Booze ban puts black-owned business development on ice

South Africa’s ban on alcohol sales has been in place for 12 weeks, and has put immense strain on the livelihoods of one million people across the industry’s value chain.

President Cyril Ramaphosa reinstated the alcohol ban with immediate effect on 12 July.

Vice president of corporate affairs at South African Breweries (SAB) Zoleka Lisa lamented that the suspension of alcohol sales has placed “an immense burden” on black-owned businesses across SAB.

Of the 35,000 taverns supporting black entrepreneurs, 54% of those are owned by women. The tavern industry is worth between R40 and R60 billion, but 15% of township liquor outlets could not reopen, as they lacked the finances due to the initial alcohol ban on 26 March.

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

In the logistics sector of SAB, three suppliers that employ hundreds of workers have lost millions of rands in revenue.

40% of the contracted South African T1 transport grid are 80% to 100% reliant on SAB. The ban has led to suppliers needing to restructure their businesses, and possibly lay off staff.

“The beer economy supports black entrepreneurs that support thousands of livelihoods. The ban puts this in jeopardy.”

Lisa emphasised that the one month of alcohol trade in June was not sufficient for businesses to recover from the revenue lost in the previous nine weeks where no sales were permitted.

SAB has 5 700 direct employees. It has 250 000 supplier and retail employees, 1 300 farmers, 800 of them emerging, and supports over 10 000 retail businesses that sell alcohol for off-site consumption, as well as over 22 500 labour-intensive businesses that sell alcohol for on-site consumption.

The alcohol industry lost R18 billion due to the last ban, costing government R3.4 billion in excise tax. Considering that SAB pays approximately R1.2 billion in excise tax contributions per month, with a total of R14.4 billion in excise tax contribution in 2019 alone, the sector is one of the largest tax contributors in the country, Lisa said.

In addition, CEO of Consol Mike Arnold, and iSanti Glass CEO Shakes Matiwaza recently provided their figures to the Department of Trade, Industry and Competition.

Between these two glass packagers, over 26 000 direct and indirect employment is created, the income from which supports an additional estimated 50 000 people.

The alcohol industry accounts for over 85% of Consol and iSanti Glass’s production and sales.

They warned that “the closure of the glass industry and permanent failure of suppliers in the value chain would deindustrialise the South African economy by R20 billion, and the country would have to become a net importer of glass packaging and other related products.”

This deindustrialisation would take the sector “a decade or more to recover,” they warned.

Westbury community members Annie Mahlangu (L) and Amanda Ndebele with groceries from The Saeed Foundation’s volunteer Natalie Leas helps Coronation resident with soup in Johannesburg, 18 July 2020. The Foundation gave 5000 Hot meals and groceries to the hunger, unemployed and destitute people of Westbury and Riverlea. Working in hand with Kofifi FM to assist community that’s ravaged by poverty, unemployment, drug abuse and domestic violence. On Mandela Day, the Saeed Foundation honered Mandela by doing more for the needy people in the community. Picture; Nigel Sibanda

The first lockdown cost Consol and iSanti R1.3 billion, and the reinstated alcohol ban has resulted in many companies having to consider restructure, retrenchments and closure.

Within the glass packaging sector, Consol and iSanti explained that in order for controlled shutdowns of their furnaces, specialist overseas technicians are required to assist. However, due to travel restrictions, this will not be possible, and the reinstated ban has forced the sector to start closing down production.

“When we shut furnaces, which will likely be in an uncontrolled and unsafe manner… the glass inside the furnace will be frozen and will also cause damage to the furnace infrastructure. It is likely that it will take six to 12 months to decommission these furnaces, ignoring market damage and significant new funding requirements.”

The Food Allied Workers Union (Fawu), which represents the majority of workers in the liquor industry, said they were “outraged” by government’s decision to reinstate the alcohol ban. They said the decision “degrade[s] them as human beings with families who should have been given an opportunity to prepare before complying with the regulations.”

The uncertainty of the renewed ban has wreaked havoc in townships, where those who sell beer to survive used “their last cents” to stock up on beer and alcohol products before the announcement.

Fawu slammed government’s decision as “irrational”, especially in not giving people “an opportunity to prepare”.

They said workers should not be the ones funding shortfalls “because of this reckless decision,” and implored government to mitigate “deficiencies that shall be faced by the people of South Africa who survive by selling alcohol.”

Fawu expressed concern that the ban would seal the fate of thousands joining the 10.2 million already unemployed people in the country, and warned that growing unemployment figures will exacerbate current socio-economic challenges.

Ultimately, the lowest paying workers will pay the price of challenges brought on by Covid-19, while those in senior positions who have not been retrenched are not as affected.

“The small largely black-owned businesses are the ones that will be hit hardest, as they suffer major financial losses and government has taken no initiative or said anything about them.”

Another result of the ban Lisa raised was the thriving illicit alcohol trade, which increases when any regulatory measures that interfere with the normal trade of the alcohol market are instilled.

Packers load purchased alcohol into a customer’s vehicle, 1 June 2020, at the Makro Liquor Store, Strubensvalley, in Roodepoort, on the first day South Africa moved to Level 3 lockdown as part of its efforts to curb the coronavirus pandemic. Picture: Michel Bega

“South Africa has a fully functional illicit alcohol market which we knew would be ready to capitalise on any ban implemented.

“Apart from the imminent negative impact on the market, we know that a ban on sales would have a severe impact on our business as well,” she explained.

She added that although SAB commended government’s “decisive nature” to protect the lives of South Africans,  people need their financial future safeguarded.

“The lockdown, particularly on our company and industry, has a myriad of unintended negative consequences.”

Certainty is needed with the reinstated ban, Lisa said, in order to give the thousands of affected employees across the alcohol sector’s value chain a chance to find ways to eek out ways to survive the pandemic.

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