Draft Liquor Policy: Department of Trade and Industry (DTI) briefing

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Trade and Industry

10 June 2015
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

The Department of Trade and Industry (DTI) said the liquor industry in South Africa was regulated by DTI and comparatively, the liquor industry contributed significantly to the economy of the country. Because of the problems this country were experiencing in terms of the socio-economic impact of alcohol use, the President initiated an Inter-Ministerial Committee (IMC) that comprised of the Ministers Of Social Development, Health, Trade and Industry, Police and Education, among others. The intention of the IMC was to ensure that there was no fragmentation in the approach to liquor regulation matters. Liquor regulation in South Africa was subject to concurrent jurisdiction and required cooperative governance to be effective. The National Liquor Policy Council (NLPC) was a structure created to coordinate concurrent jurisdiction to ensure policy consistency, alignment and harmony.

Statistics on the liquor industry relating to manufacturers and distributors showed that there were 35 distributors in 2003 and currently there were over 2 000 licensees. An estimated 65 000 retail licences had been granted in 2011 compared to approximately 35 000 in 2003. The total recorded alcohol per capita consumption in liters of pure alcohol for the Southern African Development Community (SADC) countries showed South Africa had the second highest consumption at 27.1 litres alcohol per capita. South Africa had one of the riskiest drinking patterns in the world and ranked in the top five. Between 2003 and 2005, per capita consumption of pure alcohol equalled 9.5 litres per year, compared to an African average of 6.2 litres. This meant that South Africans drink, on average, 53% more than the rest of Africa. Alcohol was the third leading cause of premature death and disability in South Africa. Tangible financial costs of harmful alcohol use alone were equivalent to 1.6% of the Gross Domestic Product (GDP). South Africa was also a global leader in terms of alcohol related harms, with 10 times the global average for male homicides and twice the global average for road injury deaths.

The DTI developed the liquor policy to address the socio-economic costs and harms associated with liquor abuse, the slow pace of transformation in the liquor industry and standardisation of key aspects of regulation and improved regulatory collaboration. The policy also aimed to address illegal liquor manufacturing and trading, capacity and enforcement constraints within the National Liquor Authority and the ineffectiveness of the NLPC as a coordination structure.

Some of the more contentious policy proposals were:

- Review of the legal drinking age from 18 to 21 years

- Manufacturers, suppliers and retailers to bear liability for any harm or damages caused by an intoxicated person

-Amendment of section 9 of the Liquor Act to align with the Control of Marketing of Alcoholic Beverages Bill. The Bill called for restriction on advertising and prohibition of sponsorship and marketing

- The set uniform trading hours within the norms and standards should be integrated in national, provincial and municipal legislation

- Liquor premises to be located at least 500 meters away from schools, places of worship, recreation facilities, and rehabilitation centres, residential areas and public institutions

- No liquor licenses should be issued to petrol service stations; premises attached to petrol service stations; premises near public transport

- National Liquor Authority to ensure that registration conditions as articulated in the Broad-Based Black Economic Empowerment (B-BBEE) Codes of Good Practice are imposed and strictly monitored. Failure to adhere to the B-BBEE Codes of Good Practice may result in revocation of a registration or non renewal.

The Department was open to the input that would be given during the consultation process and emphasised that in order to deal with the socio-economic effects of liquor, it was important to apply a combination of interventions relating to price, marketing, availability and accessibility.

The Committee questioned the legal validity of the proposals dealing with liability, whether this policy fully incorporated concurrent jurisdiction as prescribed by the Constitution and what the realistic impact would be if the legal drinking age was increased from 18 to 21 years. Members questioned the enforceability of some of the proposals and questioned whether the Department had benchmarked these proposals against international best practices or whether the proposals had been legally researched.

The Committee wanted a clear understanding of what South Africans drank; the impact of advertising and whether the Department’s consultation process had been extensive enough. It had been formally proposed to extend the 30 days for public comments to 60 days so that all the role players in the industry and those affected by alcohol use and abuse had an opportunity to give input.

Meeting report

The Chairperson welcomed everyone to the meeting. The Department would brief the Committee on the Draft National Liquor Policy Review Document, as published for public comments on 20 May 2015.

