OLIVER DICKSON: Driving us to (illegal) drink

SA’s economic recovery is going to take far longer than most people imagine. Not just getting back to pre-pandemic production, which wasn’t much to begin with, but fully recovering small business activity in a way that can get businesses generating jobs to recover those that are continually being lost.

Finance minister Enoch Godongwana is well aware of the relief businesses need for that to happen. The single percentage point reduction in corporate income tax was ostensibly implemented as a catalyst in the recovery process, to hopefully attract investors — albeit that this may be a short-lived intervention depending on how long the commodities boom can sustain better-than-expected revenue collection.

In fact, most taxes were either reduced or remained the same in the most recent budget, with the exception of one category — those businesses that are subject to “sin taxes”. The alcohol industry, like others in that category, begged for relief but did not get it. Excise taxes were increased. This exception is peculiar to me. What was the economic case behind it, if any, given that the alcohol industry was particularly hard hit by the lockdown bans? You don’t have to think too long or hard to come up with the answer. There was no economic case behind it, just an antiquated and morally unsound one.

A few hours after Godongwana tabled his budget speech in February I bumped into him at a gala dinner and I asked him why every industry but alcohol had received substantial relief. His rather flippant answer was: “We cannot encourage people to drink alcohol”. This reflects a long-standing, deeply intuitive belief that making alcohol unaffordable will dissuade people from drinking and ultimately reduce alcohol abuse. Yet there is no empirical data to support this view, nor does the premise hold that there is an inverse relationship between alcohol consumption and alcohol affordability.

Cause and symptom

If that were the case all the social ills that are attached to alcohol abuse would long have been in decline, in line with the ever-rising year-on-year excise increases. The fact that this has not been the case proves quite pointedly that the problem may not be alcohol itself, but more plausibly that alcohol abuse is a symptom of our social decay rather than its cause.

An even more stark reason to dispel the idea that excise on alcohol assists in mitigating social ills is that it deepens the illicit market. People suffering from alcohol abuse don’t stop consuming alcohol as a result of the excise on alcohol; they simply seek cheaper alcohol in the thriving, unregulated black market. That, more than any other reason, is why government should reconsider its position. The illicit market is an ever-growing one that thrives on government's regulatory inefficiencies.

Government’s goal should be better regulation. I need to qualify this: better doesn’t mean more regulation and more taxes. It means sensible regulation and consistent and predictable tax policy. But why is it that it is so easy to intuitively accept the premise that alcohol is an inherent social ill? This has a lot to do with personal moral positions and biases, and little to do with well-founded principles. It is easy to blame alcohol abuse for youth despondency, for instance, rather than the dehumanisation that arises from economic disenfranchisement, a direct result of mass unemployment.

The political elite still holds onto the popular view of taverns and shebeens in townships during apartheid; they were seen as direct tools of imperial control to weaken and distract the black masses. For this reason policy-makers fail to see taverns in a positive light, as economic contributors, and therefore the policy approach will always be to make things as difficult as possible for those businesses, rather than to help them thrive.

Predictability

The sort of economic relief the alcohol industry needs is about more than just lenient excise increases but, more importantly, a predictable and standardised excise regime. SA’s investment prospects have long been impeded by policy uncertainty. That has defined the last 20 years of economic, fiscal and industrial policy and it remains ever-present in the alcohol industry.

Alcohol retailers and manufacturers have no idea what is to come next year, because excise policy is a discretionary excise, at the whim of the finance minister and Treasury officials. This puts the business landscape across the alcohol value chain in a permanent “nervous condition” where businesses can’t plan for the future and therefore struggle to make any meaningful decisions that will drive their businesses forward.

As the National Treasury continues to consult stakeholders in the build-up to the medium-term budget policy statement, if the government chooses to stubbornly hold onto the idea that above-inflation increases in excise are a necessary and sufficient moral signal against alcohol abuse, the least it can do is standardise it over the medium to long term to allow businesses to plan ahead.

• Dickson, a former communications adviser to the home affairs ministry, is a political analyst, policy and political risk consultant and talk show host.