A breakthrough in the fight against illegal alcohol trade has been welcomed by the South African Liquor Brand Owners Association (SALBA). This follows the confiscation of duty-free liquor worth R15 million from a warehouse in Mpumalanga.
With the support of role players in the liquor industry, the South African Revenue Service (SARS) and the South African Police Service (SAPS) seized more than 152 000 bottles (12 700 cases) of spirits after a year-long investigation. The liquor was originally destined for the overseas market but being recycled back into local trade.
Equipment to alter the original products were also found.
Explaining the modus operandi, SALBA chairman Sibani Mngadi says that syndicates purchase product intended for export tax-free, as it would only be subjected to duty at the destination country.
“The bottles are then rebranded to conceal that they are meant for export, and resold into the South African market at a competitive rate. A duty-free spirit product can undercut the retail price of the duty-paid spirits brand by up to 41%,” Mngadi explains.
In some cases, syndicates also replace the caps of the bottles and remove the lot codes from the boxes.
Blunt policy interventions have consequences
Welcoming the multimillion-rand liquor confiscation, SALBA’s CEO Kurt Moore says it is time government realised the unintended consequences of blunt policy interventions such as alcohol sales bans and trading hour restrictions.
“To put things into perspective, in 2020 the illicit market was worth R20.5 billion, which is R6.5 billion more than the R14 billion budget that the South African Police Service is allocated for criminal investigations.
“In 2020 SARS lost R11.3 billion to the illicit alcohol trade. This is R1 billion more than the R10.3 billion allocated for Covid-19 vaccines,” Moore points out.
According to Euromonitor International, the illicit alcohol market has grown to 22% of the total volume of alcohol sold in South Africa following the sales bans.
Spirits constitute 48% of the illicit market (mainly through smuggling), followed by homebrews at 24% and sugar-fermented ales at 22%.
Moore warns that ongoing restrictions will continue to encourage the illicit alcohol industry and further damage the legitimate enterprises struggling under the weight of these irrational measures.
Smugglers ‘will be brought to book’
Illicit liquor smugglers are only harming the local industry at a time when Covid restrictions were obviously a significant impediment to the industry, SARS commissioner Edward Kieswetter said in a press release.
“Such criminal action will not be tolerated but confronted, and all those involved in this smuggling network will be brought to book. SARS has the mandate to combat illicit trade and such activity is clearly illicit and unfair competition for the local industry,” stated Kieswetter.
“We are committed to making it hard and costly for any taxpayer or trader who does not comply with the tax or customs laws of the country.”
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