Presentation on the Draft National Liquor Policy Review Document

Ms Zodwa Ntuli, Deputy Director-General: Consumer and Corporate Regulation Division, DTI, said the draft policy document was out for public comment and the Department was already engaging with stakeholders and on public platforms to provide clarity on the rationale for some of the proposals. The presentation would be an overview and not each and every detail of the Draft Policy would be dealt with. The liquor industry in South Africa was regulated by DTI and comparatively, the liquor industry contributed significantly to the economy of the country. Oversight was done from a regulatory point of view looking at the manufacturing and distribution of liquor in South Africa. DTI was also responsible for assisting the liquor industry on matters relating to market access and exports to ensure sustainability of the industry. Because of the problems this country was experiencing in terms of the socio-economic impact of alcohol use, the President initiated an Inter-Ministerial Committee (IMC) that comprised of the Ministers of Social Development, Health, Trade and Industry, Police and Education, among others. The intention of the IMC was to ensure that there was no fragmentation in the approach to liquor regulation issues. All of the proposals from various departments had been integrated into this policy.

Mr MacDonald Netshitenzhe, Chief Director: Policy and Legislation, DTI, said the Liquor Act 27 of 1989 governed the liquor industry in various provinces. In 1997 the Liquor Policy Paper was developed with the objectives to restructure the liquor industry to promote wider participation and encourage transformation and to address and reduce the socio-economic costs of alcohol abuse in South African society. The Liquor Bill was referred to the Constitutional Court on grounds of constitutionality in 1998 and in 2003 the the Liquor Act 59 of 2003 was passed with transitional provisions relating to the repeal of the 1989 Liquor Act in provinces. In 2013 DNA Economics commissioned by the DTI produced a report on the effectiveness of the Act which highlighted serious gaps and the Minister then issued Regulations to strengthen registration requirements and processes, and to introduce trading hours for distributors. In February 2014 the Minister issued the National Liquor Norms and Standards, after consultation with the National Liquor Policy Council (NLPC). The Draft National Liquor Policy Review Document was tabled at the NLPC for consideration and it was adopted in March 2015 for public consultation. In May 2015 the Draft National Liquor Policy Review Document was gazetted for public consultation, after Cabinet approval.

Liquor regulation in South Africa was subject to concurrent jurisdiction and required cooperative governance to be effective. The NLPC was a structure created to coordinate concurrent jurisdiction to ensure policy consistency, alignment and harmony. The NLPC comprised of the Minister and relevant provincial MECs. The National Liquor Authority (macro manufacturers and distributors) and Provincial Liquor Boards (micro-manufacturers and retailers) implemented respective legislation. Municipalities also oversaw by-laws that impacted on liquor regulation, e.g. zoning.

Statistics on the liquor industry relating to manufacturers and distributors showed there were 2 706 registrants with 2 180 of those registrants being active, including duplicates (where one entity had multiple premises/subsidiaries). There was a decrease in grape farmers from 4 346 in 2003 to 3 527 in 2011. Macro beer brewers also decreased from 5 in 2003 to 2 in 2011. These decreases could be attributed to mergers and acquisitions in the industry. In 2003 there were 35 distributors and currently there were over 2 000 licensees. An estimated 65 000 retail licences had been granted in 2011 compared to approximately 35 000 in 2003. The statistics also showed prevalence of current alcohol use, binge drinking and hazardous/harmful use among males and females in South Africa. The total recorded alcohol per capita consumption in liters of pure alcohol for the Southern African Development Community (SADC) countries showed South Africa had the second highest at 27.1 litres alcohol per capita. South Africa had one of the riskiest drinking patterns in the world and ranked in the top five. Between 2003 and 2005, per capita consumption of pure alcohol equalled 9.5 litres per year, compared to an African average of 6.2 litres. This meant that South Africans drank, on average, 53% more than the rest of Africa.

Alcohol was the third leading cause of premature death and disability in South Africa. Tangible financial costs of harmful alcohol use alone were equivalent to 1.6% of the Gross Domestic Product (GDP). South Africa was also a global leader in terms of alcohol related harms, with 10 times the global average for male homicides and twice the global average for road injury deaths.

The greatest contributor to alcohol-related harm was violence, which accounted for 39% of all such harms; 18% was due to mental health problems resulting from harmful alcohol use and 14% of harm was due to road deaths. Foetal Alcohol Syndrome (FAS) had also reached endemic proportions in some parts of the country. In a research conducted in the Western Cape (Wellington), the prevalence of FAS among grade 1 scholars in 1997 was found to be at 4,8%, increased to 7.6 % in 1999 and to 8.8% in 2001. The industry contributed considerably to the economy, with jobs estimated at 548 000 directly, with total government tax revenue estimated at R41.8 billion, and total economic contribution estimated at R94.2 billion including production, sales and value added products as at 2009. Government spent significantly in dealing with harm. The DTI developed the liquor policy to address the socio-economic costs and harms associated with liquor abuse, the slow pace of transformation in the liquor industry and standardisation of key aspects of regulation and improved regulatory collaboration. The policy also aimed to address illegal liquor manufacturing and trading, capacity and enforcement constraints within the National Liquor Authority and the ineffectiveness of the NLPC as a coordination structure.

