Five microbrewers shut down in April, hit by a lack of funding, high excise duties, intense competition and the prevalence of illicit trading — resulting in hundreds of job losses in this niche sector.
There are about 200 microbrewers, many of whom specialise in craft beers, and most are in the Western Cape, where the provincial liquor legislation has provided an enabling environment.
“These businesses are struggling to scale themselves. Funding is limited for alcohol businesses. SMME [small, medium-sized and micro-enterprises] funding agencies still have an unspoken aversion to funding alcohol-related entities,” said Charlene Louw, CEO of Beer Association of South Africa (Basa).
Only mainstream financial institutions are willing to support these businesses. she said.
A lot of the smaller guys are affected even more. They can’t price themselves competitively as they need to have prices that do not annihilate the consumer. Once you go over a certain price, nobody will buy your brand.
— Charlene Louw, CEO of Beer Association of South Africa
“They need to look at the positives around this industry; the businesses that are created throughout the value chain and employment.
“Sadly just last week, I got messages from about five small brewers that they are closing their businesses,” she said.
The average small brewer employs between five to 20 people, so an estimated 80 to 100 people may have lost their jobs.
Mad Giant is one of the small brewers that shut its doors. In a post on its Facebook page in April, it said the “ever-evolving landscape presented challenges that ultimately made it impossible for us to continue operating”. The brewery had been operating for 10 years.
Louw said Basa was trying to facilitate funding for SMMEs through partnerships with banks to “formulate some packages for small players. We are making inroads in that direction. Moreover, some funding agencies are looking at internal policies to wrap their heads around how they position this industry. This should be looked at as an agri-processing industry.”
The industry has also bemoaned the high excise tax on alcohol. It makes drinks produced by small businesses unaffordable and forces many consumers to switch to illicit products.
In 2024 excise duties on alcoholic beverages were hit with above-inflation sin tax increases of 6.7% to 7.2%. Finance minister Enoch Godongwana, will table a new budget in the next two weeks, which is expected to maintain this line.
Louw said small manufacturers cannot always pass extra costs through to customers, but the bigger manufacturers can, to an extent, absorb them.
“A lot of the smaller guys are affected even more. They can’t price themselves competitively as they need to have prices that do not annihilate the consumer. Once you go over a certain price, nobody will buy your brand.”
She said illicit alcohol — which accounts for 30% of the market — was thriving, much to the detriment of legal operators.
Basa has called for reduced excise duties for lower-alcohol beers (0.5% to 3.5% ABV) to encourage innovation and responsible drinking. Moreover, it wants an exemption or reduction in taxes for microbrewers to support craft beer producers to drive job creation, entrepreneurship, and economic diversity.
“There are a lot of countries that are incentivising lower-alcohol beers,” Louw said.
“Margins for legal traders are under pressure. Smaller businesses ought to have a special excise tax regime.”
In a statement released in February Basa said: “Excise duties have significant economic consequences, including reduced production, employment losses and misallocated resources. A structured and transparent system will help minimise these negative effects.”
South Africa’s slow economic growth and declining real incomes impact beer affordability. Overburdening the industry with excessive excise hikes will exacerbate economic challenges.
— Basa
The organisation acknowledged that excise duties contribute to reducing harmful drinking by influencing affordability, but said a substantial increase in these taxes was unnecessary and could end up harming the legal market.
“South Africa’s slow economic growth and declining real incomes impact beer affordability. Overburdening the industry with excessive excise hikes will exacerbate economic challenges.”
Louw said the industry was intensifying consumer education about illicit alcohol and also working closely with the police to combat illegal traders.
“I accept the view is if we make alcohol more expensive, people will drink less; but the market is showing something different. People are not going to drink less but will look for cheaper alternatives, ultimately switching to illegal products. This is inadvertently killing viable businesses contributing to GDP.”
According to Basa, in 2023 the beer sector employed 210,000 people, equivalent to 1.3% of national employment or 31% of employment in Pretoria. Of those, beer brewers account for 150,000 jobs. Tax paid by the beer industry amounted to R74bn in 2023, and its contribution to GDP was R98bn.
“An effective taxation policy must consider economic realities, consumer behaviour, and industry sustainability,” Louw said.
She noted the growing interest in lower or non-alcoholic beers, saying consumers were embracing these beverages, with sales growing 8% annually.
“Consumers are responding positively, and at the same time, the industry is also innovating to give them more options. There are low alcohol volume beer brands and gluten-free beers.”
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