Diplomats dabbling in illicit alcohol trade a sign of lockdown drawbacks

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Diplomats found with ties to the illicit alcohol trade in SA. Photo: Getty Images
Diplomats found with ties to the illicit alcohol trade in SA. Photo: Getty Images

NEWS


The SA Liquor Brand Owners Association (Salba) has said that the involvement of diplomats in the recent illicit liquor trade scandal has proved just how lucrative the activity is and how a ban on alcohol trading fuelled underground networks.

Salba has been pleading with government to never again consider a total ban of liquor sales, even if the latter feels the need to re-introduce stricter lockdown regulations.

According to a study by the liquor industry, the SA Revenue Service lost R11.3 billion in 2020 due to underground alcohol sales.

READ: Foreign diplomats face expulsion over illicit alcohol trade

South Africa is expected to expel more than 200 diplomats from more than 10 countries for abusing their diplomatic privileges by buying duty-free alcohol and then selling it at a profit in the country. This cost South Africa about R100 million per month.

Government has already expelled 17 diplomats from Lesotho and Malawi after they were declared persona non grata following an investigation by the department of international relations and cooperation (Dirco).

Salba chairperson Sibani Mngadi said the involvement of persons of such high social standing demonstrated the lucrative nature of illegal alcohol trading, which was accelerated by the lockdown.

When formal sales are banned, illegal alcohol smugglers become the only suppliers to the market. When formal sales reopen, [the smugglers] undercut formal retail on pricing as these products do not pay tax, which is typically about R74 per bottle of spirits.
Sibani Mngadi

Diplomats have the privilege to purchase alcohol duty free for their own use, but not for resale or any other commercial reason.

A report released by Euromonitor International last month – titled Illicit Trade: Alcoholic Drinks in South Africa in 2020 – indicated that illegal alcohol trade had grown at a compound annual growth rate of 17% since 2017 and now stood at 12% of the R177.2 billion total industry market value and 22% of the market by volume.

“This expansion of the illicit trade has had a devastating social impact on our citizens’ health and wellbeing, and is stalling economic recovery and fuelling the engines of organised crime,” Mngadi said.

READ: Illicit alcohol trade claims R20bn of the market

He said that while the action taken by Dirco was welcome, the report confirmed that incidents of tax leakage only account for 9% of the more than R20 billion market.

“Incidents of smuggling and counterfeit alcohol account for a massive 70% of the illicit market, which will continue to service the demand for alcohol during periods of alcohol bans,” he added.

Dirco spokesperson Clayson Monyela said that he would know about the next batch of diplomats to be expelled by Tuesday.


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Sizwe sama Yende 

Journalist

+27 11 713 9001
sizwe.yende@citypress.co.za
www.citypress.co.za
69 Kingsway Rd, Auckland Park
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