South Africa’s wine industry faces collapse

South Africa’s ruling African National Congress party has slapped a ban on the domestic sale of alcohol. This, plus the loss of wine tourism, threatens to cripple the wine industry, says Michael Fridjhon.
 

Photo by Victor He on Unsplash
Photo by Victor He on Unsplash

The liquor industry in South Africa is facing destruction on a scale not seen since the Volstead Act ushered in Prohibition in the United States a century ago. Long the whipping boy of the ruling party, the African National Congress (ANC), alcohol has been singled out in the regulations drafted ostensibly to combat the spread of Covid-19. 

When it became clear during the course of March 2020 that some form of lockdown was necessary to prepare for the pandemic, the government promulgated a series of regulations in terms of the Disaster Management Act. At the time it said that it needed to shut down the economy to slow transmissions while it built hospital capacity, and acquired the necessary protective clothing, ventilators and medicine. (The majority of the population has no form of health insurance and is dependent on broken state-run hospitals.) Only essential businesses were permitted to operate. All alcohol sales were banned – and for the first month, even wine exports were prohibited.

During the second month of lockdown exports were allowed, but by then congestion at the major ports made it difficult for producers to meet the supply deadlines they had originally committed to: more than just the single month of exports was lost. Listings were cancelled and many wineries missed their spring and summer promotional slots. 

The second month of local prohibition was even more destructive. The major breweries had brew batches in tank and bottle approaching their sell-by date. They weren’t even permitted to move freight between their warehouses. Finally, they sought a court order to override the government ruling. When local sales with restricted selling hours opened on the 1st June, producers and the off-trade breathed a collective sigh of relief.

Their happiness was short-lived: less than six weeks later, and without prior notice, the government announced a complete lockdown on all domestic liquor sales. Citing concerns about alcohol-induced trauma such as road accidents, domestic and gender-based violence distracting medical staff from dealing with the rising number of Covid-19 infections, the ban has been reimposed for as long as the Disaster Management Council deems necessary.

There is no doubt that a portion of the South African population has a toxic relationship with alcohol. It is also a matter of record that the majority of the ANC’s leadership is officially in favour of prohibition – a result of alcohol having been used as an instrument of repression for the better part of the last century by the white government. However, this does not entitle the Covid Council to make decisions which effectively undermine the industry’s constitutional right to manufacture and sell its product.

During the first lockdown, when producers and retailers believed that the sacrifice was necessary for the country to prepare for the Covid-19 storm, they grudgingly accepted the domestic market ban. But now that it is clear that the ANC Government did not use the first lockdown to prepare properly – it failed to complete even a single field hospital – there is less sympathy for the argument and a much more acute concern around survival.

The South African economy was in deep recession even before the pandemic. The lockdown – coupled with international travel restrictions – has decimated the hospitality industry, leaving liquor suppliers with a mountain of bad debt. To the extent that restaurants are allowed to open (maximum 50% capacity and with liquor sales prohibited) the viability of the survivors is in doubt. Even the major producers and distributors are talking about business rescue if the current ban continues beyond mid-August. Since the government has not even hinted at a termination date (and Covid-19 infections are unlikely to peak before September), the collapse of the production sector, along with its key suppliers (glass and packaging) is now a very real prospect.

Michael Fridjhon

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