The National Treasury has proposed substantially increasing excise taxes on alcohol. In response, the alcohol industry commissioned its own research arguing that the illicit alcohol trade has increased by 55% from 2017 to 2024. But the revenue figures from Treasury tell a different story.

In the past few years, the alcohol industry has regularly warned that the illicit trade in alcohol is increasing. The reasoning behind this is straightforward: if the industry can convince National Treasury that illicit trade is on the rise, it may weaken the Treasury's determination to raise alcohol excise taxes.

In November 2024, the National Treasury published a review document on alcohol taxation, in which it proposes substantially increasing alcohol excise taxes, especially on beer and wine. Such increases would raise excise revenue and improve public health, but would come at the cost of the alcohol industry’s profits.

The alcohol industry regularly commissions research. For example, in 2024, the Drinks Federation of South Africa (DFSA), an industry body representing major producers and distributors across the alcohol industry, commissioned Quantec to research the alcohol industry’s contribution to the South African economy.

A year later, in 2025, the DFSA commissioned Euromonitor International to quantify and describe the illicit alcohol market in South Africa. Euromonitor International’s report was based on several sources: desk research, in-depth interviews with twelve stakeholders in the alcohol industry (including regulatory bodies, alcohol manufacturers, associations, NGOs, ethanol producers, and government agencies), store visits to 57 liquor outlets, and a survey of 707 consumers, who provided their perceptions of various aspects of the illicit alcohol market. According to the report, illicit alcohol volume sales comprised 18% in 2024, down from 22% in 2020, but up from 15% in 2017. The report splits total consumption into legal and illicit components, but it does not provide any replicable methodology as to how they did this.

Despite the polished presentation and the seemingly precise numbers, it is very difficult for independent researchers to interrogate the analysis. The report provides many statistics, often with a high degree of precision, but does not indicate a source, other than ‘Euromonitor International’. On some pages, there is some further elaboration, e.g. ‘Desk research’, ‘Trade interviews conducted in February and March 2025’, ‘Store visits conducted in February and March 2025’, or references to other Euromonitor International publications. Official statistics were explicitly referenced only once, in an appendix on excise taxes.

To test the industry’s claims, we analysed National Treasury’s revenue data, which is published annually in the Budget Review. The data provides a more objective and verifiable indication of changes in the alcohol market. A drop in alcohol revenue data (which captures the legal market) would imply that legal sales are being replaced with illegal sales. The Budget Reviews provide disaggregated excise tax revenue for beer, ‘wine and other fermented beverages’, and spirits. The excise tax on each of these categories is levied as a specific tax: based on per litre of alcohol for beer and spirits, and per litre of beverage for wine. 

In Figure 1, excise taxes per litre of absolute alcohol, expressed in real (inflation-adjusted) terms, are presented for beer and spirits for the period 2000 to 2025. Over this period, the compound annual growth rate (CAGR) of real excise taxes on beer was 2.2%, while that of spirits was 3.9%. The higher CAGR for spirits excise taxes was driven by the National Treasury’s decision in 2012 to raise the average total spirits tax burden (i.e., excise tax plus VAT) from 45% to 48% of the retail price. In comparison, the CAGR of the real excise tax on cigarettes was 3.1% over this period – higher than the growth in the beer excise tax, despite a sharp increase in illicit trade in cigarettes.

Figure 1: Real excise taxes per unit on beer, spirits, and cigarettes

Source: National Treasury, Budget Reviews, various years

Figure 2 indicates the real excise tax revenue for alcohol and cigarettes (which includes cigarette tobacco, a very small category), for the period 2000 to 2025. Real excise tax revenue has been increasing steadily for all alcohol categories. After the decline in revenue in 2020, caused by the Covid-related sales bans, real government revenue from alcohol has grown at a similar rate as in the pre-Covid period. There is nothing in the revenue data to suggest that the legal market is being undermined by illicit alcohol.

In contrast, real tobacco excise tax revenues have remained roughly constant from 2008 to 2015, and then decreased after Tom Moyane disbanded the special investigative units at SARS (2015 to 2018). In 2020, real excise tax revenue dropped sharply, driven by the 20-week sales ban on tobacco products. Whereas real alcohol tax revenue has recovered strongly from the 2020 sales bans, real tobacco tax revenue has not, and is now even lower than in 2020. This provides a prima facie case that illicit tobacco sales are dominating the market.

Figure 2: Real excise tax revenues on alcohol and tobacco

Source: National Treasury, Budget Reviews, various years, for revenue data; Statistics South Africa, Consumer Price Index for CPI data to deflate the series.

