Spirits cut: SA’s liquor law change sparks fears of economic fallout and illicit trade surge

Key topics: Lowering minimum spirit alcohol content from 43% to 40% threatens local jobsSARS may lose billions in excise from cheaper importsIllicit alcohol trade likely to grow amid weakened enforcement barriers.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here.The auditorium doors will open for BNIC#2 on 10 September 2025 in Hermanus. For more information and tickets, click here..By Kerry Lanaghan.Listen to this story instead:.A recent amendment to the Liquor Products Act has triggered significant concern within South Africa’s alcohol industry, as an insider warns of potentially devastating economic and public health consequences. Signed into law in March 2024 by the Department of Agriculture, Land Reform and Rural Development, the amendment lowers the minimum alcohol content for spirits such as gin, whisky, vodka, brandy, and rum from 43% to 40%. While aligning South Africa with global norms, the industry fears that this change, introduced without consultation with the South African Revenue Service (SARS), could unintentionally incentivise illicit trade, reduce excise revenue, and threaten local jobs.An anonymous industry source told BizNews that this technical regulatory shift, though underreported, could have “a profound impact on the liquor industry.” The previous 43% minimum was protective, discouraging the influx of cheap, substandard alcohol from international markets and maintaining quality standards. The lowered threshold now opens the floodgates for imports from multinational giants such as Diageo, who can bypass local production requirements and instead import ready-made products at lower alcohol volumes and lower costs.Under South African tax law, excise duties are calculated based on alcohol percentage. Thus, a 3% drop in alcohol content equates to significant savings for producers and importers, but a major revenue loss for SARS. The source estimates that just one company could pay R500 million less in excise annually, adding that “Godongwana will have more than his R3.5 billion deficit” once these changes are felt across the industry. The amendment, they say, was enacted “without informing SARS,” raising serious questions about interdepartmental coordination and oversight.The implications extend beyond revenue. With cheaper imported spirits now legally permissible, the competitive edge of domestic producers is under threat. South African distillers, particularly minor players, may struggle to match the pricing of global conglomerates with economies of scale. Job losses, especially in rural distilleries and bottling plants, appear imminent as local operations scale back or shut down.Even more troubling is the anticipated growth in the illicit alcohol trade. Already accounting for around 20% of the South African market by value, illicit producers often exploit regulatory loopholes. The 43% labelling rule previously acted as a barrier to counterfeiters. With that barrier removed, industry experts warn it will now be “easier to dodge excise and duties,” exacerbating the problem and potentially increasing public exposure to unsafe alcohol.The Department’s amended draft regulations confirm the reduction in alcohol content across multiple spirit classes, including brandy, whisky, rum, cane spirit, and various gins. Notably, it introduces new classifications for agave-based spirits and allows flavoured versions of traditional spirits to drop even further, to as low as 35% alcohol by volume (ABV).Despite the sweeping impact, public and media attention have been minimal. “The feeling in industry is mixed,” the source said, “but the facts are clear. This decision will be much more negative in the long term.” Compounding these fears is the prospect of the government compensating for lost revenue by hiking excise taxes next year or introducing alcohol-based excise on wine - moves that could severely damage South Africa’s already embattled wine sector.In light of the unfolding situation, calls are mounting for greater transparency and engagement with industry stakeholders. Analysts suggest that Parliament must urgently review the policy’s broader implications for fiscal sustainability and employment, health, and local enterprise.The anonymous source aptly concluded: “I don’t think people understand the potential impact.” With implementation underway, South Africa may soon be forced to reckon with the unintended consequences of a seemingly minor regulatory adjustment.

Spirits cut: SA’s liquor law change sparks fears of economic fallout and illicit trade surge

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