Large amounts of bad debt, failed loan repayments, depleted savings accounts and threats from landlords is the grim reality faced by more than half of South Africa’s craft breweries.
Should the current ban on alcohol sales continue indefinitely, 70% of craft breweries have indicated that they are in serious danger of closing down, says Craft Brewers Association South Africa (CBASA) chief executive Wendy Pienaar.
“It is no longer a matter of keeping the industry alive. It is actually keeping people alive,” she tells Food For Mzansi.
The alcohol industry has repeatedly pleaded with government to lift the blanket ban on alcohol sales, calling for a more reasoned response.
However, government maintains that the ban is an added precautionary measure to keep hospital beds free from alcohol-related trauma cases. The latest ban imposed last month came as Mzansi was hit by a second wave of Covid-19 infections.
Brewers donate food vouchers
Meanwhile, Pienaar says craft breweries have been left with large amounts of debt from 2020. Most are also not in any position to repay their loans due to the lack of income.
Their trouble, however, stretches far beyond their businesses, Pienaar believes.
“We have so many calls every day from brewers who are now unable to pay their staff or feed their own families. It is very hard for hungry people to pivot to new ways to innovate and stay employed.”
Aggravating the already bad situation are staff who are struggling to survive, Pienaar says.
Despite brewers’ efforts to keep their employees in service, the latest alcohol sales ban is proving to be another nail in the coffin. Many brewers who were able to hang on last year, have now started letting their staff go.
“Things are so dire that we have been reaching out to those who can help us supply food vouchers to the many individuals who are in need. We have managed to help feed 46 families so far through kind donations.”
A further 3 500 jobs are reportedly at stake if things were to continue as they are, and that is without even looking further along the value chain.
The knock-on effect is enormous, especially in smaller towns where there are already limited employment opportunities, warns Pienaar. Furthermore, affiliated businesses such as CBASA, hops and barley farmers and packaging suppliers are also exposed to the risk of shutting their doors.
Unsustainable climate for business
Meanwhile Beer Association of South Africa chief executive Patricia Pillay says government’s “knee-jerk” reaction is causing instability. She wants to see government prioritise relief measures for small business owners, specifically craft breweries and taverns.
This business, says Pillay, has been forced to endure restricted trade for a cumulative period of over 100 days since the outbreak of Covid-19.
“We also require far more clear policy certainty in future. To declare bans without notice being given, and with no end date, is an untenable and unsustainable climate for a business to operate in,” Pillay explains.
The blanket ban on alcohol currently threatens a million livelihoods across the alcohol industry while simultaneously losing R7.8 billion in excise taxes.
Illicit liquor trade booming
While the alcohol industry has been plunged into a financial abyss, reducing much-needed government revenue, illicit alcohol markets are thriving.
According to the South African Liquor Brandowners’ Association (Salba), the unintended consequences, specifically the rapid rise of illicit liquor production and distribution, far outweigh the efficacy of the ban.
Salba chairperson Sibani Mngadi says the industry supported government’s efforts to curb the rising spread of coronavirus infections. However, such measures should be applied rationally without merely resorting to imposing the knee-jerk reaction of prohibition.
“Government also has a duty to recognise the devastating social and economic consequences resulting from shutting down an entire sector of the economy,” he states.
“Apart from the resultant ‘pandemic of poverty’ the ban is creating, the increasing illicit trade in alcohol is a severe threat to the economy. There is an enormous loss of taxation, including VAT and excise, as well as the loss of jobs contributed by legal alcohol producers and merchants to the fiscus.”
Kurt Moore, chief executive of Salba, says, “Roughly 15% of market share is accounted for by illicit trade or organised crime.
“That’s a significant portion of market share in the hands of syndicates who have only been further entrenched by the Covid-19 lockdown period.”
Moore says the problem is widespread. All stakeholders must ramp up their efforts – including the police, alcohol manufacturers, retailers and consumers – to combat the illicit trade. However, they can only do so if the ban is lifted.
In 2019, the alcohol sector accounted for 3.4% (R173 billion) of South Africa’s nominal GDP. Government is estimated to lose around R6.4 billion per year due to illegal alcohol trading.