We use the revenue data to calculate consumption. For beer and spirits, it is straightforward to calculate the quantity of legal alcohol consumed by dividing total excise revenue by the relevant excise tax rate. For ‘wine and other fermented beverages’, one can get a good approximation of the volumes using this method (assuming that the average alcohol content is 12%).

Euromonitor International’s report indicates that total legal alcohol volumes sold increased by 24% between 2017 and 2024. We are broadly in agreement with this figure, based on National Treasury’s revenue data. In this period, the population aged 15 and higher increased by 14%, which means that per capita alcohol consumption increased by about 10%. Within the context of a sluggish economy, modest alcohol excise tax increases, and a global decline in alcohol consumption (particularly among young people), the alcohol industry should consider this performance a significant achievement. 

In the context of such a rapid increase in the legal consumption of alcohol, it would require a substantial leap of faith to believe that the illicit market is increasing at an even greater rate. According to Euromonitor International’s report, the volume of illicit alcohol increased by 55%, from 498,290 hectolitres of pure alcohol in 2017 to 773,424 hectolitres of pure alcohol in 2024. We believe, based on the numbers presented here, that there is a stronger case for a decrease in the illicit alcohol market than an increase.

We expand on Euromonitor’s analysis of the legal market, by looking at each year from 2010 to 2025. Figure 3 shows per capita legal consumption of alcohol (expressed in litres of pure alcohol per person above the age of 15), and per capita legal consumption of cigarettes. These consumption figures are derived from official excise tax revenue numbers published by the National Treasury shown above. 

In 2020 and 2021, a succession of Covid-19 sales bans ran for a combined total of around 20 weeks. The sales bans reduced legal alcohol sales in the 2020/21 financial year, but legal alcohol sales rebounded the following year. Average per capita legal consumption in the post-Covid period (based on legal alcohol sales data) is more than 10% higher than in the immediate pre-Covid-19 period. This is in line with Euromonitor International’s analysis of the legal market. Over the past five years, per capita alcohol consumption has fluctuated somewhat, but no more than the normal year-to-year variation observed before Covid-19.

Sluggish economic growth, relatively stable real prices of alcohol, and a global environment where alcohol consumption is not increasing, all contribute to a situation where total alcohol consumption is expected to remain roughly the same. The fact that legal sales of alcohol have increased since the pre-2020 period makes it extremely improbable that this coincides with an even larger increase in the illicit alcohol market, as the industry contends. 

Contrast this with cigarettes. Between 2010 and 2024, legal per capita cigarette consumption decreased by more than 60%. The illicit market skyrocketed from less than 10% in 2009 to well above 50% in 2020 and beyond [13]. Illicit cigarettes replaced legal cigarettes. The increase in illicit trade was driven by parts of the tobacco industry and criminal syndicates that took advantage of institutional failures at SARS (2014 to 2018) and the sales ban of 2020. 

The illicit cigarette market is a case study of a market that has been overrun by tax-evading criminals. As illicit trade increases, the legal market shrinks sharply, as do excise tax revenues. Whether the total cigarette market expands or contracts is largely immaterial – the dramatic increase is in the illicit market, while the legal market shrivels away. 

Figure 3: Per capita legal (tax-paid) consumption of pure alcohol and cigarettes in South Africa, 2010/11 to 2025/26

Source: National Treasury Budget Review, various years. Population data (aged 15 and above) are obtained from World Population Prospects.

The alcohol industry’s claims about illicit trade are not supported by available data. By repeatedly raising the alarm about illicit trade, the industry seeks to create a narrative (and ultimately a public perception) that illicit alcohol trade is widespread and growing. If that perception becomes entrenched, it will make it politically harder for the National Treasury to raise excise taxes on alcohol. An easy accusation to direct at the Treasury is: ‘How can you justify raising excise taxes when illicit trade is flooding the market?’.  

Of course, government should not ignore illicit trade. Although there is currently little evidence that it is a significant problem in the alcohol sector, authorities should strengthen monitoring and enforcement to prevent it from emerging. Illicit trade is driven primarily by criminal activity rather than by excise tax increases. Government, specifically SARS, should therefore ensure that, regardless of any increases in excise taxes, the authorities are able to collect excise taxes efficiently.

Ultimately, policy debates on alcohol taxation should be grounded in transparent and credible evidence, not in selectively constructed industry narratives. The available data do not suggest that there is a surge, or, for that matter, an increase, in illicit alcohol activity. This provides policymakers with both the confidence and the responsibility to pursue well-designed excise increases, while simultaneously strengthening enforcement capacity. In doing so, the government can safeguard revenue, improve public health outcomes, and pre-empt the very illicit market risks that are so often invoked to oppose higher excise taxes.

Written by Corné van Walbeek, Nicole Vellios; Econ3x3