Healthcare and medical industries

The temporary alcohol bans in South Africa has resulted in great controversy. The country has undergone three bans on the sale, dispensing, distribution and transportation of liquor since March 2020, equivalent to 15 weeks of zero sales. This article explores the costs and benefits associated with the alcohol sales bans, specifically looking at the health and economic aspects. Such a discussion is critical given the known social and health harms associated with alcohol consumption and the industry’s significant contribution towards revenue, jobs, and gross domestic product.

According to the Ministry of Health’s task team, the alcohol bans were expected to deliver on the twin objectives of curbing the infection rates and reducing the burden on healthcare facilities during wave peaks.[1] The South African Medical Research Council (SAMRC) noted the temporary bans on alcohol sales and the stricter trading hours could help focus government’s efforts towards flattening the curve.

Notably, within the first four weeks of the lockdown, trauma presentations reduced by 22 212 patients, and this was linked to the temporary alcohol bans.[2] In December, the President reinstated the latest temporary ban in 2020 due to a rapid increase in cases, now termed the ‘second wave’. The possible effects of the third temporary alcohol ban were evident soon after, with Chris Hani Baragwanath Hospital, the largest hospital in Africa, recording no trauma patients on New Year’s Eve.[3] The government is of the opinion that these temporary bans have freed up medical resources e.g., theatre time, and staff. Additionally, the reduced hospital intake has lessened overcrowding in medical facilities, thereby curbing the rate of COVID-19 transmission among patients and hospital staff.[4]

Venter et al. (2021) concluded that the reduction in trauma was not only linked to the temporary ban on alcohol, but also associated with the restrictions on the movement of people and social gatherings, as well as a decrease in the number of vehicles on the roads, among other factors.[5] Similarly, the Western Cape Department of Health suggested that the curfew and responsible citizenry have played a non-negligible role in reducing trauma cases in hospitals, especially over the New Year period.[6] Nevertheless, the available research recognises that restricting access to alcohol in South Africa, even in the absence of COVID-19, can contribute towards reducing alcohol-related mortality, crime and injuries, given the ‘high burden of harm associated with alcohol consumption in South Africa’.[7]

Sales and revenue

The temporary bans and stricter trading hours have led to lower revenue for firms operating along the alcohol value chain, and for the government itself. A study by Naidoo (2021) shows that the South African government, over the course of the bans, has lost close to R60 billion in excise duty and value added tax (VAT) collections, which is equivalent to 14.9% of the excise duty collections from 2019/20.[8]

Additionally, there have been reports that the temporary bans fuelled illicit trade of alcohol. The South African Liquor Brand Owners Association indicated that illicit trade could be occurring through border smuggling, hijacking delivery trucks, and diverting exports products for domestic sale, among other mechanisms.[9] This has resulted in R13 billion illicit trading.[10]

The alcohol industry, specifically the breweries, wineries, and craft beer industries, have reported revenue losses of more than R21.8 billion.[11] While the large breweries (SAB and Heineken) have put measures in place to curb the losses (see investment and jobs discussion below), smaller breweries and craft breweries are much more vulnerable.[12]

Restaurants and traders have also been affected by the temporary bans and stricter trading regulations. In particular, restaurants noted that (on average) 36% of their sales rely on alcoholic products.[13] Reportedly, 4 000 restaurants have closed as a result of the curfew and alcohol ban.[14] These closures have economy-wide impacts for industries such as agriculture, agro-processing and packaging.

The bans have undoubtedly had a negative impact on the broader liquor industry (and related value chains). However, there is also some evidence that the bans have opened markets and opportunities for new entrants and products. Notably, non-alcoholic industries have registered an increase in sales. This is evident with The Duchess Drinks Company recording a year-on-year revenue increase of 100% in December 2020.[15] SAB also stated that non-alcoholic beverage sales had at least doubled, even though this has not offset the losses from alcohol sales. Yuppiechef, an online retailer, saw a 500% increase in their sales of alcohol-free beverages.[16]

Jobs and investment

Revenue losses have also resulted in job cuts, and wage reductions. The alcohol value chain reportedly retrenched close to 165 000 workers following the first two bans, though it is not clear how this figure was calculated.[17] In January 2021, South African Breweries (SAB) reported suspending 550 workers[18], while Heineken let go of 70 workers.[19] These retrenchments have been coupled with wage reductions: SAB reported having cut salaries by 10% and reduced discretionary spend.[20]

Companies in the alcohol industry have cancelled investment plans. SAB announced that it would be cancelling R2.5 billion worth of scheduled investments, which were targeted at annual capital and infrastructure upgrades.[21] Heineken has also stopped its plans to invest in a brewery in KwaZulu-Natal.[22] This contraction has likely been mitigated, to a small extent, by capacity expansions by the non-alcoholic beverages’ manufacturers mentioned earlier. Other sectors may also have gained from a diversion of household spending, away from alcohol consumption.

Concluding remarks

The recent alcohol bans have had both positive and negative consequences for South Africa. This has led to a resurgence in long-standing policy debates about the overall cost or benefit of the industry. Previously, it was difficult to collect the data needed to assess the merits of different alcohol policy options. The multiple alcohol bans (and related restrictions) implemented during the pandemic provide a unique opportunity to gather evidence associated with the costs and benefits of liquor consumption in South Africa under different policy scenarios. Hopefully, the unprecedented behavioural experiment forced on us by the COVID pandemic will be fully utilised to review South Africa’s current regulatory environment for liquor and ensure that future policy changes carefully balance the benefits of a well-regulated liquor industry against the multiple costs of liquor consumption and abuse.