Heineken Beverages, the largest beer and cider group in South Africa by combined brand portfolio following its 2023 merger with Distell and Namibia Breweries, has issued a direct warning to National Treasury that the country’s alcohol sector risks replicating the collapse of the legal tobacco market — a sector in which illicit products now account for approximately 75% of all cigarette sales.
The tobacco precedent that Heineken is invoking is not hypothetical. South Africa’s illicit cigarette market stood at approximately 22% of total sales in 2020, before the government’s Covid-19 tobacco ban — a prohibition that, despite its intent, resulted in roughly 90% of smokers continuing to access cigarettes through informal channels. When the ban was lifted, illicit tobacco had captured approximately 75% of the market, a position it has broadly maintained. Between 2020 and 2022 alone, the illicit tobacco trade cost the country R84 billion in lost excise tax revenue, according to data cited by then-SARS Commissioner Edward Kieswetter. In January 2026, British American Tobacco announced the closure of its Heidelberg manufacturing facility — the last remaining cigarette plant in South Africa after 70 years of operation — citing an illicit market accounting for approximately 75% of sales, making legal production commercially unviable and placing 230 direct jobs and an estimated 35,000 value chain positions at risk.
Heineken Beverages South Africa managing director Jordi Borrut argued that excise policy should balance fiscal objectives, responsible consumption, economic sustainability, and efforts to constrain the growth of illicit trade. His comments were directed at National Treasury’s ongoing excise policy review, which includes a discussion paper published in November 2024 proposing a 20% tax increase on standard beers with an alcohol content of between 4% and 6% by volume — a tiered structure designed to nudge consumers towards lower-alcohol products. Borrut noted that legal alcohol volumes are growing broadly in line with adult population growth, while illicit alcohol is expanding considerably faster, and argued that enforcement alone will not resolve the problem if policy decisions widen the price differential between legal and illegal products.
The data underlying that concern is significant. Heineken has cited figures showing illicit alcohol volumes have risen 55% since 2017, with the sharpest periods of growth correlating directly with above-inflation excise increases. SAB, in its own Treasury submission, noted that illicit beer is already approximately 37% cheaper than legal equivalents — a gap that a 20% excise increase on standard beer would substantially widen. South Africa’s illicit alcohol market is now estimated at R25 billion annually, with approximately one in every five alcoholic drinks sold in the country falling outside the formal, regulated, and taxed system.
The spirits category provides the most immediate empirical comparison. According to Diageo South Africa, large excise tax increases on spirits over successive years directly facilitated the exponential growth of illicit spirits trade, which by the time of its submission now accounted for approximately 18% of the alcohol market. A 2025 Euromonitor International study estimated that illicit spirits trade alone was costing the government R11 billion per year in lost tax revenue. Diageo called for a halt on further excise increases for spirits while the broader policy review is under way.
The February 2026 Budget, delivered by Finance Minister Enoch Godongwana, represented a partial retreat from the more ambitious excise reform agenda. The budget locked in a 3.4% increase across alcohol categories — inflation-linked and well below the 6.75% increase applied the previous year. A 340ml can of beer rose by 8 cents, a 750ml bottle of wine by 15 cents, and a 750ml bottle of spirits by R3.20. The alcohol industry welcomed the outcome, with Heineken’s corporate affairs director Millicent Maroga describing inflation-linked increases as a reflection of fairness and long-term sustainability across alcohol categories. Critics, including the Southern African Alcohol Policy Alliance, characterised the result as a victory for industry lobbying over public health evidence — noting that South Africa’s alcohol harm burden, which includes more than 37,000 preventable deaths annually and an estimated 10% to 12% of GDP in social costs, had not shifted meaningfully despite years of excise policy debate.
The structural argument advanced by Heineken and SAB — that punitive taxation drives consumers to the illicit market rather than reducing consumption — is supported in the tobacco evidence but contested by health economists in its direct application to alcohol. The tobacco ban of 2020 was an exceptional policy intervention that created conditions for a sudden and extreme market shift of a type unlikely to replicate in alcohol unless a comparable shock occurred. The more measured concern, and the one that Treasury’s own data may support, is a gradual migration of price-sensitive consumers — particularly in lower-income segments — away from legal products as the price differential widens incrementally over successive excise cycles.
Drinks Federation South Africa, which represents producers across beer, wine, cider, and spirits, has called for a coordinated national enforcement strategy to accompany any excise adjustments, arguing that without meaningful disruption of illicit supply chains, tax increases function primarily as a subsidy to unregulated competitors. Heineken cited the government’s announcement of the National Illicit Economy Disruption Programme as a positive signal and expressed willingness to partner with government on enforcement efforts.
The Treasury’s excise policy review remains open for further stakeholder engagement, with additional workshops planned through mid-2026. The final framework — and whether the proposed 20% tiered increase on standard beer survives industry and academic scrutiny — is expected to inform the 2027 Budget process. At that point, the tobacco sector’s trajectory will be the most contested piece of evidence in the room: cited by industry as a warning and by health advocates as a separate case whose dynamics do not translate directly to a product consumed across a far broader demographic base than cigarettes.