OPINION | Liquor retailers may never recover from unjustified restrictions

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A bar fully stocked with premium liquor
A bar fully stocked with premium liquor

Government's restrictions on off-site liquor consumption, as they currently stand, are unjustified and discriminatory, not to mention anti-competitive and will cause irreparable harm and damage to the liquor retail sector, say Gareth Ackerman and Sean Robinson.

There is no doubt that the coronavirus pandemic has caused considerable harm to the South African economy, as well as to lives and livelihoods. The impact on the economy, which was already struggling to grow, has been significant, and as a result, we have witnessed job losses, company closures and rising poverty.

While the intermittent lockdown restrictions have largely helped to avoid massive surges in infection rates, these restrictions have inflicted further harm to the economy. And the consumer goods retail sector, which is one of the largest employers in SA, with over two million people employed, has also borne the brunt of the restrictions.

It must be stressed, however, that the sector has and continues to be fully committed and supportive of national effort to balance between business continuity and the need to protect and save livelihoods. The sector has also thrown its weight behind the government’s Economic Reconstruction and Recovery Plan, which aims to build a new economy and unleash South Africa's true potential.

However, for the sector to recover from the impact of the pandemic and play its part towards economic recovery, there are matters of concern requiring the government’s urgent intervention and assistance. Of particular concern has been government’s unilateral decision to restrict the sale of liquor products for off-site consumption to initially between Monday and Thursday, which has been extended by an extra day to Friday, while similar restrictions have not been imposed on those selling liquor for on-site consumption. Not only is this unjustified and discriminatory, it is also anti-competitive and is causing irreparable harm and damage to the liquor retail sector.

The restrictions on off-site consumption have particularly devastated the SMMEs and employees operating in the sector. Of the more than 3 000 affected retail liquor outlets, about 15% are black-owned and 16 400 of the directly affected employees are black women. On average, five employees excluding service providers’ employees (merchandisers, security workers, cleaners) per outlet are now at real risk of losing jobs with devastating consequences.

A recent research conducted by Ipsos on behalf of the Consumer Goods Council of South Africa (CGCSA) and the Liquor Traders' Association of South Africa (LTASA) revealed that the loss of income between Friday and Sunday is colossal and many affected retailers may never recover from such restrictions, more so when considering that they are still to restore their viability levels which have been affected by previous lockdown restrictions on the sale of liquor.

The research also found that nearly 3 000 jobs have been lost in the over 1 400 independently owned liquor store sector; aggregate loss in sales since the inception of lock down stands at approximately R8.5 billion; sales volume has dropped by 20%-50% across the retail formats per month; at least 67% of those interviewed predict business closure should the restrictions continue, with 35% at risk of closing in less than three months and another 25% in six months or more; and liquor retailers losing about 50% of revenue they would have earned from Thursday to Saturday.

Liquor retailers have been losing about 50% of revenue they would have earned from Thursday to Saturday; yet, overhead costs have remained unchanged. The revenue losses for small liquor outlets is as high as 65% of weekly turnover between Friday and Sunday, and many can no longer sustain such losses.

In addition to cutting staff and costs, retailers have been negotiating with landlords to reduce rentals, which in turn affects the revenue of commercial property owners. Some have reduced the working hours and wages of staff, and diversified products/service lines or changed/improved operations model to adapt to new conditions. Yet others have explored e-commerce focus/capabilities, cut discretionary spending, cancelled salary increases, renegotiated leases or debt repayments, or applied for government support, although not all have received the required funding.

Particularly worrying is that the restrictions have simply gifted the illicit market which has grown since the first total ban on alcohol sales was imposed in March 2020 and further exacerbated by the looting of alcohol stock amounting to over R500 million during the recent unrests in KwaZulu-Natal and parts of Gauteng. People have found ways to access alcohol that has benefitted unregulated, illegal operators to the detriment of responsible, law abiding liquor traders. The current trading limitations therefore are a major constraint to the recovery of the retail sector and an inconvenience to consumers whose shopping habits have historically indicated an increase after 17h00 on weekdays and on weekends.

One of the unintended consequences of the restrictions on off-site consumption is that they have created a new and undesirable trend of consumer panic buying leading to vast increases in purchases and pantry loading. This puts increased strain on supply chains and demand forecasting and may even lead to increased consumption due to the increased availability of larger quantities of liquor in homes. People are buying liquor in large quantities to sell during the days when trading is restricted, often at inflated prices, again negating the government’s objectives of limiting consumption during this period.

Our view is that restricting trade to five days is not a viable nor sustainable solution to responding to Covid-19 cases. Alcohol restrictions are merely driving trade to the illicit market while causing irreparable harm to the sector through closures and job losses. And the longer the government continues to restrict the off-site consumption and the more it imposes restrictions on the alcohol industry and value chain, the higher the probability that illegal trade will become further institutionalised, as has happened in the tobacco sector, whilst many licensed liquor traders will face bankruptcy as they continue to lose a significant portion of their weekly revenue.

CGCSA and the LTASA are against the decision by the government to extend the sale of liquor for offsite consumption from Monday to Friday, and insists there is no valid reason not to allow trading to take place for seven days under licence conditions. We are concerned by the media reports that the decision to extend alcohol sales for off-site consumption by an extra eight hours on a Friday was against the advice of Ministerial Advisory Committee that advised that there be a full return to trading.

We therefore find this decision not only inexplicable but unjustified. We therefore wait for the promised two-week review of the lockdown restrictions with expectations that those remaining on the sale of liquor for offsite consumption will be lifted.

Gareth Ackerman is co-chair of the Consumer Goods Council of SA and Sean Robinson chairs the Liquor Traders Association of SA. Views expressed are their own. 

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