R38bn lost from sales ban, liquor industry says

The alcohol industry has reported just over R36bn in lost sales revenue because of the three bans on the sale of liquor, while the tax revenue loss for the state amounted to R29.3bn.

In addition, direct excise tax revenue lost was R8.7bn.

The country’s annualised GDP loss due to the prohibition was about R51.9bn, or 1% of the total GDP measured at market prices, according to the industry’s economic impact assessment report, which provides a snapshot of economic transactions. The report was prepared by FTI Consulting on behalf of the industry.

The liquor industry is one of the largest and most reliable contributors to state coffers, accounting for about R46.8bn in excise tax in 2019.

The R140bn industry, which contributes 3% to SA’s GDP and is responsible for 1-million jobs, was left fuming late in December when the government announced an immediate ban on alcohol sales, saying it was critical to reduce alcohol-related trauma cases in hospitals and to free up desperately needed resources for Covid-19 patients amid a surge in infections.

The ban was lifted earlier in February.

Sales were also prohibited in March and July 2020, leading to a jobs bloodbath of about 165,000 workers.

Kurt Moore, CEO of the SA Liquor Brand Owners Association (Salba), said that not only are the industry and its people suffering, but the government itself was experiencing considerable losses to the fiscus.

He said that according to the assessment, the tax revenue loss excluding excise to the fiscus from the value chain arising from the bans amounted to R29.3bn, or about 2.3% of tax revenue, and direct excise tax revenue lost across the nation was R8.7bn, equivalent to 21.2% of excise revenue.

"If you factored in the loss of potential total capital formation — some R21.7bn — then the prohibition measures could only be viewed as a national socio-economic disaster," he said.

That R21.7bn is equivalent to 0.3% of national capital formation, or fixed capital investment, in 2019.

Patricia Pillay, Beer Association of SA CEO, which includes major brewers SA Breweries (SAB) and Heineken, said the beer industry alone lost about R18bn in sales throughout the three restrictions.

"But the job losses are exceptionally damaging to society and the economy. More than 200,000 jobs, equivalent to 1.22% of national jobs in the informal and formal sectors, are under threat due to the bans," Pillay said.

"The destructive economic effects of prohibition cannot be ignored and should not be reinstated in the future.

"We again ask the government to consider viable alternative measures that address alcohol misuse while maintaining the livelihoods of a significant number of people whose jobs and access to income are dependent on the industry," Pillay said.

Earlier in January, SAB approached the high court in Cape Town to challenge the constitutionality of the bans. The brewer is forging ahead with the court challenge despite the lifting of the ban to ensure that its continued business operations are not interrupted unnecessarily by further "unlawful and unconstitutional prohibitions".

Wine producers’ body Vinpro is also pressing ahead with its legal challenge, saying that it wants to avoid a situation in which the industry is vulnerable to the government switching it "on and off".

Vinpro MD Rico Basson said the bans threaten the future of the wine industry. "There were significant job losses among the farming community where each worker often supports more than six dependants. The impact of travel restrictions on wine tourism, which represents significant value for SA’s tourism industry, coupled with the prohibition of alcohol sales, has crippled the wine industry."

The convener of the National Liquor Traders Council, Lucky Ntimane, said the effect of the restrictions has been devastating to the tavern industry and the entire alcohol value chain.

"The country cannot survive such losses. The government should find viable and better alternatives, and the sector has continually sought ways of collaborating with the government to re-examine better alternatives to prohibition," said Ntimane.