Vinpro, a non-profit company that represents 3,500 South African wine producers, will challenge the government’s adjusted level 4 lockdown restrictions in court this week in a bid to have the prohibition around the sale of alcohol relaxed.
The group, which is set to have its urgent interdict application heard in the Western Cape High Court on Wednesday (7 July), is specifically aiming to lift the ban on the sale of wine in the Western Cape, seeking relief for wine businesses.
“The latest ban of two weeks that has now been imposed follows on 19 weeks of revenue loss over the past 15 months, which has had a devastating effect on the wine and tourism sector that employs more than 269,000 people,” said Rico Basson, Vinpro managing director.
“A large number of our wine producers and wineries are small – more than 80% of the 529 wineries are small and medium enterprises and are reliant on direct sales to customers.
“Although wine exports may continue, the industry exports less than 50% of annual production, with the other half sold on home soil. With no financial support from the government for these businesses, their prospects, and that of employees, are extremely bleak.”
In a separate matter, South African Breweries (SAB) has filed papers challenging the ban on administrative law grounds.
SAB said it has been left with no other choice but to defend its rights and protect its business, and the group has already imposed an investment freeze of around R5 billion following the previous alcohol bans.
Level 4 lockdowns
The total prohibition on the sale of alcohol under South Africa’s adjusted level 4 lockdown follows months of lost trading last year.
During the 2020 national lockdown, the government imposed an unprecedented total trading ban on alcohol from the end of March to the beginning of June, with further restrictions in place for the rest of 2020.
The South African Liquor Brand Owners Association said that the sales bans cost the legal alcohol industry R36 billion in lost revenues and the Treasury, R29 billion in lost tax receipts.
They also estimate that 15% of the alcohol market has continued to operate illegally, without paying any taxes.
While the government is set to review its level 4 lockdown this week, analysts say that the current restrictions are likely to be extended.
Besides the severe impact it is having on the health sector, the upcoming week’s Covid-19 statistics should influence whether the government decides on an extension of the two-week adjusted level 4 regulations, say economists at the Bureau for Economic Research (BER).
In a research note on Monday (5 July), the group pointed to the previous week of data which shows that South Africa saw record-high increases in daily new infections of above 24,000 on Friday and Saturday.
South Africa also frequents the global top-10 list of daily new cases per country, and with vaccination rates low, also registers high daily increases in Covid-related deaths.
“Unfortunately, given the progression of the third wave since the measures were announced, we think it is likely that most, if not all, of the current restrictions will be extended,” the BER said. This will then start to have a more meaningful adverse impact on the Q3 2021 GDP performance.”
While it is too early to tell whether the restrictions helped in limiting the spread of Covid-19 cases, the direct impact of the restrictions, the third wave and subsequent changes in consumer/firm behaviour on businesses is already apparent, the BER said.