Budget 3.0: Alcohol and Cigarette Prices to Rise as Excise Duties Hit Maximum Limit

South Africans should brace themselves for price hikes in their favourite alcoholic beverages and cigarettes as Budget 3.0 introduces significant increases in excise duties. The latest 2025 Budget announcements revealed that excise duties on alcohol and tobacco products have been raised to near the maximum statutory limits, signalling notable cost increases for consumers across Gauteng and the country at large.

This article breaks down the key changes, expert opinions, and what these hikes mean for South Africans. We will also explore the rationale behind these increases and their expected impact on public health and government revenue.

What Does Budget 3.0 Mean for Alcohol and Cigarette Prices?

Budget 3.0, the South African government’s latest fiscal framework for the 2025 financial year, has confirmed that excise duties on alcohol and cigarettes will rise significantly. This move continues the government’s long-standing approach of using “sin taxes” to generate revenue and discourage excessive consumption.

According to official figures presented by Finance Minister Enoch Godongwana, excise duty increases include:

• Malt beer, cider, and alcoholic fruit beverages: Excise duty rises by 6.75%, which equates to roughly R0.14 more per 340ml can.
• Unfortified and fortified wines: Excise duties increase by 6.75%, adding approximately R0.28 and R0.47 per bottle, respectively.
• Sparkling wines: Duty hikes by 6.75%, adding close to R0.89 per bottle.
• Spirits: Excise duty increased by 6.75%, leading to an additional R5.53 per 750ml bottle.
• Cigarettes: The excise duty rises by 4.75%, adding nearly R0.97 per pack of 20 cigarettes.
• Cigarette tobacco and heated tobacco products: These follow the same 4.75% increase.
• Pipe tobacco and cigars: Excise duties increased by 6.75%, adding R0.57 per pipe tobacco pack and R9.51 per cigar.

These percentage increases represent some of the largest hikes seen in recent years and push excise duties closer to the legal maximum allowed under South African law.

Why Are Alcohol and Cigarette Prices Rising?

The government’s decision to increase excise duties is driven by two core objectives:

1. Revenue Generation: The hikes are expected to raise an additional R1.3 billion in revenue for the 2025/26 fiscal year. This revenue supports vital public services and helps address the country’s budget deficit.
2. Public Health Concerns: Excise duties on alcohol and tobacco are also designed as deterrents, reducing consumption of products linked to health issues such as liver disease, lung cancer, and heart conditions. By making these products less affordable, the government aims to curb harmful usage patterns.

Finance Minister Godongwana explained in the Budget speech:
“We continue to increase excise duties on alcohol and tobacco products as part of our broader fiscal strategy to raise revenue and promote public health.”

Expert Opinions on the Excise Duty Increases

Health advocacy groups such as the Health Tax Alliance (HTA) have welcomed the increases, stating that higher taxes on alcohol and tobacco help reduce the burden on South Africa’s public health system. They argue that diseases related to tobacco and alcohol cost the health system billions annually.

“This year’s excise duty increases are among the largest in recent years, reflecting both inflation adjustments and the government’s commitment to curbing harmful consumption.”

However, critics warn that higher prices could push consumers toward illicit products, which are cheaper and unregulated, potentially undermining public health objectives.

What Does This Mean for Gauteng Residents?

For consumers in Gauteng, which has one of the highest rates of alcohol and tobacco consumption in the country, these price increases will be felt at retail outlets immediately. The increase in excise duties will likely lead retailers to raise prices to maintain margins.

Those who purchase alcohol regularly, especially spirits and wines, should expect to pay noticeably more from mid-2025 onward. Smokers will also face higher costs, with a near R1 increase per cigarette pack.

Key Takeaways

In summary, Budget 3.0 signals a substantial rise in excise duties on alcohol and tobacco products in South Africa, driving alcohol and cigarette prices to rise significantly. These increases serve both as a fiscal tool to bolster government revenue and as a public health measure aimed at reducing harmful consumption.

While the hikes will place additional financial pressure on consumers, especially in Gauteng, they reflect the government’s ongoing balancing act between economic needs and health priorities.

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