Alcohol industry urges government to get SA back to business

by | Jul 22, 2021 | Article, Covid-19

The alcohol industry has urged government to work alongside business to define a clear and detailed path to economic recovery, including lifting the latest, month-long, nationwide ban on the sale of alcohol.

This as the industry counts the cost of four successive bans in response to the coronavirus pandemic and the devastation wrought by last week’s looting in Kwa-Zulu Natal and Gauteng that left more than 200 alcohol retailers and outlets plundered, damaged and burnt. Over R500 million of looted liquor stock is now in the public domain and is being sold in the illicit market.

The South African Liquor Brandowners Association (SALBA), Beer Association of South Africa (BASA); Vinpro; National Liquor Traders (NLT), Liquor Traders Association of South Africa (LTASA); and the Consumer Goods Association of South Africa (CGCSA) called for an opening up of the liquor trade as of 26 July for all to operate according to license conditions.

The alcohol industry lost at least 23 weeks (161 days) of trade from 26 March 2020 to 25 July 2021 due to government implementing alcohol bans in response to the Coronavirus pandemic. Even before the cost of the looting to the alcohol industry is factored in, the four alcohol bans have already cost the country’s GDP an estimated R64.8 billion or 1.3% of GDP.

“This is a cost that every South African has to bear in future,” said Sibani Mngadi, Chairperson of SALBA. “It is all happening while illicit trade continues to thrive, and government remains unable to effectively counter the growth of this criminal element.”

He added that the uncertainty was exacerbated by the lack of transparency around what scientific basis the National Coronavirus Command Council uses to justify repeated alcohol bans to curb Covid-19 under the Disaster Management Act.

“It is incredibly difficult for businesses to plan production, distribution and future investment under the current circumstances, with little or no clear steer from government on what metrics it uses to decide to implement, reassess or lift a ban,” added Mngadi. “We are at the mercy of decision makers who are able to make decisions that affect hundreds of thousands of jobs with little oversight or recourse under the auspices of the Disaster Management Act.”

He said the industry questioned whether the theory that the ban on liquor sales has reduced the number of trauma admissions had any merit and had shown that it was instead the restrictions on mobility under lockdowns and curfews that freed up hospital beds.

The four alcohol bans resulted in a total loss in retail sales revenue of R45.1 billion, equivalent to 15.8% of the sector’s projected sales for 2020 and 2021.  Excluding the impact of last week’s looting, 248 759 jobs were already at risk across the industry – about 1.59% of the national total of formal and informal employment for 2020.

The combined impact of the alcohol bans together with the recent looting has caused irreparable reputational damage to South Africa from an investor confidence and international tourism perspective.

“Many of our members are understandably concerned as there is little to no relief from government in sight to help get their businesses back up and running,” said National Liquor Traders Council spokesperson, Lucky Ntimane.  “The continued ban on the sale of alcohol exacerbates the precarious economic position of thousands of businesses – many of them small and black-owned – with no scientific basis for containing the spread of the Coronavirus.”

‘’The four liquor bans and the recent looting and destruction of liquor stores has left the independently owned liquor store channel in financial ruins,” Sean Robinson, Chairman of the LTASA added. “It’s devastating and its heart-breaking. If the Government doesn’t lift the liquor ban on Monday 26 July, many of our members will lose their businesses and never re-open.’’

The four alcohol bans also led to tax revenue losses (excluding excise) of R34.2 billion as well as R10.2 billion in lost excise revenue for government over the period, pushing the country further into the red.    The potential total capital formation lost as a result of the latest 4-week ban alone is estimated to be R 20.4 billion – equivalent to 0.2% of national capital formation for 2020.

“Not only has the recent looting and arson of liquor outlets and distributors in parts of Kwa-Zulu Natal and Gauteng put further strain on our industry, it has also served to boost the illicit market with stolen alcohol freely available in these communities,” said Patricia Pillay, CEO of BASA. “This makes the current ban even more nonsensical. It is critical that legal businesses be allowed to trade, at a time of such profound economic distress for the country.”

Vinpro said wine and tourism businesses are on the brink of collapse, leaving thousands of struggling employees.

“In desperation we were driven to challenge the national alcohol ban in court on an urgent basis to request provincial deviations to enable off and on-site consumption sale of liquor,” said Vinpro Managing Director, Rico Basson.

The CGCSA said the liquor value chain needs to be opened to allow for recovery and to prevent the loss of jobs following the unrest and liquor trade restrictions under the Disaster Management Regulations. CCGSA retail members have been at the forefront of providing food relief and security to the areas affected by the recent unrest, however the restriction on alcohol sales makes it financially onerous to continue with the relief efforts as the liquor side of their respective businesses heavily subsidises the grocery business.  “The restrictions on the sale of liquor products places a significant financial burden on independent SMME traders ‒ a material number being black owned,” said the CGCSA.

Mngadi said government needs to take practical steps to support business and the economy:  “It’s time to put the economy into recovery mode and for government to work with the alcohol industry and help SA get back to business.”

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