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Industry stirred, but not shaken by liquor bill

Almost shaken

Following years of debating, the new Liquor Bill was passed by the National Assembly early in September. The process started back in 1996, when consultation took place between government and industry stakeholders. The result was the 1997 Liquor Policy, aimed at restructuring the liquor industry and addressing the socio-economic costs of alcohol abuse.

A Liquor Bill was passed by Parliament in 1998, incorporating the concept of a three-tier registration of manufacturers, micro-manufacturers, distributors and retailers. The Constitutional Court found the bill unconstitutional and ruled that the authority over retail liquor licensing, micro manufacturing and sorghum beer rests at provincial level. The redrafting of the Bill was undertaken and in April 2003 the Bill was re-submitted, but again referred for re-drafting following heavy criticism from the industry.

The new Bill is the result of the debates throughout this long history. Mr Alec Erwin said: "This time has been well spent and the Liquor Bill that I am now introducing reflects broad agreement with the industry, addresses the constitutional and technical matters that were raised and meets with governments original intentions in a workable manner.

What the bill says

The new Liquor Bill proposes a new and more comprehensive regulatory structure for the industry.

The introduction of a flexible three-tier system to regulate and largely separate the three tiers of manufacture, distribution and retail was a matter of contention. However, changes made to the Bill means that cross-ownership between the three sectors will be allowed and provision is made for the registration of manufacturer or distributor, or both. The registration and regulation of the manufacture and distribution of liquor takes place on national level, while that of the micro-manufacture and retail of liquor takes place on provincial level.

The Bill aims to address the socio-economic costs of alcohol abuse and to this end restrictions are imposed on the supply of liquor to minors; the advertising of liquor, particularly advertising targeting minors; the use of liquor as an inducement for employment, thus outlawing the "dop" system; the manufacture and supply of methylated spirits and the prohibition of concoctions. Responsibility is further placed on the manufacturers and distributors, who are required by the legislation to submit a plan to combat the abuse of alcohol as part of their registration requirements.

Manufacturers and distributors must apply for registration with the Department of Trade and Industry within a year. Applications will be considered against three main criteria: commitment to black economic empowerment; commitment to combating the abuse of alcohol; and the extent to which the registration will restrict new entry, diversity of ownership and competition in the industry, balanced against the impact of employment, efficiency and exports.

This evaluation will be the basis of decisions by the Minister to impose conditions on the registration. Registrations may be reviewed if the conditions of the application changes, for example if the registrant becomes registered as a retailer or micro-manufacturer in terms of provincial legislation or has fundamentally changed its operations.

The Bill provides for inspection powers and penalties for offences. In addition, a National Liquor Policy Council will act as an inter-governmental forum, headed by the Minister and made up of Executive Council members responsible for provincial liquor licensing. The Council will develop national norms and standards and national policy as well as promote intergovernmental relations for the industry.

Transitional measures have been provided for, particularly creating a mechanism by which the Liquor Act of 1989 is repealed in each province once the province has prepared the necessary provincial legislation. The Bill further provides for the conversion of existing manufacture and distribution licenses, subject to Ministerial review. The retail rights of existing license holders will also be protected until the required provincial laws are in place.

The Provinces

The issue of unlicensed retailers and regulation of the retail sector is a priority. There are an estimated 200 000 unregulated retailers, including shebeens.

The Gauteng Liquor Bill, tabled in April, addresses trading hours, the socio-economic costs of alcohol abuse and self-regulation within the liquor industry. A comprehensive framework is included for the regulation of the sale and supply of liquor and while the control of the sale and supply of liquor will fall under a Gauteng Liquor Board and local committees. The Bill will also regulate the granting of different kinds of licenses, while providing an inspectorate function.

KwaZulu-Natal published its provincial liquor bill in July. The aim of the Bill is to level the playing field, ending exploitation, inefficiencies and corruption in the industry. Promulgation is expected by the end of the year. Key aspects of the proposed legislation includes reducing the 25 types of liquor licences to six, extending the licence period from one to nine years, creating a provincial liquor licensing authority; and establishing a licensing appeals tribunal.

Implications

A firm commitment to negotiation and meaningful consultation with industry players and maximum participation by all stakeholders was demonstrated. The dti says that it is not the intention of government to restructure the industry and that government will in no way disturb the efficiency of the industry. However, the Bill promotes the development of a "responsible and sustainable liquor" industry, while facilitating the entry of new participants; diversity of ownership and an ethos of social responsibility, including black economic empowerment and combating alcohol abuse.

There have been suggestions that the government has buckled to pressure from the industry and that the new bill allows those who dominate the industry to continue business as usual, maintaining the status quo and ignoring empowerment and transformation.

Regulation of retailers will fall under provincial authority and, until provincial legislation has been passed, the fact that 90% of retailers are unlicensed will remain the reality. This poses a major problem, as unlicenced retailers cannot be regulated and thus combating alcohol abuse and leveling the playing field remains an unattainable goal. In addition, the definition of a retailer is somewhat vague in the Bill and does not specifically include shebeens.

A further concern was the fact that the Bill overlaps with the legislation that should be dealt with under the Competition Act and Empowerment Act and that the industry is being subjected to burdens not imposed on an industry wide basis.

Less government interference is required and the Liquor Bill has displayed a move toward this trend. Many entrepreneurs are capable of carving a niche for themselves and would be in a better position to do so if the industry was less regulated. In addition, the big players build on economies of scale and contribute greatly to the economy, while offering good value to consumers.

A complete copy of the new bill is available at http://www.gov.za/gazette/bills/2003/b23-03.pdf

Sources and for more information see www. www.fastmoving.co.za; www.iafrica.com; Business Day www.bday.co.za; dti www.dti.gov.za.