A bar well stocked with premium spirits
Government restrictions on off-site alcohol consumption, as they currently exist, are unwarranted and discriminatory, not to mention anti-competitive, and will cause irreparable damage and harm to the alcohol retail industry, according to Gareth Ackerman and Sean Robinson.
There is no doubt that the coronavirus pandemic has caused considerable damage to the South African economy, as well as to lives and livelihoods. The impact on the economy, which was already struggling to grow, was significant and as a result we have seen job losses, business closures and increased poverty.
While intermittent lockdown restrictions have gone a long way in staving off massive increases in infection rates, those restrictions have inflicted further damage on the economy. And the consumer goods retail sector, which is one of South Africa’s largest employers, with more than two million people employed, has also borne the brunt of the restrictions.
It should be emphasized, however, that the sector has been and continues to be fully engaged and supporting the national effort to balance business continuity with the need to protect and save livelihoods. The sector has also supported the government’s economic reconstruction and recovery plan, which aims to build a new economy and unleash South Africa’s true potential.
However, in order for the sector to recover from the impact of the pandemic and play its role in economic recovery, there are areas of concern that require urgent government intervention and assistance. Of particular concern is the government’s unilateral decision to restrict the sale of alcoholic products intended for off-site consumption between Monday and Thursday, which has been extended an additional day until Friday, while similar restrictions do were not imposed on those who sell alcohol for consumption on the premises. Not only is this unjustified and discriminatory, it is also anti-competitive and causes irreparable harm and damage to the alcoholic beverage retail industry.
The restrictions on off-site consumption have particularly devastated SMEs and employees operating in the sector. Of the more than 3,000 alcohol retail outlets affected, about 15% are black and 16,400 of the employees directly affected are black women. On average, five employees excluding service providers (traders, guards, cleaners) per point of sale now run a real risk of losing their jobs with devastating consequences.
Recent research conducted by Ipsos on behalf of the Consumer Goods Council of South Africa (CGCSA) and the Liquor Traders’ Association of South Africa (LTASA) found that the loss in revenue between Friday and Sunday is colossal and that many retailers affected might never recover. of these restrictions, especially since they have yet to restore their viability levels that were affected by previous foreclosure restrictions on the sale of alcohol.
The research also found that nearly 3,000 jobs were lost in the more than 1,400 independent liquor store sector; the overall loss in sales since the start of the lockdown amounts to around R8.5 billion; sales volume fell 20-50% in all retail formats per month; at least 67% of those surveyed plan to close their business if restrictions continue, 35% are likely to close in less than three months and 25% in six months or more; and liquor retailers lose about 50% of the revenue they would have earned from Thursday to Saturday.
Liquor retailers lost about 50% of the revenue they would have earned from Thursday to Saturday; however, overheads remained unchanged. Losses of income for small alcohol outlets can reach 65% of weekly turnover between Friday and Sunday, and many can no longer bear such losses.
In addition to reducing staff and costs, retailers have negotiated with landlords to reduce rents, which in turn affects the income of commercial property owners. Some have reduced working hours and staff salaries, and diversified product / service lines or modified / improved the operating model to adapt to new conditions. Still others have explored the direction / capabilities of e-commerce, reduced discretionary spending, canceled salary increases, renegotiated leases or debt repayments, or sought government support, although not all received the funding required.
What is particularly worrying is that the restrictions have simply offered to the illicit market that has grown since the first total ban on alcohol sales was imposed in March 2020 and further exacerbated by the looting of alcohol stocks. amounting to over R500 million during the recent unrest in KwaZulu-Natal. and parts of Gauteng. People have found ways to access alcohol that has benefited unregulated illegal operators at the expense of responsible and law-abiding alcohol traders. Current trade limitations are therefore a major constraint to the recovery of the retail sector and an inconvenience for consumers whose purchasing habits have historically indicated an increase after 5:00 p.m. on weekdays and on weekends.
One of the unintended consequences of the off-site consumption restrictions is that they have created an unwanted new trend of panic buying by consumers, resulting in a dramatic increase in pantry shopping and loading. This puts increased pressure on supply chains and demand forecasts and may even lead to increased consumption due to the increased availability of larger amounts of alcohol in households. People buy alcohol in large quantities for sale during days when trade is restricted, often at inflated prices, again defeating government goals of limiting consumption during this time.
Our view is that restricting trade to five days is not a viable or sustainable solution to responding to cases of Covid-19. Restrictions on alcohol only push trade into the illicit market while causing irreparable damage to the sector through closures and job losses. And the more the government continues to restrict off-site consumption and the more restrictions it places on the alcohol industry and the value chain, the greater the likelihood that illegal trade will become more institutionalized, as has happened. in the tobacco industry, while many alcohol traders will face bankruptcy as they continue to lose a significant portion of their weekly income.
The CGCSA and the LTASA oppose the government’s decision to expand the sale of alcohol for off-site consumption from Monday to Friday and insist that there is no valid reason not to allow the trade for seven days under license conditions. We are concerned about media reports that the decision to expand alcohol sales for off-site consumption by eight overtime on Fridays was contrary to the opinion of the Ministerial Advisory Committee which advised a full return to trade.
We therefore find this decision not only inexplicable but unjustified. We therefore await the promised two-week review of the lockdown restrictions, hoping that those remaining on the sale of alcohol for off-site consumption will be lifted.
Gareth Ackerman is co-chair of the Consumer Goods Council of SA and Sean Robinson chairs the Association of Alcohol Traders of SA. The opinions expressed are theirs.