DAVID HARRISON: How minimum unit pricing will reduce harm from heavy drinking

The National Treasury recently proposed changes to the taxation of alcohol that will reduce its societal harm with minimal damage to the liquor industry. These changes include a sliding scale of excise taxes for wines and beer based on their alcohol content and the introduction of minimum unit pricing (MUP). 

This policy instrument would require retailers to sell liquor at a minimum price per unit of alcohol, limiting the sale of cheap liquor in poorer communities, where drinking is heaviest and most damaging. The MUP is not a tax and its effect on government revenues is likely to be neutral: lower consumption will reduce income from excise taxes, but higher prices will mean greater VAT revenues. Higher prices will also mean more profit for producers, distributors or retailers of quality products (depending on who holds the pricing power), but not for manufacturers of cheap alcohol, which will experience a decrease in demand for their products.

Nonetheless, the experience of other countries is that the MUP will be resisted by the liquor industry, which is reluctant to give up any profits it derives from heavy drinking. It will point to the economic benefits of the industry, which it recently calculated as 3.6% of SA’s GDP. This estimate is likely on the high side, with even other pro-industry researchers asserting a figure of 2.9% of GDP. 

There will also be dispute about the economic costs of alcohol, which boil down to the monetary value we assign to human life. Assign a value of R1m per statistical life, and the economic benefits outweigh costs by nearly two to one. That figure is a guesstimate by an industry-aligned researcher of what government is “willing to pay” to avert a death. Increase the value of life to R3m and the costs outweigh the economic benefits of the industry. Arguably though, even that is a narrow measure of the full worth society places on health and life — when all of us aspire to a life without harm to ourselves and our families.

We don’t want our children born with fetal alcohol spectrum disorder (FASD), yet one in 12 children is affected by it — one in five in the Northern Cape. We don’t want a family member to be murdered, yet the Western Cape’s “Injury Mortality Profile Report” found that 45% of victims of homicide had blood alcohol levels exceeding 0.05g per 100ml.

We don’t want anybody to die in traffic accidents, yet more than a quarter (27.1%) of all fatal crashes due to driver error can be attributed to alcohol intoxication. We don’t want gender-based violence, yet 40% of rapes and 60% of femicides are associated with alcohol. It doesn’t have to be like this: an analysis of intimate partner femicides during Covid-19 showed a decline during the periods in which there was a complete ban on the sale of alcohol. 

A complete ban is not an option for normal times, but neither should high rates of injuries, violence and lifelong damage to children be considered the norm. SA has one of the highest rates of heavy drinking in the world, with those who drink consuming an average of 27.2l of pure alcohol a year. The heavier the drinking, the greater the risk of harm — and that risk rises exponentially.

In Scotland, the introduction of the MUP reduced alcohol consumption by 7.6%, mainly in low-income households, which tend to drink more than wealthier households. In SA, poorer drinkers also consume more than richer drinkers and four times as many die from alcohol-related causes. The experience of Scotland and Wales is that the MUP does not punish the poor: it has little financial effect on those who drink moderately and positive health and social effects on those who used to drink heavily. 

This targeted strategy will put an end to the dumping of cheap commercial wines in poor communities, though some of the benefit could be offset by an increase in illicit homebrews. However, younger, urban populations don’t regard home-brewed alcohol as aspirational; the alcohol content of these products is generally low, and they need to be consumed soon after production.

The overall effect of the MUP is likely to be healthier, safer drinking patterns. In SA, modelling of the price elasticity of demand showed that a R6 minimum unit price (in 2019 prices) would decrease consumption by 6.2% among binge drinkers, 15.5% among other heavy drinkers and 4.6% among moderate drinkers. 

The MUP will not be enough to substantially reduce the harm from heavy drinking on its own and must be augmented by strategies to curtail advertising and reduce liquor trading hours. Some of these measures are contained in the Liquor Amendment Bill, which has been dormant since 2016 and must be revived and updated based on the best evidence of how to reduce the excessive consumption of alcohol.

• Harrison is CEO of the DG Murray Trust.