The illicit alcohol trade now accounts for nearly a quarter of total market volumes in the country, says Kurt Moore, the chief executive of the South African Liquor Brand Owners Association (Salba).
He believes this is a direct result of the controversial Covid-19 booze sales bans over the last 15 months.
According to Moore, the bans have fuelled illegal activity, particularly among crime syndicates whose positions have significantly strengthened during prohibition. It will be difficult to reverse this as syndicates have become entrenched, he says.
“The illicit trade market has almost doubled in the last three years and, in 2020, [was] estimated to be worth R20.5 billion comprising 22% of total alcohol consumption,” Moore points out.
Furthermore, the illicit alcohol trade sales by volume have now overtaken the entire combined wine and cider sectors.
According to a research report by Euromonitor International, Illicit trade: alcoholic drinks in South Africa in 2020, in terms of volumes, illicit trade escalated to 1 in every 4,54 litres traded in 2020. This, compared to the 1 in every 6,67 litres traded in 2017.
The report was jointly commissioned by Salba, the Beer Association of South Africa (Basa) and wine producer giant Vinpro.
A country robbing itself
The widely scrutinised alcohol prohibition has not only injured the alcohol industry, but also the country, adds Moore.
According to the report, in 2020, the South African Revenue Service (SARS) lost R11.3 billion due to the illicit alcohol trade. This, Moore points out, is enough to pay for more than two million child support grants for a year or to place an additional 34 000 police officers on the streets.
“The illegal sale of duty-free alcohol by diplomats is reported to have robbed SARS of R100 million in unpaid taxes. Diplomats have the privilege to purchase alcohol duty-free for their own use, but not for resale or any other commercial reason,” says Moore.
“Over R500 million of looted liquor stock is now in the public domain and is being sold in the illicit market.”
This, according to Moore, confirms what the alcohol industry has been saying all along: the ban on formal alcohol sales promotes illicit trade and robs SARS and the local industry of tax and sales revenue.
“Additionally, the illicit trade encourages non-compliance with trading conditions that can lead to irresponsible alcohol consumption. When formal sales are banned, illegal alcohol smugglers become the only suppliers to the market.
“When formal sales reopen, they undercut formal retail on pricing as these products do not pay tax, which is typically around R74 per bottle of spirits,” he explains.
In addition to this, the devastation wrought by recent looting in Kwa-Zulu Natal and Gauteng have exacerbated an already dire situation, Moore points out.
In these provinces, more than 200 alcohol retailers and outlets were plundered, damaged and burnt during the recent looting. “Over R500 million of looted liquor stock is now in the public domain and is being sold in the illicit market.”
Meanwhile, across the country the police have busted alcohol smugglers during the last booze sales ban.
In Limpopo, R175 800 worth of smuggled sorghum beer was seized on a highway next to a South African Breweries depot.
In the Eastern Cape, home brews made during prohibition have already claimed 19 lives. In the most recent incident, three people in Ntabozuko, formerly known as Berlin, have died after consuming a lethal homemade alcohol concoction at a party.