The Consumer Goods Council of South Africa (CGCSA) and the Liquor Traders Association of South Africa (LTASA) have published a new report on the impact of the government’s Covid-19 regulations on the liquor industry, with the groups warning that continued restrictions will lead to thousands of job losses.
Under current level 3 restrictions, alcohol sales are only permitted a four-day trading period for off-site consumption sales and permitted on-site consumption establishments to trade seven days a week.
The study, conducted by independent research company Ipsos, found that at least 67% of respondents interviewed predicted business closure should the restrictions continue, with 35% at risk of closing in less than three months and another 25% in six months or more. Several businesses indicated that they could only operate for another month should the current situation continue.
The data shows that nearly 3,000 jobs have already been lost across more than 1,400 independently owned liquor stores, with that sector employing over 14,000 people. Many of these stores are black-owned, and employees are breadwinners and the majority being black females, the CGSA said.
“With each store on average employing five people – excluding service providers’ employees, such as merchandisers, security workers and cleaners – these are at real risk of losing jobs with devastating consequences.
“Given the impact of the severity of the lockdowns so far, and considering that some retailers may need at least six months to fully recover from successive lockdowns, further retrenchments cannot be ruled out.”
Counting the costs
The study shows that liquor retailers have lost about 50% of the revenue they would have earned from Thursday to Saturday, yet overhead costs have remained unchanged. The revenue losses for small liquor outlets were as high as 65% of weekly turnover between Friday and Sunday.
“To put this in perspective, aggregate loss in sales since the inception of lockdown stands at approximately R8.5 billion; sales volume has dropped by 20%-50% across the retail formats per month and with 60% of convenience trading being done mostly post 17h00 on weekdays and on weekends these figures are predicted to continue on a downward scale with great harm to business and jobs,” the CGSA said.
In addition to cutting staff and costs, retailers have been negotiating with landlords to reduce rentals, which affects the revenue of commercial property owners.
Some have reduced staff working hours and wages and diversified products/service lines or changed/improved operations models to adapt to new conditions. Yet others have explored e-commerce focus/capabilities, cut discretionary spending, cancelled salary increases, renegotiated leases or debt repayments, or applied for government support.
However, not all have received the required funding.
“The economic impact of the restrictions has been dramatic and devastating on the SMME businesses with the resultant severe impact on their employees and families. The continued bans on the sale of alcohol without significant Government TERS could see the decimation of the independently owned liquor store sector,” said the LTASA.
Particularly worrying is that the restrictions have gifted the illicit market, which has grown since the first total ban on alcohol sales was imposed in March 2020. People have found ways to access alcohol that has benefitted unregulated, illegal operators to the detriment of responsible, law-abiding liquor traders.