Alcohol ban will lead to ‘disaster’ for liquor industry and lift job losses

A man walks past a closed liquor shop in Hillbrow, Johannesburg, on Monday after President Cyril Ramaphosa on Sunday re-imposed a night curfew and suspended alcohol sales as Covid-19 threatens to overwhelm the health system
SHUTTERED AGAIN: A man walks past a closed liquor shop in Hillbrow, Johannesburg, on Monday after President Cyril Ramaphosa on Sunday re-imposed a night curfew and suspended alcohol sales as Covid-19 threatens to overwhelm the health system
Image: AFP/MICHELE SPATARI

The alcohol industry has jointly warned of a “disaster” including job and tax losses from the immediate ban of alcohol sales.

On Sunday night, President Cyril Ramaphosa announced a sudden ban on alcohol trade, to reduce binge drinking to free up hospitals beds used by trauma patients injured by drunk drivers or interpersonal, alcohol-fuelled violence.

Gauteng hospitals are battling to cope with an increase in Covid-19 patients as doctors on the front line say poor planning by the province is partly to blame.

During the first two-month alcohol ban, during April and May,  the industry lost R18bn in revenue, it said.

The liquor industry, including wine producers organisation Vin Pro, the Beer Association of SA, tavern owners and bottle stores represented by Liquor Traders Association of SA and the Liquor Traders Council of SA, warned of an increase in illicit trade, in a statement.

The industry, which says it employs one-million people across the supply chain, says lost sales will hit small businesses, tavern owners and the township economy the hardest.

“The government’s decision has serious economic consequences, placing hundreds of thousands of livelihoods at risk. The immediate enforcement of the ban will have other unintended consequences which includes further job losses throughout the value chain.”

Alcohol industry leaders have had regular meetings with government officials, stuck to shorter trading hours and only supplied taverns that abide by rules to sell beer for off-site consumption. Despite this, the industry was not consulted before the new ban.

In a statement, it said: “Despite these engagements, the industry was given no warning about the ban, nor an opportunity to consult with the national coronavirus command centre before a decision was made, and no consideration was given to the immediate logistical difficulties it poses for both suppliers, distributors and retailers alike.”

The industry warned of an increase in sales of homemade alcohol and illegal sales further dampening tax revenues. It believes that boosting the illegal alcohol market will make controlling alcohol harder over the long term.

By contrast, it had committed to selling alcohol only to tavern owners who complied with restrictions preventing drinking on site during lockdown.

“The illicit market is outside the regulatory reach of government and operates mostly uncontrolled.”

It said the ban would increase security risks at bottle stores.

It also said if the ban were to reduce alcohol consumption as intended, it “must be accompanied by considerably increased law enforcement” to combat illegal trade.

The liquor industry estimates that taxes lost due to the burgeoning illegal trade during the first ban and due to two months of lost sales amount to R3.4bn.

In June, finance minister Tito Mboweni announced that the country would miss its 2020 tax target by more than R300bn due to major economic contractions caused by the lockdown.

The share price of Distell, the owner of many local brands including Savannah and Klipdrift, dropped 5.38% to R73.72 at 10.23am, reaching its lowest level in two-and-a-half months  during intraday trade.

Following the first ban, Distell revenue was down 15.4% year on year from July 2019 to the middle of June 2020.

Additional reporting by Odwa Mjo.

 

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