Figures of illicit trade ‘alarming’

As President Cyril Ramaphosa announced new restrictions last night around lockdown, questions about the effectiveness of past liquor bans remained.

The tradeoff for a reduction in crime and emergency rooms filled with stabbings, shootings and assaults has been the creation of a widespread illegal trade, which accounted for 20% of the alcohol market by volume.

This has grown at a compound annual growth rate of 17% since 2017, according to the study, Illicit
Trade: Alcoholic Drinks in South Africa in 2020.

Conducted by Euromonitor International, the study was published on 20 May.

National Liquor Traders Council spokesperson Lucky Ntimane said the figures of illicit trade were alarming.

“This is going to be a massive headache for our law enforcement agencies for years to come. Illicit traders are not going anywhere, even after all the restrictions on the alcohol trade would be over,” he said.

Ntimane said there needed to be solutions that would help to manage the pandemic effectively.

“The practical solutions are to create a model that will allow both government and industry to engage when cases are rising and agree on way to mitigate against the rise in the numbers without
the need to restrict trade or ban alcohol,” he said.

According to Euromonitor, spirits were the most counterfeited alcoholic drinks as production was easier compared to fermented alcohol such as beer.

“Spirits such as vodka, whiskies and cane are subject to the greatest level of illicit activities, mostly produced from industrial alcohol, such as ethanol.

“Brands including Smirnoff Vodka, Johnny Walker Whisky and Gordon’s Gin are often counterfeited, while several cheap brands of spirits came to the market in 2020,” the research noted.

Counterfeit products were mainly produced in remote parts of the country, with KwaZulu-Natal being a hotspot.

“Counterfeits had a strong price advantage over legal alcohol, which attracted vulnerable consumers and deprived the government of tax revenue. In turn, these were are mainly sold in informal markets.”

The research noted counterfeit brands were not only priced lower than legal ones but empty bottles
used for refilling were sourced from informal retailers or stolen from licit producers.

“Consumers were not always aware of fake products but have in some cases indicated headaches and poor taste related to fake brands.

“During the various bans, it was cited that consumer reporting on illicit alcohol declined, especially for fake products, as many feared losing their alcohol source,” the research stated.

The illicit alcohol was distributed via vehicles from remote production sites to various areas, which increased sophistication of operations online channels to sell and advertise.

Wines of South Africa’s Maryna Calow said the industry was trying hard to recover from the various bans that were imposed over the past period.

“We were optimistic with export volumes, they looked positive for the year to date, but recovery will take time,” she said.

Calow said the industry was concerned government may impose another ban on alcohol sales which would again be a setback for the alcohol industry.

“While we supported the government in their efforts to ensure that lives weren’t lost due to Covid-19 infections, we implored them to take measured steps with regard to also saving the livelihood of so many people employed by the industry and those who service it,” she said.

Info

Lockdown changes

• The cumulative impact of the three alcohol bans has put 200 200 jobs supported by the alcohol value chain at risk in the nation’s informal and formal economy.
• Sales revenue lost as a result of the bans is approximately R36.3 billion.
• SA’s annualised GDP loss due to the bans is approximately R51.9 billion
• Tax revenue loss to the fiscus from the value chain arising from the bans amounts to R29.3 billion.

– South African Liquor Brand Owners Association