Township taverns and spaza shops are preparing for tighter margins after the announcement of excise duty increases during the 2026 National Budget.
Finance Minister Enoch Godongwana noted that “increases to certain taxes are unavoidable”, explaining that for 2026/27, excise duties on tobacco will rise in line with inflation, including taxes on electronic nicotine and non-nicotine delivery systems.
Under the new rates, a pack of 20 cigarettes will rise from R22.81 to R23.58, while pipe tobacco will increase by 28 cents per 25 grams and cigarette tobacco by 87 cents per 50 grams. Cigars will cost R4.56 more per 23 grams.
Alcohol prices will also climb, with a 340 ml can of beer or cider increasing by 8 cents, a 750 ml bottle of wine rising by 15 cents, and a 750 ml bottle of spirits going up by R3.20.
For small township retailers, even minor increases can affect profits. Nomsa Dlamini, who sells cigarettes and alcohol at her Tarven in Lotus, expressed her concern.
“Customers notice every price change. When cigarettes or beer cost more, some buy less or go elsewhere, and that really affects our daily earnings,” she said.
Adapting to rising costs
To cope with the increases, township retailers are to adjust how they manage stock and suppliers. Sibusiso Khumalo, a cigarette vendor in Bosman Taxi Rank, explained his strategy.
“We’re trying to buy strategically, manage smaller stocks, and negotiate with suppliers. But when the excise hikes continue alongside illicit competition, it’s a real challenge to stay profitable,” Khumalo said.
Analysts warn that persistent excise increases and the growth of illicit trade will continue to challenge the sustainability of small businesses in township economies.
Illicit trade and the threat to jobs
Illicit trade in tobacco remains a central concern for government and the industry, with legal sellers warning that black‑market alternatives undercut legitimate suppliers.
Minister Godongwana warned that there is a scourge of illicit trade that presents “a major threat to these hard-won gains”.
“It threatens our economy, endangers consumers, and robs the fiscus of billions in revenue,” he said.
One stark reality came earlier this year when British American Tobacco South Africa announced it would close its Heidelberg manufacturing facility by the end of 2026, due to the rising tide of illicit cigarette sales.
The company said the illicit cigarette market now dominates a large share of total sales, leaving local production commercially incompetent. The closure is expected to affect around 230 jobs, reflecting broader concerns that illegal trade is undermining the formal sector and eroding tax revenue.
The minister outlined that recent developments have underscored the urgency of stronger enforcement and collaboration across agencies.
