South Africa’s three alcohol bans wiped R52 billion from the economy

 ·19 Feb 2021

The alcohol industry has published a new report detailing how much money the government’s ban on the sale of liquor has cost South Africa’s economy.

The report includes an assessment of the economic impact of the three alcohol bans in 2020, including the five-week ban between 29 December 2020 to 2 February 2021.

Kurt Moore, chief executive of the South African Liquor Brandowners Association (SALBA), said that not only is the industry and its people suffering, but the government itself was experiencing considerable losses to the fiscus.

According to the assessment, the tax revenue loss (excluding excise) to the fiscus from the value chain arising from the bans amounted to R29.3 billion – the equivalent of 2.3% of tax revenue.

The direct excise tax revenue lost across the nation was R8.7 billion  – the equivalent to 21.2% of excise revenue.

Moore added that the country’s GDP loss was approximately R51.9 billion – 1% of the total GDP measured at market prices due to the three bans.

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

Job cost

Patricia Pillay, chief executive of the Beer Association of South Africa (BASA), said that  the industry’s financial loss was considerable with impacts on the industry and the lives and livelihoods of hundreds of thousands of people in the sector’s value chain.

“The sales volumes of around 1.1 billion litres lost during this period may result in a loss of more than R36.3 billion in sales revenue – the equivalent of 24.8% of total sales value for 2020 and projected sales value for 2021.

“The beer industry alone lost approximately R18 billion in sales throughout the three bans,” she said.

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

Pillay said that the destructive economic effects of prohibition cannot be ignored and should not be reinstated again 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,” it said.

Convenor of the National Liquor Traders Council, Lucky Ntimane, said that the impact of the bans 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.

“We urge the government to work with concerned stakeholders and ourselves to find alternative effective measures that address the issues of alcohol misuse while maintaining the livelihoods of people whose jobs are dependent on the industry,” he said.

Wine industry

Vinpro managing director Rico Basson said that as a direct result of the alcohol bans, domestic wine sales were down by 20% (in volume).

Additionally, the five-week export ban resulted in 300 million litres of uncontracted wine within 640 million litres of stock at a time when the industry had commenced with the 2021 harvest, which created a stock dilemma and placed huge pressure on storage capabilities.

“More importantly, the ban had significant socio-economic implications for our rural communities,” said Basson.

“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 South Africa’s tourism industry, coupled with the prohibition of alcohol sales, has crippled the wine industry.”

Basson said that the South African alcohol industry and its stakeholders shared the government’s concern over the pandemic and would continue to support meaningful measures to flatten the curve.

“We do not, however, support outright bans on wine sales while alternative, effective and targeted interventions are available.”

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