Economic damage from alcohol ban ‘unjustifiable’, says Distell CEO

Ban is punishing compliant tavern owners, driving township industry back underground

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Every day that the alcohol ban continues, South Africa loses taxes that could pay 1000 teacher salaries for a year, according to industry estimates. The loss in tax revenue could fund the annual budget of the National Prosecuting Authority many times over.

Commenting on the revelation on Friday by SARS commissioner Edward Kieswetter that SA lost R82 billion in tax revenue during the first covid-19 lockdown, Distell CEO Richard Rushton said this throws into stark relief the mounting costs of the reinstated ban on alcohol sales.

The country has already under-collected more tax revenue than it has been forced to borrow from the IMF and African Development Bank to deal with the pandemic and its economic fallout.

According to media reports, Kieswetter told Parliament that excise duties from alcohol, tobacco products and fuel contracted 42% in the first three months of the fiscal year.

Industry figures show the tax loss from the first six-week ban on alcohol sales alone came to R15.4 billion, and if the current ban remains in place for nine weeks, an additional R13 billion will be lost to the fiscus – or three times the annual budget of the National Prosecuting Authority.

“We have to ask whether an outright ban on alcohol sales can be justified when the damage outweighs the benefits and there are smarter ways to achieve the same objectives,” said Distell CEO Richard Rushton.

200 000 jobs on the line

“The alcohol industry has already lost 118 000 jobs and projections show that a nine-week ban now will cost another 84 000 livelihoods and R15.5 billion in GDP.

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“The long-term damage will be immense – wine farms, restaurants, glass container manufacturers and taverners are all bleeding and many will not survive. We’re facing a structural decline in output capacity in an industry that supports almost 1 million livelihoods and accounted for 3% of SA’s GDP in 2019,” said Rushton.

“I fear the impact this will have on the prospects of an economic recovery for SA, but more importantly, the ability of people who lose their jobs to feed their families.”

The alcohol industry supports about 35 000 township SMEs, and more than 180 000 unlicensed liquor outlets, with each tavern owner supporting another 7 people.

For licensed tavern owners alone, that amounts to 192 000 township livelihoods impacted by the ban, and 76 000 jobs already lost.

The irony is that the ban punishes licensed, compliant tavern owners while the illicit market thrives, undoing a decade-long drive to formalise the sector and bring it into the regulatory fold, says Rushton.

“Government and industry efforts to combat alcohol harm by getting tavern owners to discourage risky drinking behaviour cannot succeed if the sector is driven underground,” states Distell in a news release.

Industry estimates show the country is losing R206 million in taxes every day that the alcohol ban continues – the equivalent of 1 000 teacher salaries for a whole year.

Almost 800 micro and SMME liquor manufacturers, from wineries to craft brewers, face bankruptcy because of the alcohol ban. The glass container industry, which supports 26 300 jobs, is burning R8 million a day to keep its furnaces running, with the alcohol industry making up 82% of its business.

“We understand the government’s duty to ensure there are enough hospital beds to meet the expected need during the peak of the pandemic,” said Rushton. “But the economic consequences of a ban are likely to cause more suffering down the line, in terms of hunger and hardship, than it can possibly prevent now.

“South Africa’s ban on alcohol sales during the covid-19 pandemic is punishing compliant tavern owners and driving the township industry back underground,” he said.

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