Booze ban’s impact across multiple sectors greatly underestimated

Discussions held during a virtual roundtable meeting on Tuesday between stakeholders, media, South African Breweries’ (SAB) and Anheuser-Busch InBev (Ab-InBev) made clear not only how important it is to consider the greater impact of the ban on value-chains, but also Ab-InBev “fundamentally” disagreeing with government’s response to the Covid-19 crisis.

The discussion centred on whether shutting down an entire industry and associated value chains was justifiable based solely on the potential impact the sector has on a shortage of hospital beds.

The second ban on alcohol sales in South Africa came with no warning, discussion or room for industry to make alternative plans.

A sign at a liquor store in Cape Town that all alcohol has been removed during lockdown to avoid looting. Photo: iStock

As a direct result, more than 250 000 people’s livelihoods are at stake within SAB’s value chain. 14 112 people are employed within the South African Liquor Traders Association (Salta), and between 100 000 and 120 000 jobs are on the line within the tavern industry, with a knock-on effect.

The sector’s value chain, from detergent suppliers to waste pickers, is being negatively affected as well, with an overwhelming knock-on effect being felt by every player within the sector.

The ban has resulted in volumes of alcohol sales decreasing by over 60% in South Africa. SAB’s operating profit, according to Ab-InBev Africa Zone president Ricardo Moreira, is “basically at 0,” adding that this was “the worst quarter we’ve had in our history.”

Ab-InBev recently made the call to reduce investment in South Africa, potentially by R5 billion.

97% of SAB’s value chain is sourced in South Africa, and contributes 1.5 points to the country’s annual gross domestic product (GDP).

Crumbling value chains

Posters are seen in Parkhurst, 22 July 2020, as owners are calling for some of the lockdown regulations to be eased as their businesses are taking financial strain. Restaurants are calling for the lifting of the curfew and allowing their businesses to sell alcohol. Picture: Michel Bega

As the ban drags on, more knock-on effects within value chains dependent on the alcohol sector are starting to emerge.

CEO of Consol Mike Arnold said the company is spending R800 million a day on energy to keep furnaces running. The company is 85% dependent on the alcohol industry.

At the current rate, the increased threat of the deindustrialisation of the glass packaging sector would mean South Africa spending roughly R12 billion a year on imports for glass products.

But if alcohol sales continue to be banned, Arnold said suppliers in sectors such as water filtration, silica sand, fertilisation and detergents will also be severely impacted.

Salta chairman Sean Robinson said business within the insurance, IT and financial sectors will be affected as well, with independent business owners no longer able to keep up with costs, let alone pay rent. Salta represents 1 410 independently owned liquor outlets and businesses.

Township economy shrinking

Owner of Ebony Sports Bar Peter Poen with PPEs that were donated by Distell to his tavern in Tembisa along with two other taverns in a bid to help them fight against the COVID-19 pandemic, 6 June 2020. Picture: Neil McCartney

Lucky Ntimane, the convenor of the National Liquor Traders Council (NLTC), said 34 500 taverns across the country are represented by the Council, formed on 21 June.

He said that since 1 June, close to 8 000 taverns were not able to operate, and anticipates that a further 12 000 will remain closed.

Over half of the council’s taverns are run by women, who are often the sole breadwinners of their household, Ntimane explained.

Between three and four people are employed per tavern, with almost 250 000 people immediately affected by the ban.

Even the approximately 7 000 waste pickers dependent on collecting empty glass bottles from taverns will be hit by the ban, which has a direct impact on the township economy.

The fact that taverns usually do not have safety nets such as insurance often enjoyed by businesses in urban areas makes bouncing back even more difficult.

However, one silver lining for Ntimane is NLTC’s tavern programme to assist tavern owners relying solely on the sale of alcohol for income.

“The programme enables the tavern owner to look at other means of income than liquor, and should come into effect by September,” he said.

Failing and ailing businesses

Liquor stores are pictured closed in Parkhurst, 13 July 2020, after President Cyril Ramaphosa implemented an immediate ban on all alcohol sales due to the increasing number of coronavirus cases. Picture: Tracy Lee Stark

Robinson said business owners suddenly have inflated unplanned expenses to increase security, in light of an increase in looting, burglaries and break-ins.

If landlord spats due to defaults on rental payments reach boiling point, Robinson said this would mean invalidating that business’s license, so they no longer form part of the sector.

But a serious woe for retail owners is the potential of stock expiring and short-dated stock.

“If our members are expected to write off values of stock expiring, it would bring their business to an end,” Robinson warned.

He maintained that “most South Africans enjoy liquor responsibly,” and that a small percentage of people consume alcohol irresponsibly.

The ban, Robinson lamented, will cost livelihoods, jobs, and inevitably result in the industry “falling to its knees.”

As a whole, the sector is frustrated that the second booze ban was sprung on them and the country, as well as the inevitable battle to be fought against the illegal alcohol market as soon as the ban is lifted.

Shoppers queue to buy alcohol at the Makro Liquor Store, Strubensvalley in Roodepoort, 1 June 2020, on the first day South Africa moved to level 3 lockdown as part of its efforts to curb the coronavirus pandemic. Picture: Michel Bega

“The illicit trade is entrenched in supply networks. Products meant to leave South Africa find their way back into the market, and government then loses excise duty on that product,” Robinson explained.

When the ban is lifted, legal stores, taverns and retailers will have to battle against the illicit market, made up of people with no regard for health or tax.

“The demand hasn’t gone away because of the ban, and illegal trade is flourishing.”

SAB is more than willing to assist government in mitigating trauma admissions and pushing for awareness campaigns, Moreira said.

“But we can’t help if we don’t know what these needs are. Open conversation is essential, as well as data-driven decisions.”

The industry needs more engagement with authorities and departments, clarity, and above all, a date for the ban to be lifted, for the sector and its dependents to thrive once more.

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