South Africa’s alcohol ban puts international trade deal at risk

Local and international trade bodies have raised concerns around South Africa’s alcohol sale ban as it violates existing trade agreements.

EU industry body SpiritsEUROPE urged the South African government to provide a clear and reliable timeline to quickly lift the total ban.

“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,” Ulrich Adam, director general of spiritsEUROPE, said.

“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 South Africa on alcohol.

“Our member companies operating in South Africa are deeply concerned about the uncertainty of current trading conditions.

“The lack of clarity on whether and when the ban might be lifted makes business planning impossible. We therefore need a clear and reliable timeline.”

The group also highlighted the significant damage that the ban has had on the local industry.

The ban 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, it said.

“The total loss in taxes (excl. excise tax) for the first ban was R13.9 billion. Assuming an additional nine-week ban will increase the potential loss to between R23.8 billion. The latter is equivalent to 1.9% of tax income (excluding excise tax).

“The total loss in excise taxes for the first ban was R4 billion. Adding another 9-week ban will increase the potential loss to R7.2 billion. The latter is equivalent to 17.6% of excise tax income,” it said.

The ban is also felt among major trading partners such as the European Union (EU), the group said.

“South Africa is the prime export destination for European spirits in Africa with exports amounting to €255 million (R5.3 billion) in 2019.”

Local industry weighs in

The European Union is South Africa’s biggest trading partner and 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, local industry players said.

Sibani Mngadi, spokesperson for the South African alcohol industry, said it was important for the government to consider the overall effect of the ban when deciding on the next steps in response to Covid-19.

“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,” he said.

“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.”


Read: New push to relax South Africa’s alcohol ban at provincial level

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South Africa’s alcohol ban puts international trade deal at risk