Note to Editors: These remarks were delivered by ActionSA’s Member of Parliament, Alan Beesley, during the debate on the Rates and Monetary Amounts Bil in the National Assembly this afternoon.
Honourable Speaker,
ActionSA cannot support the Rates and Monetary Amounts Bill because, in its current form, this Bill empowers the illicit economy while undermining the legal one.
South Africa today is a tale of two economies. The legal economy limps along at barely 1% growth, unable to absorb even a fraction of the 12 million unemployed South Africans or attract the fixed investment needed to revive our industrial base. At the same time, the illicit economy is booming — growing at more than 6% a year, flooding the country with illegal cigarettes, alcohol, gold, oil, and counterfeit goods.
Honourable Speaker, this is not happening by accident. It is the result of legislative delinquency and repeated policy own-goals.
Above-inflation excise duty increases have widened the price gap between legal and illegal products to the point where fair competition is impossible. A legal pack of cigarettes costs around R35 — an illicit pack costs R5. One in five alcoholic drinks sold today is illicit because illegal alcohol is roughly 37% cheaper than legally compliant products.
These price gaps exist in a country where household incomes are collapsing and food inflation remains stubbornly high. Under these conditions, punitive excise hikes simply push consumers into the arms of criminal networks.
And the losses to the fiscus are staggering: more than R30 billion annually from alcohol and cigarettes alone, and close to R100 billion across the broader illicit economy. We now have the absurd situation where Treasury repeatedly raises excise duties, only to watch total excise revenue fall — from R14 billion in 2019/20 in cigarettes to just R9 billion in 2024/25. This is the Laffer curve in real life: tax policy so badly designed that higher rates produce lower revenue.
Above-inflation excise hikes also undermine investment. No rational business will commit billions to new production when its biggest competitor, criminals, enjoy a growing price advantage every year courtesy of Treasury. South Africa cannot claim to care about jobs while adopting policies that actively destroy them.
Honourable Speaker, ActionSA supports the Committee’s following recommendations:
- That National Treasury prioritise the ongoing excise policy review and ensure it explicitly models the interaction between excise rates, illicit trade dynamics, and the long-term sustainability of the tax base;
- That SARS submit to Parliament, within an agreed timeframe, a detailed enforcement deployment plan showing how additional resources will be used to combat illicit trade, including measurable targets, timelines, and inter-agency cooperation; and
That Treasury and SARS report to the Committee on the feasibility and expected impact of a digital track-and-trace system and a statutory minimum retail price for certain tobacco products to strengthen compliance.
These recommendations are essential if South Africa is serious about protecting revenue, jobs, and public health.
With South Africa’s economy stuttering and our unemployment crisis deepening, it is time to halt the own-goals. Government should aim at the right goal posts: creating a tax regime that attracts investment, drives growth, and creates jobs. One practical way to achieve this is to limit excise duty increases to inflation, rather than above it — ensuring that legal businesses can compete while public health objectives are still supported.
Thank you
ActionSA Rejects Rates Bill That Fuels the Illicit Economy