the Budget Speech, with broader proposals to be outlined in the Taxation of Alcohol Beverages policy document.

A particular concern for South Africa Wine is that the current excise tax burden already exceeds the target range of 11% and is significantly higher than South Africa’s competitor wine-producing nations.

“The proposed framework would push us further out of alignment with global competitors, seriously compromising our international competitiveness and severely hampering our ability to contribute to economic and socioeconomic spheres from rural agriculture to market,” Basson explains.

Treasury is suggesting the implementation of above-inflation yearly increases in excise rates, elevating of the target tax incidence from 11% to 16% of the retail selling price, and introducing alcohol-content-based taxation rather than per-litre pricing.

Government also proposes progressive taxation bands with higher rates for wines with higher alcohol content.

“The progressive taxation proposal is especially problematic. With 80% of South African wines having alcohol content above 9%, we’re looking at a staggering 72% weighted average increase in excise rates across the industry. This is unsustainable for many producers, particularly small-scale farmers and cellars,” Basson states.

The proposed changes come at a time when the wine industry is already experiencing significant challenges, including severe financial strain as loss-making wine producers struggling with high operational costs and competitive pressures.

The wine industry contributes about R56-billion to GDP every year, supporting 270 364 jobs across the value chain and earning foreign exchange through exports and tourism revenue. The industry often supports rural economic development and local communities.  

Beyond simple economic metrics, the wine industry forms the backbone of many rural communities, supporting not just direct employment but entire local economies, Basson emphasises.

South Africa Wine, on behalf of the industry, is requesting the limitation of excise tax increases to consumer price inflation (CPI) for the 2025/26 financial year, noting that the current wine excise tax incidence already exceeds the recommended incidence rate in the 2014 policy framework, and comprehensive engagement with the wine industry regarding the proposed policy changes, considering their potential existential impact on the sector.

Since 2004, South Africa has been following an excise tax framework which provides a guideline for the tax incidence as a percentage of the weighted average retail selling price of alcoholic beverages. The current guideline for the tax incidence for wine is set at 11%.

“We recognise the government’s responsibility to generate revenue and curb alcohol-related harm, but these proposals go too far. Wine consumption patterns and per capita trends in South Africa provide no economic or social basis for restructuring the current excise methodology.

“Maintaining excise increases at maximum CPI and the established incidence rate represents a balanced approach that allows our industry to recover and grow sustainably,” Basson motivates.

South Africa Wine deems it necessary to rather focus on strengthening the industry’s socioeconomic contributions through job creation, tourism and rural development. The organisation is confident that excessive taxation often produces unintended consequences that undermine economic stability and social wellbeing.

“We’re advocating for a pragmatic policy that supports industry sustainability and responsible consumption. These goals are complementary, not contradictory.

“We remain ready to engage and partner constructively with Treasury on the trajectory of excise policy for alcohol in South Africa to find solutions that work for all stakeholders,” Basson concludes.