2026 Budget: Sin tax could make alcohol unaffordable and boost the illicit trade

Alcohol company Diageo warns the tax on spirits could exceed R100 per 750ml bottle if Finance Minister Enoch Godongwana implements a more than 6% sin tax hike in the 2026 Budget. Godongwana is expected to deliver the 2026 Budget Speech on Wednesday in Cape Town. Sibani Mngadi, corporate relations director at Diageo South Africa, said the tax on spirits has practically doubled from R52 per bottle in 2016 to, most likely, over R100 with the presentation of the 2026 Budget Statement.

This includes brandy, gin, vodka, whisky and rum. “At R100 per bottle, government tax becomes the biggest component of the cost to the consumer, ranging between 55-65% of the retail selling price of mainstream spirits products. We believe there is no room for consumers to absorb further increases in the statutory component of the price,” said Mngadi in a statement on Thursday.

Mngadi said tax-evading illicit traders turn the large tax burden to the benefit of their own criminal networks, offering smuggled and counterfeited spirits at less than 50% of market prices. “The large tax increases on spirits over many years have directly facilitated the exponential growth of illicit trade, which now stands at 18% of the alcohol market,” he said. Illicit trade in spirits costs the government R11 billion in tax revenue every year, according to a 2025 Euromonitor study.

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He said Diageo has called for a halt on the excise tax increase for spirits products, while the excise tax policy is still under review. Mngadi said: “If the excise tax is intended to moderate the overall volume consumption of alcohol in the population, a similar rate per litre of absolute alcohol should apply, irrespective of whether that alcohol is from a distilled or fermented alcoholic beverage.” Diageo has previously highlighted that any above-inflation hike in excise will deal a damaging blow to the alcohol industry, which supports hundreds of thousands of jobs and generates billions in revenue for the government.

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