SA's continued ban on the sale of alcohol could threaten its biggest trade deal - the Economic Partnership Agreement (EPA) signed with the EU.
An organisation representing spirit makers and agri-product exporters in Europe is complaining that the local ban on alcohol sales is fast leading to a trade imbalance in relation to SA's wine exports and spirit imports.
In terms of the EPA signed with our biggest trading bloc, SA has a quota of 110-million litres of duty-free wine exports to Europe, which in 2019 netted the country R5.7bn in export earnings. SA is also the prime destination for European spirits in Africa, with imports amounting to €255m (R5.2bn) in 2019.
The development comes as SA's top brewers and a prominent glassmaker announced plans to halt up to R13bn in new investments as a result of the prohibition.
The organisation SpiritsEurope said the ban is ripping away the benefits of the EPA between SA and the EU. It warned the government to cancel the ban or "risk the consequences" at home and abroad.
"Our member companies operating in South Africa are deeply concerned about the uncertainty of current trading conditions. The lack of clarity on whether and when the ban might be lifted makes business planning impossible. We therefore need a clear and reliable timeline," said SpiritsEurope director-general Ulrich Adam.
Business Times understands that the matter was discussed in a meeting between Adam, the EU Commission in Brussels and EU representatives in SA this week.
It is expected to be formally raised with the South African government once regulations applicable to the extension of the lockdown are made public.
The lack of clarity on when the ban will be lifted makes planning impossible
SpiritsEurope represents Europe's agri-food export sectors and the interests of 31 associations of spirits producers, as well as 10 multinational companies.
Sidwell Medupe, spokesperson for the department of trade, industry & competition, did not respond to questions from Business Times. The EU could not be reached for comment.
The EU and SA - together with Botswana, Lesotho, Mozambique, Namibia and Eswatini - signed the Southern African Economic Partnership Agreement in 2006. Under the EPA, the EU has fully or partially removed customs duties on 98.7% of imports from SA, and guaranteesfree access for the other signatory countries.
Last year imports from Europe into SA averaged R29bn a month. In May 2020 SA received about R24bn for exports to the EU region.
It is estimated that the initial alcohol ban, from March 27 to June 1, cost SA about R4bn in excise duties alone. The current ban, announced by President Cyril Ramaphosa on July 12, is expected to increase excise duty losses to R7bn.
The liquor industry was this week successful in its request to the government to defer R5bn in excise duty payments, with the National Treasury agreeing to a 90-day payment break. The industry was liable for excise duties worth R2.5bn in July and another R2.5bn in August on products in warehouses that cannot be sold.
South African Breweries (SAB) announced it is halting R5bn in investments in SA after losing 12 full weeks of trade, which equates to 30% of the company's annual production.
Heineken SA said it is re-evaluating plans to establish a major new production facility in KwaZulu-Natal, and Consol Glass said it has indefinitely suspended construction of a R1.5bn plant in Ekurhuleni.
Andrew Murray, vice-president of finance for Africa at AB InBev, which owns SAB, told Business Times the company had planned to expand its Alrode Brewery in Alberton to increase warehousing capacity; improve equipment at its brewery in Rosslyn, north of Pretoria; and expand capacity at its beer factory in Newlands, Cape Town.
"We are at 90 days without being allowed to sell our products and all those things are informing these decisions," he said.
He said SAB could reconsider its decision to halt the multibillion-rand investments should the government rethink its stance on liquor sales.
Murray said they are still waiting for the government to open talks with the liquor industry on what the government sees as the negative effects of allowing the resumption of alcohol sales.
The ban was based on research compiled by Professor Charles Parry of the South African Medical Research Council (SAMRC), which concluded there was a marked increase in trauma unit admissions to hospitals between June 1 and July 12, when the prohibition was briefly lifted.
Parry and SAMRC president and CEO Professor Glenda Gray have since advised that liquor sales can resume as there are enough hospital beds in the worst-affected provinces to handle any surge in admissions.
Murray said the liquor industry has lost R25bn in sales during the lockdown period, with a devastating effect on those in its value chain, including tavern owners and farmers. The industry employs and supports up to
1-million people in its value chain.
He said the increase in trauma unit admissions had coincided with the reopening of more sectors of the economy, when 8-million people returned to work.
