The South African alcohol industry has called on government to consider the overall effects of the alcohol sales ban when deciding on the next steps in response to Covid-19.
This as the continued ban poses a threat to the country’s trade partnership with the European Union (EU).
“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.
“The South African economy has already lost an estimated R13 billion in direct capital investments with South African Breweries, Heineken, and Consol Glass all halting their capital expansion projects last week due to the ban,” said spokesperson Sibani Mngadi in a statement.
This comes after EU industry body SpiritsEUROPE’s call on the South African government to provide a “clear” and “reliable” timeline to lift the total ban on the sale of alcohol.
According to SpiritsEUROPE, the alcohol beverage sector is one of the country’s biggest employers, accounting for more than one million direct and indirect jobs and the ban had a devastating impact on small farmers, distilleries, packaging companies and hospitality outlets, many of which now face bankruptcy.
Ulrich Adam, director-general of spiritsEUROPE said: “South Africa first imposed an outright ban on 27 March and lifted it on 1 June, but only to re-impose it without notice on 12 July. This makes it the only country in the world to have re-introduced a complete prohibition on alcohol sales.
“While no clear evidence on the efficiency of such a measure in the Covid-19 context is available, we know that it has given rise to a sharp increase in illicit consumption and trade accompanied by high-risk behaviour and rising criminality rates. During the first ban, 476 liquor outlet robberies were reported. 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 R13.9 billion. Assuming an additional 9-week ban will increase the potential loss to between R23.8 billion. The latter is equivalent to 1.9% of tax income (excl. excise tax),” said SpiritsEUROPE in a statement.
The total loss in excise taxes for the first ban was R4 billion, said the alcohol body, adding another 9-week ban would increase the potential loss to R7.2 billion.
The ban also affects trading partners such as the European Union (EU) as South Africa is the prime export destination for European spirits in Africa, with exports amounting to EUR 255 million in 2019, added the body.
“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 banning imports of European spirits, while South Africa continues to export particularly wine which has 110 million litre quota duty free export into EU under the EPA – contributing to R5,7 billion in net exports earnings for SA on alcohol. SpiritsEUROPE urges the European Commission to foster a dialogue with the South African government on this issue.”
The South African alcohol industry said it had noted the concerns raised by spiritsEUROPE regarding “imbalances in trade”.
“The EU is SA’s biggest trading partner. 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,” it said in a statement.
The South African alcohol industry includes 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.