Mr Netshitenzhe gave an overview of the policy proposals as it related to the highlighted challenges. To address these challenges the following proposals had been made:

-Amendment of section 9 of the Liquor Act to align with the Control of Marketing of Alcoholic Beverages Bill. The Bill called for restriction on advertising and prohibition of sponsorship and marketing

- A government managed fund responsible for combating alcohol abuse should be established. The industry should continue to contribute a percentage to a fund which be held in trust by the National Liquor Authority

- Review legal drinking age from 18 to 21 years

- Manufacturers, suppliers and retailers to bear liability for any harm or damages caused by an intoxicated person

- The set uniform trading hours within the norms and standards should be integrated in national, provincial and municipal legislation

- Liquor premises to be located at least 500 meters away from schools, places of worship, recreation facilities, and rehabilitation centres, residential areas and public institutions

-Education and awareness to be included in the Act as part of the functions of the National Liquor Authority

- No liquor licenses should be issued to petrol service stations; premises attached to petrol service stations; premises near public transport

- National Liquor Authority to ensure that registration conditions as articulated in the Broad-Based Black Economic Empowerment (B-BBEE) Codes of Good Practice are imposed and strictly monitored. Failure to adhere to the B-BBEE Codes of Good Practice may result in revocation of a registration or non renewal.

- Harmonisation of national and provincial laws on liquor. Currently only KwaZulu-Natal, Western Cape and Northern Cape had new legislation while others still operated under the 1989 Act.

- The norms and standards to be integrated in both national and provincial legislation and regulations to ensure coherence and harmony

- Reposition the National Liquor Authority to become a trading entity of the DTI with more capacity and powers to enforce the liquor legislation effectively.

Mr Netshitenzhe said in order to deal with the socio-economic effects of liquor, it was important to apply a combination of interventions relating to price, marketing, availability and accessibility. It was important to acknowledge the step taken by NLPC in adopting the National Liquor Norms and Standards which would standardise trading practices across provinces. Other interventions would be required to promote exports, agro processing and agriculture to enhance trade and development of the industry. The written submissions closed on 2 July 2015, and the Department would consolidate all input for consideration. The revised National Liquor Policy Review Document would be submitted to the NLPC, and thereafter Cabinet for approval. A Draft Liquor Amendment Bill would be published for public consultation thereafter.

Ms Ntuli apologised for not making the issued norms and standards available to the Committee, because it was an important part of the policy document. Some of the proposals from the various departments were dealt with in the norms and standards. The consistency in terms of the trading conditions had been achieved, but the implementation of the norms and standards was vital. The liquor industry was dominated by a few players and the barriers to entry and the operational costs were very high. The likelihood to facilitate any form of competition in some areas was close to non-existent. The dominant player (over 90% of the market) in traditional African beers was United National Breweries (UNB) and Distell was the dominant player in the wine and spirit industry. There should be a specific level of transformation at the B-BBEE level that should be put to this industry. If the status quo remained it would not benefit the economy from an ownership and empowerment perspective. The proposal to increase the legal drinking age from 18 to 21 had come under significant attack. This proposal had been made from a social development perspective. It was without doubt that the cost of alcohol and alcohol abuse was draining the state. The amount of money made by this industry was the same amount of money, even slightly more than what the state spent on cleaning up the harm that resulted from this industry. The policy intervention should strike a balance between the contribution to the economy and the harmful effects. In terms of the age limit the Department was aware that there would be a constitutional argument that an18 year old could already get married and enter into contracts. The level of harmful effects was not the same for alcohol abuse and that of a marriage contract. Research showed that people who started drinking at a younger age were less likely to be able to control their alcohol use. The levels of minors and young people affected by alcohol abuse were increasing significantly. Advertising by the liquor industry did to some extent target the younger generation and the proposal was not unconstitutional as long as it was justifiable on the public interest grounds. In 2008 a study had been commissioned to look at advertising and the recommendations were centered on broadcasting hours in order to protect minors. Those recommendations had not been adopted by the industry and the relevant legislation did not empower the Department to enforce the recommendations. If self-regulation did not work, legislation needed to ensure the level of compliance needed in a specific industry. The consistent argument that had been put forward by the advertising industry was that there was no scientific proof that advertising led to consumption and the aim of the advertising was to get existing drinkers to change brands. That argument had become stale, because if there was no proof that it led to increased consumption the industry would not be spending the amounts of money on advertising. The issue around liability came specifically from the transport Ministry, because of the level of harm alcohol caused in this area. The aim was to incorporate some level of liability to disincentivise traders from continue to serve customers that were already drunk, because they could equally be held liable. The prohibition to sell to already intoxicated persons had already been in the norms and standards. The question that arose from the liability proposal focused on how an intoxicated person would be identified and how it would be enforced or proven in court. An intoxicated person was identifiable and there was a role for civil society to play in this proposal. A lot of communities had said during a summit on this issue that they had given up calling the police because nothing happened. The SAPS was constrained by the enforceability of provincial legislation on trading in light of the growing illegal trading in alcohol and this needed to be addressed. The industry had given input on the proposals and would do so again during the public consultation process. The Department was open to alternative proposals and these proposals were based on the consultative processes with the IMC and various departments. The final policy proposals would balance workable solutions for both the industry and consumers and society.

