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Surprise! Not… illegal booze flourishes in SA

The illegal alcohol trade has grown dramatically in the past year – even overtaking the legal wine and cider trade in SA, according to research by Euromonitor.

The study was commissioned by the alcohol industry ie the Beer Association of SA, the SA Liquor Brand Owners Association, and Vinpro which represents wine and grape growers to gauge the effect of the cumulative alcohol bans and to probe the illegal trade. 

Euromonitor did similar research for the industry in 2012 and 2017. Research planned 2022 was brought forward a year at the request of the industry, due to concern that the 19 weeks of lockdown had further entrenched illegal, alcohol-smuggling networks and the selling of untaxed alcohol.

The research report, “Illicit Trade: Alcoholic Drinks in SA in 2020”, calculates that losses of excise taxes, excluding VAT and company taxes, increased from R6.4bn in 2017 to R11.3bn in 2020 — a compound annual growth rate of 20%. 

It found that for every 6.5 legal litres of alcohol sold in 2017, one illegal litre was sold. In 2020, for every 4.5 legal litres of alcohol sold, one illegal litre was sold.

Beer Association CEO Patricia Pillay said, “The report confirms a clear correlation between the sales ban and the increase in the demand for illicit alcohol.

“The illicit market has almost doubled in the past three years and, in 2020, was estimated to be worth R20.5bn and comprised 22% of total alcohol consumption.

“The tragic, indirect consequence of this has been the rise in illicit, homebrew consumption-related deaths, and an increase in criminal activities, which are now firmly entrenched.”

The researchers visited 21 places in six provinces, such as taverns, and restaurants and bars in which alcohol was sold, and spoke to manufacturers, traders and those involved in the supply chain. 

Illegal alcohol includes sachets of cheap, brown alcohol brought over the border from Mozambique and Zimbabwe. Another form of illicit alcohol is refilling branded bottles at bars with cheaper alcohol.  

Smugglers can also sell European spirits that have 40% alcohol content rather than the legislated 43%, but look the same to the average consumer. These are imported into SA and resold to other African countries, but lately some have been sold locally. 

The product most at risk of being sold illegally is spirits, such as vodka and brandy, that have high alcohol volumes and attract the highest sin taxes.

Illegally sold spirits can cost up to R90 less than legal spirits as they do not have excise taxes added to their price

The research was recently shared with labour and the department of trade and industry representatives at the National Economic Development and Labour Council (Nedlac).  

The industry has called on the government and anti-alcohol abuse lobby groups to do their own research into the illicit trade. 

Rico Basson, head of Vinpro, has called on health groups as well as the government to do research into illicit trade and the impact of bans and high sin taxes. 

“No-one but the liquor industry researches the effects of excise tax rises and liquor bans on the illicit industry, and I think, government and anti-alcohol groups should also do research.”

The industry has also called for more enforcement to stop smuggling illegal alcohol for sale at taverns and bars.

Source: Vinpro,