A study by the Consumer Goods Council of South Africa (CGCSA) and the Liquor Traders Association of South Africa (LTASA) has found that the ongoing trade restrictions on retail liquor stores in South Africa are unjustifiable, discriminatory and uncompetitive.

The restrictions, which mean retail liquor stores are only able to trade for four days a week, have also fuelled an illicit market, with significant revenue losses for the government.

The CGCSA and the LTASA sought to assess the impact of Covid-19 regulations on the liquor industry, particularly the off-site consumption liquor sector.

While the government eased liquor restrictions from a total ban on July 26, it imposed a four-day trading period for off-site consumption sales and permitted on-site consumption establishments to trade seven days a week.

The study reports that nearly 3 000 jobs have already been lost in the over 1 400 stores of the independently owned liquor store sector – which employs more than 14 000 people.

With each store, on average, employing five people – excluding service providers’ employees, such as merchandisers, security workers and cleaners – there are real risks of further job losses, with devastating consequences.

Given the impact of the severity of the lockdowns so far and, considering that some retailers may need at least six months to fully recover from successive lockdowns, further retrenchments cannot be ruled out, the organisations state.

The study, undertaken by independent research company Ipsos, also found that at least 67% of those interviewed predicted business closure should the restrictions continue, with 35% at risk of closing in less than three months and another 25% in six months or more.

Some businesses even indicated that they could only operate for another month should the current situation continue.

According to the study, liquor retailers have been losing about 50% of revenue they would have earned from Thursday evening to Saturday, yet overhead costs have remained unchanged. The revenue losses for small liquor outlets were as high as 65% of weekly turnover between Friday and Sunday.

“To put this in perspective, the aggregate loss in sales since the inception of lockdown stands at about R8.5-billion; sales volume has dropped by 20% to 50% across the retail formats per month, and with 60% of convenience trading being done mostly after 17:00 on weekdays and on weekends, these figures are predicted to continue on a downward scale, with great harm to business and jobs.”

In addition to cutting staff and costs, retailers have been negotiating with landlords to reduce rentals, which in turn affects the revenue of commercial property owners.

Some have reduced the working hours and wages of staff, diversified products or service lines, or changed and improved operations models to adapt to new conditions.

Yet others have explored e-commerce capabilities, cut discretionary spending, cancelled salary increases, renegotiated leases or debt repayments, or applied for government support, although not all have received the required funding.

“The economic impact of the restrictions has been dramatic and devastating on the small, medium-sized and microenterprise businesses, with the resultant severe impact on their employees and families.

The continued bans on the sale of alcohol without significant government support could see the decimation of the independently owned liquor store sector, says the LTASA.

Particularly worrying is that the restrictions have simply benefited the illicit market, which has grown since the first total ban on alcohol sales was imposed in March 2020. People have found ways to access alcohol that has benefitted unregulated, illegal operators to the detriment of responsible, law-abiding liquor traders.

Commenting on the research, LTASA chairperson Sean Robinson notes that restricting trade to four days is not a viable nor sustainable response to Covid-19.

“Alcohol restrictions are merely driving trade to the illicit market, while causing irreparable harm to the sector through closures and job losses.”

The CGCSA warns that the longer the government continues to restrict off-site consumption and the more it imposes restrictions on the alcohol industry and value chain, the higher the probability that illegal trade will become further institutionalised, while many licensed liquor traders will face bankruptcy as they continue to lose a significant portion (three days) of their weekly revenue.