Spirits industry urges South Africa to cancel alcohol ban - ‘or risk devastating consequences at home and abroad’

11-Aug-2020 - Last updated on 11-Aug-2020 at 15:30 GMT

Pic:getty/olegevseev

Alcohol industry organisations are calling on the South African government to provide a clear timeline of its coronavirus alcohol ban: not only because of the effect on the local economy, but also because of the constraints placed on international trade.

South Africa initially imposed an alcohol ban in response to the coronavirus pandemic on March 27, then lifted it on June 1. However, it was then reimposed without notice on July 12. In re-instating the ban, the government said the move was 'reflective of an increased number of trauma cases seen in hospitals' - which affects the capacity to deal with COVID-19 cases.

But the alcohol industry questions the effectiveness of a ban on the fight against coronavirus; while pointing out the economic impact both at home and abroad.

'Dire economic consequences for the entire supply and distribution chain'

The South African economy has already lost an estimated R13bn in direct capital investments with South African Breweries, Heineken, and Consol Glass all halting their capital expansion projects last week due to the ban, according to the South African alcohol industry.

It says the focus of the South African government should now be on reviving the sector as quickly as possible, having called for a more targeted approach in dealing with the problems of alcohol misuse than a full ban.

“The fact that the South African Medical Research Council is also calling for a lifting of the blanket ban on alcohol sales confirms our belief that there are better and more sustainable alternatives to the ban,” said South African alcohol industry spokesperson Sibani Mngadi (representing the National Liquor Traders Council, South African Liquor Brandowners Association (SALBA), the Beer Association of South Africa (BASA), Vinpro, the National Liquor Traders Council, and manufacturers among others)

spiritsEurope, the body representing Europe’s spirits sector, says the ban is having a ‘devastating impact’ on businesses in South Africa. It is also being keenly felt by the European industry: South Africa is the prime export destination for European spirits in Africa, with exports amounting to €255m in 2019.

spiritsEurope says that there is no clear evidence available on the efficiency of such a measure in South Africa in the COVID-19 context - but the ban has given rise to a ‘sharp increase in illicit consumption and trade accompanied by high-risk behavior and rising criminality rates’.

“During the first ban, 476 liquor outlet robberies were reported," says spiritsEurope. "It is expected to take years and considerable financial resources to curb the illicit trend and bring back consumers into the legal system.

“The ban also has dire economic consequences for the entire supply and distribution chain, hurting smallholder farmers who produce grains and grapes, as well as distributors and sector workers. The total loss in taxes (excl. excise tax) for the first ban was R13.9bn. Assuming an additional 9-week ban will increase the potential loss to between R23.8bn.”

Constraints on international trade

In terms of international trade, the EU is SA’s biggest trading partner, while South Africa is the prime export destination for European spirits in Africa.

The Economic Partnership Agreement signed between the two parties in 2016 allows for export of 110 million litres of South African wines duty-free into the EU region. In return, the EU exports mainly spirit products into Southern Africa.

This trade is now constrained due to the extended ban on alcohol sales.

spiritsEurope says the “ban rips away all the benefits from the Economic Partnership Agreement between the EU and South Africa at a time when we should actually find ways to deepen our trading relations to support each other’s recovery processes.”

Banning sales also means halting imports of European spirits; while South Africa continues to export particularly wine.

Ulrich Adam, Director General of spiritsEUROPE, said: “Our member companies operating in South Africa are deeply concerned about the uncertainty of current trading conditions. The lack of clarity on whether and when the ban might be lifted makes business planning impossible. We therefore need a clear and reliable timeline.”

The South African alcohol industry says it notes the concerns raised by spiritsEUROPE and says it is important for the South African government to consider the overall effect of the ban when deciding on the next steps in response to COVID-19.

Sibani Mngadi, spokesperson for the South African alcohol industry, said: “With progress being made in the health response to the pandemic, it is critical for the Government to limit further the negative impact of the ban in the local economy and on our international obligations as a country.”