‘Sin ban’ to cost SA billions and shed countless jobs

South Africa cannot afford to lose the over R4,6 billion it will lose on tax revenue for every month the prohibition of the sale of alcohol and tobacco is effected, and the ban has already led to layoffs in the wine industry.

Economist Mike Schussler has criticised government’s choice to ban the sale of the two products, saying it could cause more economic strife than necessary.

Just under two weeks into the 21-day lockdown period, the effects of the sudden prohibition on alcohol and tobacco began to surface as early as last week in the form of several burglaries of liquor outlets, and concerns raised by civil society groups about the dangers of alcohol withdrawal for those living with addiction during a lockdown. Rehab centres stopped admitting new addicts when the lockdown came into effect, and thousands of alcoholics were left without the support they were used to due to the social distancing regulations.

It was not just the revenue at stake, but also the jobs which were likely to be lost, Schussler said, as a result of the impact of the liquor sale ban on various industries from the producers, the farmers, to the wholesalers and retailers. According to Schussler, last year taxes on the sale of beer alone raked in R15 billion, wine and other fermented beverages raked in R8,3 billion, and sorghum beer brought in R4,5 billion.

This year, many of these stats were projected to be far higher and the impact of the lockdown bans would be devastating across the board.

“The impact is going to be quite severe. We are major wine exporters and we were already struggling in the export market and the entire supply chain was affected, and also the money they were making from tourism is gone.”

Winemakers already shedding jobs

The ban was already leading to lay-offs in the wine industry and hundreds more jobs could be at stake the longer the ban was in effect, according to Gerard Holden, chairman of Franschhoek Vignerons, an organisation representing 48 wine producers in the Franschhoek Wine Valley area in the Western Cape.

According to Holden, the industry was still recovering from a three-year drought period and conditions caused by the ban could reverse over ten years of investment the industry had made in improving the quality of South African wine, and marketing South Africa as a premium wine producer.

He warned that unemployment in the Western Cape’s wine belt could rise to 60%, which could be “very bad” for small towns like Franschhoek.

“If we can’t sell any wine then we cannot get any revenue, whether it’s by exports or by selling it locally, we have no revenue, therefore there is going to be an immediate impact on jobs,” said Holden, co-owner of the Holden Manz Wine Estate.

“We already had to lay off about 35 workers and there is a knock-on impact on contracting workers. Quite often we would use 20-25 contractors five or six times a year, so there is a significant impact on employment and if you multiply that by the number of producers in the Franschhoek Wine Valley, you get an idea of the number of people in the local economy who depend on the production of wine for their livelihood.”

The wine industry is a major contributor to the export earnings of South Africa, competing with wine producers globally, including France, Italy, Spain, Argentina and Chile.

“None of those countries have got a wine export ban in place and certainly Italy and Spain have worse coronavirus issues than we have here, and so we are competing with production from those countries and if we don’t have our products on the shelf, then we lost that listing at the retailer. The retailers can’t afford to have an empty shelf, and we won’t get that space back in a hurry,” said Holden.

Producers of beer also stood to lose an incredible amount of revenue from units which could reach their sell-by date before they hit the shelves, because beer had a notoriously short shelf-life.

‘No logical reason’

Economist Dawie Roodt concurred that South Africa stood to lose more than it could afford to in banning the sale of liquor, adding that the sale of alcoholic beverages for retailers made up around 4% of the total annual revenue for the sector.

“It wont affect the restaurant sector as much because they are already closed at this time. Wholesalers may be less affected as well because they keep large volumes of inventory’, and the effect on producers even less so in the short-term, but this could worsen should the lockdown be extended.”

Retailers relied on the mark-ups on alcoholic beverages to meet their margins and pay their monthly expenses such as rent, he added.

Justice Project South Africa (JPSA) founder Howard Dembovsky was highly critical of government’s decision to ban alcohol and tobacco sales during the lockdown, saying it simply made no sense except to indicate that the Covid-19 outbreak was being used to further certain political agendas.

“There is simply no logical reason for it and at a time when the economy simply cannot afford further pressure, you go and get rid of two major sources of tax income, it simply makes no sense,” he remarked.

We find booze for sale during lockdown, but is it worth it?

Despite the impact the ban has had on legal outlets and manufacturers, not all South Africans were cooperating with authorities on the strict regulations government has effected.

The ban on alcohol and tobacco sales in the country appears to have created the perfect conditions for a black market reminiscent of the 1920s ban on alcohol sales to black people in South Africa.

In search of illegal alcohol dealers around Soweto, The Citizen struck gold at a restaurant and popular drinking hole in Protea Glen, where locals informed us that in order to obtain the alcohol, one would have to buy a meal, sit down and patrons were only allowed to consume the alcohol inside the premises.

Another stroke of luck – bystanders near a shut-down liquor store pointed us in the direction of a nearby corner house where the only beverage available was gin, sold at nearly twice its store value.

Closer to town, in Roodepoort, however, a kind of drive-through operation went undetected at the back-entrance of a precinct which housed a brothel/strip club operation and a bottle store.

Patrons could be seen parking next to the entrance where packets of presumably pre-ordered bottles of beer were handed to them in a discreet exchange of goods and cash.

Dembovsky said he was not surprised at how easy it still was to obtain booze under the strict ban, but expressed concern that this would put desperate consumers at risk of buying sub-par products that were either expired or not genuine, which often happened when products were pushed into the black market.

Home breweries and lethal concoctions made in backrooms were sure to follow should government not lift the alcohol ban.

– simnikiweh@citizen.co.za

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