Industry questions Govt decision to impose blanket ban on alcohol

by | Jun 27, 2021 | Article, Covid-19

The alcohol industry is calling on the government to reassess its response to the Covid-19 pandemic by implementing more effective measures, including addressing its handling of the vaccine rollout, that will have greater success in curbing the sharp rise in infection rates during the third wave.

As the country battles the third wave of the coronavirus, the South African Liquor Brandowners Association (SALBA) calls on the government to re-evaluate its efforts towards preserving economic livelihoods with safeguarding lives by focusing on a more effective and faster vaccination programme.

Inefficiencies in the widespread rollout of the vaccine are directly compromising the business and economic activity of the country. Without implementing a widespread, efficient vaccination programme, there is no possibility of allowing the country to begin the long process of economic recovery. The decision to ban alcohol will place jobs at risk at a time when the government does not have the fiscal resources to provide support for those workers who find themselves unemployed.

The industry strongly questions the government to explain its decision to enforce a complete ban on alcohol sales for 14 days, despite a lack of evidence to demonstrate its role in driving up current infection rates. SALBA has always contested the assertion that alcohol consumption drives up infection rates, particularly when home consumption purchases have no greater risk than grocery shopping.

This evening’s announcement will only fuel the growth in the illegal trade of alcohol, which has been proven to increase exponentially when a total ban is imposed. The illicit trade also encourages non-compliance with trading conditions that can lead to irresponsible alcohol consumption and increased health risks.

Indeed, according to figures from Euromonitor International published in May 2021 entitled Illicit Trade: Alcoholic Drinks in South Africa in 2020, illicit alcohol trade has grown at a compound annual growth rate (CAGR) of 17% since 2017 and now stands at 12% of the R177.2 billion total industry market value and 22% of the market by volume and worth R20.5 billion.

The ban on formal alcohol sales robs the South African Revenue Service (SARS) and the local industry of tax and sales revenue that would be paid in a formal trading environment. In 2020 alone, SARS lost R11.3 billion due to the illicit alcohol trade.

SA Liquor Brandowners Association (SALBA) chairperson, Sibani Mngadi commented, “As an industry, we are deeply concerned by the increased infection rates. We have repeatedly taken our proposals to government, most recently via the NCCC, that would help to minimise infection rates but help to preserve our beleaguered economy, but to no avail.

“We are deeply disturbed by this evening’s decision by the President to ban alcohol sales for 14 days when there is no evidence to suggest alcohol consumption is the driver of the current rise in infection rates. First and foremost, the government should be concentrating on generating greater efficiency in the country’s vaccine rollout to allow for the economy to open up.”

Mngadi added, “The ban is being implemented without any consideration of any form of economic relief for businesses and employees of the industries that are being now restricted. It is an unfortunate situation in the context of a large amount of resources allegedly lost through corrupt relief claims.”

The cumulative impact of the three alcohol bans’ economic impact in 2020, including the five-week ban between 29 December 2020 to 2 February 2021, has already risked at least 200,200 jobs supported by the alcohol value chain, equivalent to 1.22% of national jobs in the formal and informal sectors.

The bans have amounted to a tax revenue loss (excluding excise) to the government fiscus of R29.3 billion (equivalent to 2.3% of tax revenue), and direct excise tax revenue lost across the nation was R8.7 billion (equal to 21.2% of excise revenue).

Sales revenue lost as a result of the bans was approximately R36.3 billion. Additionally, the country’s GDP loss was approximately R51.9 billion—1.0% of the total GDP measured at market prices due to the three bans.

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