SA’s alcohol ban will create the mother of economic hangovers
Those with a puritanical mindset often ignore the developmental impact of the township liquor industry
SA’s third Covid-19 alcohol ban was lifted this month, but the economic hangover will be felt for years, with lost tax revenue, job losses and a rise in illicit alcohol sales.
The sale of alcohol was illegal in the country for a total of 154 days after the first hard lockdown was imposed on March 27 2020, yet there is no sign that the government has any intention of reaching beyond crude prohibition and searching for less damaging policy instruments.
Speaking four days after the third ban was lifted, co-operative governance & traditional affairs minister Nkosazana Dlamini-Zuma stated that “it is not inconceivable that another suspension may be imposed in future”. With third and fourth waves of the virus predicted in SA, such action is more than likely. Yet the three spasms of prohibition so far have left an economic wasteland and driven an industry that is always difficult to police deeper into the arms of criminals.
The first two bans led to 165,000 jobs being lost across the entire industry value chain, but the problems of large, capable firms seem manageable next to the devastation wrought on the township liquor trade. The country’s 35,500 legal taverns employed 250,000 people before the ban and the knock-on effects threaten the livelihoods of all of them and their dependants, perhaps 1-million South Africans in total.
The developmental impact of the township liquor industry is often ignored by those of a puritanical mindset, but it is a powerful avenue out of poverty. Tavern owners send their children to college and university and invest in or facilitate the creation of other related businesses. These often involve the preparation and serving of food at the tavern, especially shisanyamas (barbecues) as well as services that can be used by patrons — car washes, adjacent nail boutiques and internet cafes.
Taverns have only come into their own as a mechanism for capital accumulation since the demise of grand apartheid. Bantu affairs administration boards, the primary mechanism for controlling the movement and employment of black people under apartheid, had a monopoly on alcohol sales, which was used to finance operations.
At the time black people were denied access to spirits and forced to consume beer (only) in state-run “Bantu beer halls”. Independent brewers and sales outlets could expect to be raided and shut down by officials. Those engaged in what was then defined as “illegal trade” were tried and jailed. The situation was reversed only during PW Botha’s institutional tinkering in the 1980s.
During the initial lockdown ban, from March 27 to June 20 2020, the government negotiated with tavern owners and agreed that they could convert their businesses to liquor retail outlets. But under the second and third bans, imposed without warning or discussion, off-sales were also barred.
Far more than its constitutional implications, the alcohol ban has, as predicted by all too many experts, driven a huge surge in illicit trade. According to the Transnational Alliance to Combat Illicit Trade (Tracit), the liquor ban has spurred the growth of black market alcohol, sidelining legitimate businesses and fuelling a rise in criminal activity.
Even before the Covid-19 pandemic illicit alcohol was known to account for 14.5% of the market by volume, costing the fiscus more than R6.4bn a year in lost tax revenue. There is no doubt that it has grown during the ban. The shape of this shadow market is far less clear than the parallel (and related) market for illicit tobacco, but anecdotal evidence suggests most illicit demand is for established commercial products (branded beer and spirits) rather than illegally distilled or brewed products, the popularity of home-brewed pineapple beer notwithstanding.
Evidence is provided by the increase in media reports of alcohol theft and hijackings. In an incident reminiscent of the famous Hatton Garden jewellery robbery, thieves in downtown Johannesburg tunnelled through concrete to steal R300,000 worth of whisky, brandy, gin, vodka, cider and beer. In January, six truckloads of alcohol were stolen from a depot in Kempton Park.
Other trucks transporting alcohol have been hijacked in every part of the country, with 10 incidents reported in Port Elizabeth alone over a two-week period in May/June. There was widespread looting of locked liquor stores during the ban, with 16 incidents reported in the Western Cape in the three weeks immediately after the hard lockdown.
The upsurge in criminality is as much a consequence of the government’s deployment of the blunt instrument of an outright ban as is the much-heralded greater availability of emergency hospital beds. On this last point it should be observed that the government has never advanced scientific evidence to show the alcohol ban was the decisive factor in allowing the health system to cope with the last Covid-19 surge. It has never disaggregated the impact of the ban from other factors, especially the curfew imposed at the same time. To say it worked because Baragwanath Hospital had no emergency admissions on New Year’s Eve is to govern by anecdote.
What is especially galling is that the alcohol industry was geared up to restrict and control consumption in support of the campaign against Covid-19 transmission. The industry had already withdrawn support for potential superspreader events over the festive season and tavern owners had offered to ensure social protocols were implemented. Of course, the illicit industry is in no position to offer such co-operation. The Medical Research Council, which advanced a series of alternatives to the alcohol ban in June 2020, believes an opportunity for more intelligent regulation of alcohol consumption is being missed.
One of the indicators of a faltering state capacity is the use of inappropriately crude policy instruments. Ramaphosa vowed in his state of the nation address to deal with the problem. But rather than subjecting officials to abstract courses at the National School of Governance, he would be advised to build the project around practical real-world issues. Building capacities to avert a further blanket ban on alcohol might be a good place to start.
• Christianson, a freelance writer, has been a political scientist, NGO researcher and development banker. He entered business journalism in 1997 and was Diageo African Business Writer of the Year in 2006.
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