In early March 2020, the South African government decided to ban liquor sales due to the impact coronavirus had made on the economy. In June 2020, the government lifted the ban. But, the ban was soon put back in place in July when the pandemic had worsened.
Before the pandemic, South Africa’s alcohol trade was estimated as a multi-billion dollar industry. During the highs of the liquor industry in South Africa, the sector paid R2.5 billion (US$165m) per month in excise tax contributions to SA Revenue Service (Sars) for locally-produced and imported products. As the industry saw a significant loss of income, governing bodies decided to defer the excise tax payments until the ban was safe enough to be lifted for the economy. Since the ban, the liquor and fast-moving consumer goods (FMCG) industries have been severely impacted. The prohibition on alcohol did not just stop at sales in South Africa. The government also decided to pause the distribution of alcohol. Of course, this meant the sales and transport of local alcohol products were impacted as much as international exports.
Due to the economy suffering a loss, the governing bodies such as the South African Liquor Brand Owners Association (Salba) announced that there would be a significant impact on jobs and small businesses. It was said that people’s lives would be affected daily due to the immediate effect on the economy. Thus, not only would businesses be forced to close, but sales and jobs in the import industry would suffer too. After the announcement, all liquor businesses were faced with the responsibility to pay their excise taxes with no government help. Of course, companies had no choice but to use their profits to pay the tax, which left many businesses out of profit and had to close down. Drowning liquor companies are now desperately seeking a deferment of monthly excise duty payments to the South African Revenue Services.
Vinpro, the largest South African wine producer, has faced a loss of R8 billion alone since the pandemic in March 2020. This will be reflected across all liquor and alcohol producers across the nation. Not only will they suffer job losses and business closure, but they will have to deal with structural damage to their industry sector and price pressure.
Although the liquor industry was severely impacted and faced severe pressure, all producers respected the government’s decision to put an alcohol ban in place. The nation and its local businesses understood the pressure the government faced. The industry knew that it needed to make tough decisions to save the economy and ensure safety for its people. The nationals understand that South Africa’s healthcare industry is one to protect, so the closure of non-essentials was acknowledged and accepted.
Due to the impact of coronavirus on the local economy in South Africa, the liquor industry suffered a substantial financial crisis. In recent months, the liquor industry has slowly been able to open back up again as the government has released the alcohol ban. But, only a small number of businesses have been in a safe enough position due to financial struggles. It may be a very long time until the liquor industry in South Africa is stable again.