Is the alcohol and tobacco sector on the path to recovery? SAB and SATTA give us the rundown

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Looking at the grave impact which the business sector endured during the lockdown, being a pressing question on most peoples minds, we spoke with two industries who dealt with just that much more than others.

At the height of the hard lockdown, the alcohol and tobacco sectors were among the industries which were hit the hardest. All due to the nonsensical decision on banning the sale of tobacco and alcohol products for extended intervals.

Such was the impact of the lockdown, prior to Level 2 being implemented, Zoleka Lisa, Vice President of Corporate Affairs at South African Breweries, explained, the ban on alcohol sales put a staggering 1 million jobs at risk across the industry’s value chain.

She further highlighted stopping the sale of alcohol products resulted in an R18 billion loss in revenue across the alcohol industry, all due to the last ban.

Furthermore, the estimated Excise Tax, which the Government wrote off just from the alcohol industry, due to the illicit trade during the last ban was R3.4 billion.

At the time, South African Tobacco Transformation Alliance (SATTA), told the Newcastillian – Online Daily News that the ban on the sale of tobacco products has had a devastating impact across the entire value chain. Furthermore, SATTA explained the Government (at that stage) lost out on R36-Billion in tax revenue 

Read more: The ice-cold truth, SAB and SATTA speak out on alcohol and tobacco ban

While Level 2 of the lockdown allows for the sale of tobacco products and alcohol, how are companies such as SAB and the tobacco industry recovering?

As one of South Africa’s largest companies, sustaining a direct workforce of over 5 000 people, Zoleka Lisa confirms that every SAB employee is looking forward to once again getting the industry back on track and contributing to the national economy, which has thus far lost an estimated R19 billion due to the ban. 

According to Lisa, one of the imperatives to achieve this economic re-set, is the acceleration of the nation’s capability through the localisation of production and local procurement instruments, which are essential components on the SAB agenda to enhance consumer and business confidence.

As SAB works on getting back on track, what type of feedback has the company received from its clientele?

South African Breweries (SAB) has taken proactive steps, calling on tavern owners, restaurants, bars, liquor outlets and the South African public to follow strict Covid-19 protocols and adhere to Level 2 regulations. This is in order to protect lives and support the 1.1 million livelihoods which depend on a healthy and functioning alcohol industry.

Lisa goes on to say, “The warnings are clear and unambiguous, such as compliance with the new operating hours for taverns, bars and restaurants as well as restrictions on retail outlet trading times. Should establishments have their alcohol license revoked for any lawful reason including the contravention of any applicable current COVID-19 Regulations, SAB will not be legally allowed to sell further alcohol to them.”

As SAB works on ensuring compliance and enhancing business, does the company forecast another ban on the sale of alcohol? And what would the implications be, if the Government does put another ban in place?

“We do not speculate when it comes to the actions of our government. Having said that, we do not believe that a ban is a sustainable measure and has a catastrophic impact on not only our own business but the national economy,” states Lisa.

However, she does say, SAB will continue to actively engage with their social partners through Nedlac and are committing additional PPE resources to help the Department of Health and our frontline workers.

Furthermore, she stresses the alcohol industry cannot sustain another alcohol ban. Especially when looking at the last ban and how the industry was impacted with 117 000 jobs lost.

“Another ban could mean further job losses, tax revenue loss that the Government desperately requires, it will impact our glass industry that relies on alcohol production and bottling, farmers will not be able to utilise the barley they have planted. The impact of another ban effects 1000 000 livelihoods across our value chain and we simply cannot sustain it,” Lisa concludes.

When looking at the cigarette industry, SATTA explains there are several challenges which they are still facing, despite smokers, being able to legally purchase cigarettes.

“The five-month ban on tobacco sales during the lockdown has had a devastating impact on the legal tobacco value chain and caused a dramatic shift in the market in favour of the illicit trade.”

Furthermore, the ban on tobacco sales has seen tensions escalate between cigarette manufacturers within South Africa.

“Surveys conducted by the University of Cape Town’s Research Unit on the Economics of Excisable Products (REEP), for example, show that cigarette brands mainly associated with the ‘Fair-Trade Independent Tobacco Association’ (FITA) have made extraordinary gains, while SATTA value chain brands have been almost entirely eclipsed,” SATTA explains.

Read more: The tobacco battles begin, as BATSA and FITA lock horns over illegal cigarettes

In this context, the immediate priority for SATTA is to ensure that a level playing field is achieved as quickly as possible and the illicit trade rooted out.

“This is why SATTA is calling for the urgent ratification of the World Health Organisation (WHO) Illicit Trade Protocol. Ratification would mean that the country, which has by far the biggest illegal trade in tobacco in the world, implements global WHO Track and Trace guidelines,” SATTA points out.

In terms of the future and the ramifications of another ban on tobacco products, SATTA explains it currently has its hands full.  

“We are obviously still awaiting the outcome of our court action, which will provide a definitive legal opinion on the ban itself and will probably help us all understand the future of South Africa’s tobacco industry,” SATTA concludes.

With the tobacco and alcohol industry resolving the issues caused by the lockdown, the question now remains, will the Government re-introduce the ban on alcohol and tobacco products if there is a second wave of COVID-19? Or will the Government not allow the pandemic to wreak further havoc on the economy?

Read more: Dr Hurley discusses Medical sectors concerns around a second wave of COVID-19

Author: Quinton Boucher

Edited: Calvin Swemmer


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