SIBANI MNGADI: A body blow to the liquor industry

More than two years ago, on March 27 2020, the government implemented unprecedented, extraordinary restrictions on human movement, and economic and social activities in response to the Covid-19 pandemic swirling across the globe.

Now, despite the relative success of the vaccination rollout and enhanced immunity in minimising the impact of the latest wave of the pandemic, the health minister has gazetted draft regulations under the National Health Act of 2003 that will give him unconstrained power in future dealings with a pandemic.

When the initial national state of disaster restrictions were implemented (including the prohibition of alcohol sales), the argument from the government was that it needed to delay the onset of the high wave of infections while preparing the health system for extraordinary pressure on hospital admissions.

After four waves of Covid-19 the health department regulations now seek to empower the minister to restrict civic liberties and economic activities without clear scientific reasoning.

In a joint opinion article, professors Marc Mendelson, Shabir Madhi, Jeremy Nel, Glenda Gray, Regina Osih and Francois Venter describe the health regulations as “inconsistent, incoherent and illogical” and argued that they are “not conducive for economic recovery”. 

“It is inappropriate to continue pursuing policies and imposing regulations aimed at trying to prevent Sars-CoV-2 infections, as opposed to primarily focusing on enhancing population immunity through vaccination to prevent severe disease and death from Covid-19,” the scientists wrote.

Despite the country having a renowned pool of scientists and socio-economic experts, many of the decisions taken by the National Coronavirus Command Council have not been cognisant of this when making decisions, and this is also apparent in the regulations proposed under the National Health Act.

The regulations empower the health minister to “share advice” with his cabinet colleagues relating “to the sale, dispensing and consumption of alcohol”. It is unclear why a health minister would require regulations to share information with cabinet, nor why information regarding alcohol sales and consumption are regarded as information that would need to be shared.

One can only presume this advice would be to the trade, industry & competition minister, who has authority over alcohol trade, and might empower him to consider restrictions to the sale of alcohol over and above what already exists in the national liquor legislation. Even if the minister was to act on this advice from the health minister, that action would be unconstitutional because the sale of alcohol is the prerogative of provincial governments, which was only escalated to national level under the state of disaster.

The four prohibitions of alcohol sales during the state of disaster demonstrated the extreme level of connectedness and interdependency between tourism, hospitality and alcohol sales. Across the board it is evident that alcohol is an integral part of the tourism and hospitality sector. And these value chains contribute substantially to the country’s employment figures.

The lockdown bans and restrictions on business activity caused irreparable damage to the economy. It was a uniquely SA government approach (not adopted by other countries) that led to significant job losses and the closure of some businesses as the operations of restaurants and hospitality establishments became financially unviable once alcohol was removed from the menu.

The sector lost at least 23 weeks (161 days) of trade between March 26 2020 and July 25 2021. This cost the country an estimated R64.8bn (1.3% of GDP), resulting in a tax revenue loss (excluding excise) of R36.4bn (2.8% of tax revenue); and direct excise revenue loss of R10.9bn (19.6% of excise).

Far more alarming and of greater concern is that the policies directly contributed to the extraordinary growth of the illicit alcohol trade. Illicit trade has a devastating social impact on citizens’ health and wellbeing, while stalling economic recovery and fuelling the engines of organised crime. Another tragic consequence has been the rise in illicit consumption-related deaths and increased criminal activities, which are now firmly entrenched.

The economic impact of the illicit trade has also been disastrous. For example, in 2020 the SA Revenue Service lost R11.3bn to the illicit alcohol trade — enough to pay for more than 2-million child support grants for a year, or put 34,000 additional police officers on the streets.

This was confirmed in a report by Euromonitor International, “Illicit Trade: Alcoholic Drinks in SA in 2020”, which showed a clear correlation between the sales ban and the increase in the demand for illicit alcohol. As a result, the illicit market has almost doubled in the last three years, and in 2020 was estimated to be worth R20.5bn and comprise 22% of total alcohol consumption. Furthermore, the illicit trade has grown at a compound annual growth rate of 17% since 2017 and now stands at 12% of the R177.2bn total industry market value.

The loss to the fiscus has several repercussions. First, it places an additional burden on the state’s ability to combat Covid-19. Second, it makes it difficult to enforce regulations and, third, it seriously hampers attempts to stimulate economic recovery.

The alcohol industry is committed to helping rebuild the economy and will play an integral part in the revival of the tourism and hospitality sector. We can achieve this by ensuring meaningful and ongoing engagement, and realising that decisions not based on science and reason can have disastrous consequences.

• Mngadi is spokesperson for the SA Liquor Brandowners Association.