South Africa urged to end "devastating" alcohol prohibition

11 August, 2020

The South African government has been urged to scrap its alcohol prohibition in order to avoid “devastating consequences” at home and abroad.

President Cyril Ramaphosa initially imposed the alcohol ban on March 27 in a bid to reduce domestic violence and decrease hospital admissions during the Covid-19 pandemic.

He lifted the ban on off-trade sales on June 1, leading to long queues outside liquor stores, but bars were not permitted to reopen. Ramaphosa then reinstated the country’s prohibition on July 12 after reading the riot act to people that flouted rules designed to stem the spread of the coronavirus.

It is now the only country in the world to have reintroduced a full prohibition on alcohol sales. The wine, spirits and beer industry in South Africa employs more than a million people, directly or indirectly, and many people now face bankruptcy.

Trade body Spirits Europe urged the South African government to provide a clear and reliable timeline to quickly lift the ban.

Director general Ulrich Adam said: “The ban rips away all the benefits from the Economic Partnership Agreement between the EU and South Africa at a time when we should actually find ways to deepen our trading relations to support each other’s recovery processes.”

South Africa is the largest export market on the African continent for European spirits producers, with exports worth €255 million in 2019.

“Banning sales also means banning imports of European spirits, while South Africa continues to export, particularly wine, which has 110 million litre quota duty free export into EU under the EPA – contributing to R5.7 billion in net exports earnings for South Africa on alcohol,” added Adam. “Our member companies operating in South Africa are deeply concerned about the uncertainty of current trading conditions.

“The lack of clarity on whether and when the ban might be lifted makes business planning impossible. We therefore need a clear and reliable timeline.”

During the first ban, 476 liquor store robberies were reported between March 27 and June 1.

The country was also plunged into chaos when soldiers patrolling Alexandra reportedly beat to death a local man, Collins Khosa. The soldiers allegedly found a half-empty bottle of Castle Milk Stout in his home and accused him of breaking the lockdown regulations.

It sparked protests across South Africa, with many directing their anger at Ramaphosa, and Khosa’s name even appeared on posters in Black Lives Matter marches in the US.

The AB InBev-owned South African Breweries halted R5 billion worth of investments in the country because of the prohibition.

“The cancellation of this planned expenditure is a direct consequence of having lost, as of August 3, 2020, 12 full trading weeks, which effectively equates to some 30% of annual production,” said SAB’s finance vice-president, Andrew Murray. “This decision is a result of the first, and the current, suspension of alcohol sales which has led to significant operating uncertainty for ourselves, our partners, as well as colleagues in the industry, including participants in the entire value chain, and which affects over one million livelihoods across the country.”

The South African wine industry was initially ordered to cease all operations during the middle of the harvest. Trade associations lobbied the government to reverse that decision and it relented on March 26, allowing producers to complete the harvest. However, all sales were still prohibited, which prevented the producers from completing any exports.

After much flip-flopping, wine exports were permitted once again, but producers have seen their domestic market vanish due to the prohibition.

Spirits Europe calculated that the total loss in taxes, excluding excise tax, for the first ban was R13.9 billion. It predicts that an additional nine-week ban will increase the potential loss to around R23.8 billion.

The total loss in excise taxes for the first ban was R4 billion. Adding another nine-week ban will increase the potential loss to R7.2 billion. The latter is equivalent to 17.6% of excise tax income.

Spirits Europe has urged the European Commission to “foster a dialogue” with the South African government on this issue.

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