Discussion

Mr D Macpherson (DA) said the Department would be familiar with Schedules four and five of the Constitution that dealt with national and provincial competencies relating to liquor. This policy seemed to ignore the 1999 Constitutional Court challenge around the Liquor Bill and what the prerogatives of the Department and the provinces were, specifically around the standardisation of licensing. If the court challenge was compared to the policy it would not be possible for the policy to speak to issues such as the location of liquor premises, business zoning concerns, trading hours, pre-inspections and zoning certificates. He asked how it would be determined where the suburb began and ended to ensure that no liquor premises were situated within the prescribed distance and similarly what would happen if a place of worship opened within the prescribed distance of an existing liquor store. The liability issue essentially meant that if a licensed gun store sold a firearm that murdered someone that gun store owner would be held responsible for the crime. It was an example of bad law and the Department already had a challenge with the enforceability of some of the legislation.

Mr Netshitenzhe replied that the 1999 dispute had been between the national and provincial governments. Currently, national and provincial government had already agreed on the norms and standards. The Department would try to balance the concurrent jurisdiction to ensure that neither sphere of government felt the need to challenge the legislation. It would be a harmonious approach that upheld the Constitution. It might be true in respect of the gun store owner, but in this case the Department benchmarked this proposal against UK laws where a trader should not continue to serve alcohol to an already intoxicated person.

Ms Ntuli replied that setting trading norms and standards was a competence allowed by the Constitution. It was for that reason that Section 37 created the NLPC where the norms and standards would be agreed upon.

Mr B Mkongi (ANC) said the legal voting age was 18 and he questioned how a person could be trusted to influence the future of a country, but could not be trusted to make responsible decisions on alcohol use. The Department needed to be tough with advertisers, because smoking had decreased significantly because of the messages on the packaging and in the media on the harmful effects of smoking. The laws around where people could smoke were also enforceable and the same should be done in the liquor industry. He asked why there was a discrepancy in trading hours for township and suburban liquor traders, especially in the Western Cape. There were taverns operating close to schools and churches in some townships and he asked whose responsibility it was to monitor these taverns.

Ms Ntuli replied that through discussions in the NLPC it became clear that provinces were not keen to proceed with the age restriction issue, but it came out of the resolutions of the IMC. It was in this document for further consultations and industry would give further input and the Department would make informed recommendations at the end of the consultation process. Provincial Liquor Boards monitored trading hours and the Western Cape had to deal with the argument that had been raised that more affluent areas were treated better than townships.

Mr Netshitenzhe said the tobacco industry had showed there was a causal link between advertisement and use.

Adv A Alberts (FF+) asked if the Department did any international best practice research or a regulatory impact assessment in dealing with some of the socio-economic harms. Much of these problems related to poverty and he asked if some of the solutions should not be of a socio-economic nature. Increasing the legal drinking age would be criminalising a lot of young people. He asked whether behavioural incentives would not be a better option to deal with this. In terms of the liability proposal, he said the Department was imposing a legal liability on individuals without any causal link between themselves and the eventual harm. It was contrary to any law in South Africa and so unconstitutional that it would not be entertained by any judge who took him or herself seriously. He asked if any legal research had been done on this issue and whether there was precedence that supported this view.

Adv Sandile Nkosi, Deputy Director: Legal Support and Prosecution, NLA, replied that the Department did some international benchmarking to see how South Africa could address the challenges and effects of alcohol abuse. DTI visited the USA, England, Thailand and Seoul. The World Health Organisation (WHO) issued 10 strategies to combat alcohol abuse, but those strategies could not work in isolation. The Department wanted to tackle age restriction, advertising restrictions and trading hours holistically to determine if it would to reduce the harmful effects of alcohol in South Africa.

Ms Ntuli replied that the Department had applied its mind to these proposals and legal opinions had been sought. There certain imperatives that required a public policy position that should be made by Cabinet after considering all the issues. The legalities could be detailed in the legislation itself. The Department was willing to listen and the outcome of the consultation process could take these proposals off the table.

Mr N Koornhof (ANC) said the liquor industry was not homogeneous and there should not be an umbrella policy without proper research in place. Many players in the industry contributed towards employment, tourism and transformation while others were mainly in it for the money without any regard for the consumer. He asked if there was any research that showed what South Africans were drinking, because this information was needed to see what sectors of the industry needed to be targeted. Taking away the sports sponsorships by the liquor industry would negatively impacted the development of certain sporting codes. He asked if there had been any interactions with Departments of Tourism and Sports and Recreation with regards to this policy.

Adv Nkosi replied that beer was the number one alcoholic beverage consumed by South Africans, followed by ciders and thirdly spirits and wine. In poorer communities, people consumed “papsak”, which was a cheap and in some cases illegal wine and African traditional beer.

Mr Netshitenzhe agreed that engagements needed to be held with the Departments of Tourism and Sports and Recreation.

Prof C Msimang (IFP) said although the statistics on the amount of alcohol South Africans were consuming were frightening, the approach of the Department in dealing with the concerns were problematic in some instances as highlighted by Members. In the criminal legal system liability was based on wrongfulness and there needed to be a change in the legal system in order to hold traders liable. A person under the age of 18 years was still school going and did not earn an income while young adults between the ages of 18 and 21 had the ability to work and generate an income which would make it even more difficult to control. There was already so much pressure from the industry that liquor outlets should be open on Sundays and further limiting of trading hours would be met with much resistance from the industry.

Mr Netshitenzhe replied that liability, as far as he knew, was a common law issue within South African law. He conceded that liability in this sense could create a problem in terms of the burden of proof.

Ms Ntuli replied that the norms and standards allowed for trading and Sunday with specific limitations.

Ms P Mantashe (ANC) said the impact of alcohol abuse on families and communities was devastating and it validated the establishment of the IMC, because the Eastern Cape and Limpopo, two of the poorest provinces had the most liquor traders and outlets. This often affected black communities the hardest, especially women who had to deal with broken households. She supported the Department’s objective to strike a balance between the economic benefits the liquor industry created and the harmful effects of alcohol abuse.

Mr M Kalako (ANC) asked what public institutions the Department had in mind when determining the distance liquor traders should maintain from these institutions. There was no doubt that the proposals had good intentions, but he questioned whether the Department went far enough in the consultation process. He asked whether 30 days for consultation would be enough to get input from everybody in and affected by the liquor industry. He asked whether the Department had engaged with tavern owners, because in some townships where the unemployment rate could reach levels of up to 90%, each and every street had a small tavern.

Mr Netshitenzhe replied that consultations had been done and would also continue. There was no issue in asking for an extension of the consultation process to accommodate every role player or affected party.

The Chairperson said the statistics seemed to support Ms Mantashe’s point that poorer communities had more access to alcohol. She asked how come there had been such a drastic increase in the trading licences issued since 2003. She asked if there were comparative studies that showed the cost of the harmful effects of alcohol use as well as on the legal drinking age in other countries. The prohibition on serving alcohol to an already intoxicated person was being upheld years ago and it was also quite disturbing that some of the provinces had not been implementing the 2003 provisions. She asked what was wrong with the legislation that gave provinces the license to simply ignore legislation.

Mr Netshitenzhe replied that it had already been scientifically proven and the Department would submit further evidence in writing on the harmful consequences in the age 18 to 21 year age group. Other countries that had a below 18 year legal age could substantiate it because such countries had cultures of responsible drinking. Age limitations, together with trading hours and responsible distributing could curtail the harmful effects of alcohol abuse. The Department would provide a comparative analysis of the legal drinking age in other countries in writing.

Ms Ntuli replied that the Department would address any outstanding issues.

Mr Macpherson said there were many unasked questions and he requested that the Department come back for further discussions and he proposed that the Minister be approached to extend the consultation deadline by 30 days.

Adv Alberts raised a point of order and said the Committee should make a decision that any policy, Bill or legislation before the Committee should be accompanied by a regulatory impact assessment.

The Chairperson agreed and said further questions and comments would be forwarded to the Committee. She also asked that when the Department brought a Bill before the Committee, the Select Committee on Trade and International Relations should be invited to avoid the duplication of presentations. She asked the Committee Secretary to approach the Parliamentary Legal Unit to get an opinion on concurrent jurisdiction in this regard, because the flouting of legislation was an ongoing challenge. This was a serious matter and extension of the deadline should be considered. She thanked everyone for their input.

The meeting was adjourned.

 

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