Renewed alcohol ban not surprising, but comes with economic costs

Yuki Shintani / Getty
  • With SA's coronavirus cases surging, the re-imposition of the ban on the sale of alcohol was not surprising for some businesses.
  • Business for South Africa says the renewed ban will, however, again put pressure on jobs in the alcohol industry. 
  • When the sale of alcohol was unbanned in June, SA experienced a spike in trauma cases.
  • South African Breweries says it worries about a rise in the illicit alcohol trade. 

With South Africa moving worryingly up the global rankings in terms of Covid-19 case numbers ever since the majority of the economy was unlocked in the start of June, there was an expectation that the state would have to reintroduce stricter lockdown regulations.

The reintroduction of the ban on the sale of alcohol, announced by President Cyril Ramaphosa on Sunday evening, may not have been a major surprise for businesses, but nevertheless comes with economic drawbacks that will be difficult to recover from. 

In June, after the sale of alcohol was unbanned, the country immediately experienced a spike in trauma cases. Already limited hospital beds were taken up by victims of car accidents, as well as gender based and other forms of violence. The peak of SA's pandemic is only expected in September, and with fears of as many as 50 000 deaths, there is urgent need to free up as many beds as possible.

Martin Kingston, chairperson of Business for South Africa’s steering committee, said organised business respected the need to reintroduce the ban on alcohol, in light of the pressure trauma cases are putting on hospital bed capacity.

"We are of course equally concerned at the immediate and longer impact on the sector and the economy with the attendant risk to jobs and we are very mindful of the fact that once these jobs have been forfeited, it’s going to be challenging to reinstate those employees." Further job losses will add a drain on the country's fiscus, he warned.

Similar to the previous ban on alcohol, the latest prohibits its sale and transportation except for the production of hand sanitisers, soap, household cleaning products and disinfectants. Exports can continue, as well as transportation from manufacturing plants to storage facilities.

The ban has major implications for SA's alcohol industry that directly employs about 90 000 people. It comes with the economy already economy in a recession for three consecutive quarters to the end of March. Between the months of April and June, where the economy was on a hard lockdown, the South African Reserve Bank has forecast a 30% contraction in GDP.

The National Liquor Traders Council, South African Liquor Brandowners Association (Salba), the Beer Association of South Africa, Vinpro, and the Liquor Traders Association of South Africa, voiced their disappointed on the ban in a joint statement on Monday, saying they had not been aware the government was going to reinstitute the ban.

In a statement on behalf of the organisations, Salba said it also hadn’t been afforded the opportunity to consult with the National Coronavirus Command Centre before the ban was brought back with no consideration being made to the logistical challenges the immediate ban posed for suppliers, distributors and retailers.

Salba added that the alcohol industry lost R18 billion in revenue and R3.4 billion in excise tax during the nine weeks of lockdown before the ban was initially lifted.

"The industry recognises the need to balance the risk to lives with maintaining livelihoods. In addition to the economic consequences that threaten livelihoods, the contribution by the industry to the fiscus will be severely compromised, at a time when tax revenue is coming under increased pressure," Salba said.

Fears of illicit trade 

In an emailed response to questions, Ab InBev-owned South African Breweries said it shares the government's concern about the about the increase of Covid-19 cases and the need to safeguard people. 

However, Zoleka Lisa, vice president for corporate Affairs at SAB, said it doesn't believe the ban is the right move. 

"We do not believe that the suspension of alcohol and beer sales will contribute to such an end. Learnings from the previous ban show that prohibiting the legal sale of alcohol and beer led to the exponential growth of illicit alcohol trade with dire public health consequences."

She added that the ban will threaten jobs across the beer industry's value chain and will deprive the government of revenue.

The National Liquor Traders Council, was also unimpressed with the government’s sudden decision.

The council represents more than 35 000 traders, also known as tavern owners in townships across South Africa’s nine provinces.

"Our view is that this is an unfair position taken by government and flies in the face of collaborative engagement that government always advocates. The ban caught us by surprise and will surely leave economic ruin in its wake. We are yet to fully understand what government is trying to achieve with this," said the council’s convener, Lucky Ntimane.

Taverns generate between R40 billion and R50 billion in annual sales and contribute 34% in total liquor sales annually.

Plunging income 

Ntimane said tavern owners will not have an income in the foreseeable future due to the ban.

The tavern owners also have limited financial support from government finance services, said Ntimane.

Distell spokesperson Frank Ford said the company had anticipated that demand would normalise after the ban was lifted but would not reach June 2019 levels. The company which produces wine, spirits and ciders, also expect that there will be a surplus of 240 million litres of wine in the industry. 

"This surplus was as a result of the original ban. The new ban will likely exacerbate the situation," Ford said.

We live in a world where facts and fiction get blurred
In times of uncertainty you need journalism you can trust. For 14 free days, you can have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today. Thereafter you will be billed R75 per month. You can cancel anytime and if you cancel within 14 days you won't be billed. 
Subscribe to News24
Rand - Dollar
Rand - Pound
Rand - Euro
Rand - Aus dollar
Rand - Yen
Brent Crude
Top 40
All Share
Resource 10
Industrial 25
Financial 15
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot