National Liquor Policy briefing

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Meeting Summary

The Department of Trade and Industry briefed the Committee on its Final National Liquor Policy

The intention was to provoke a serious debate on alcohol abuse that was on the increase. The state spent R37.9bn per annum on matters like welfare, crime, accidents, and treatments due to alcohol abuse. SA was ranked in the top three countries in the world on alcohol consumption. The indirect cost to SA of alcohol abuse was along the lines of R240bn per annum, a figure released by the Department of Health. There was a liquor policy council in place which would set norms and standards, which would be turned into legislation. Background on the process of the policy was provided to the Committee. An overview of the liquor regulatory framework was also provided. Liquor regulation in SA was subject to concurrent jurisdiction and required cooperative governance to be effective. The National Liquor Policy Council was created to coordinate concurrent jurisdiction to ensure policy consistency, alignment and harmony. The Council comprised of the Minister of Trade and Industry, i.e. national government, and relevant provincial Members of Executive Committees i.e. provincial government. The Minister chaired the NLPC. The National Liquor Authority regulated macro manufacturers and distributors and Provincial Liquor Boards regulated micro-manufacturers and retailers. Respective legislation would be implemented.

The Committee was given insight into the socio-economic impact of liquor abuse by speaking to challenges and the policy position taken to address them. Alcohol abuse was on the increase and led to higher levels of family violence, crime and road accidents. SA had one of the highest rates of foetal alcohol syndrome). The policy decision was taken to reduce liquor advertising. The Minister of Trade and Industry could determine more restrictions and parameters for advertising and the marketing of liquor products. Research had shown that increases in alcohol availability contributed to increases in alcohol consumption. The policy position on radius was that liquor premises had to be located at least 500m away from schools, places of worship etc. To reduce the availability of liquor there was a need to regulate days and hours when alcohol sales should be permitted.

Research had shown that teenage drinking was on the increase. Review of the national minimum legal drinking age from 18 to 21 years was to be done. Age verification had to be done if the person appeared to be under the age of 21. The policy also covered issues of product liability where manufacturers and suppliers for instance had to ensure that liquor products were not supplied to unlicensed traders. There were also provisions that traders should not serve liquor products to already intoxicated persons. Education and awareness of alcohol abuse and of the liquor legislation would be done.

Transformation in the liquor industry was needed as the industry was predominantly white-owned. The policy position was that the National Liquor Regulator was empowered to impose allowed registration conditions as articulated in the amended Broad-Based Black Economic Empowerment (B-BBEE) Codes of Good Practise and implement strict monitoring measures. Another challenge was that differences in provincial and national liquor legislation in South Africa certainly worsened the complexity of enforcement processes. The policy position was amongst others to ensure that norms and standards as adopted by the Council should be integrated in both national and provincial legislation and regulations, to ensure coherence and harmony. Provincial and national bodies needed to work together to coordinate regulatory response, share data and ensure the success of enforcement activities. On regulatory capacity constraints, the National Liquor Authority was housed as a chief directorate within the Department and was currently under resourced to effectively perform monitoring and enforcement roles. The National Liquor Authority would be restructured to become a National Liquor Regulator. The Regulator would be funded through normal budgetary processes. Currently if there was a dispute with regard to liquor administrative issues it had to be referred to the courts which were costly. The policy position was to introduce an internal review mechanism to deal with aggrieved applicants. However, if the applicant was still aggrieved he/she may approach a court of law for relief. A policy decision was also taken to improve the effectiveness of the National Liquor Policy Council. The Council should be empowered to take a binding decision on a particular matter if there was no quorum in two consecutive meetings. The Council would take a binding decision in the third meeting whether a quorum was reached or not. The National Liquor Policy 2016 would inform the amendment of the current National Liquor Act.

 

The Committee appreciated the briefing as alcohol abuse in SA was a serious problem. SA had one of the highest levels of foetal alcohol syndrome. Some Members felt that the proposed legislation had not been thought through as it had lapses in certain respects. It was explained that 20-24 years ago, in Eastern Europe there was huge alcohol abuse due to the dire economic circumstances that countries found themselves in. There was huge poverty and unemployment which caused people to drink their sorrows away. As the economic situations of those countries improved so too did the levels of alcohol abuse drop. The point that was being made was that regulating the legal age of drinking and the times when alcohol could be sold would not solve the problem of alcohol abuse. However, improving the economic situation in SA and educating people about alcohol abuse would. Another point that was made was that trading hours for liquor outlets varied from province to province. Each province had its own bylaws on liquor. Members felt that there needed to be consistency in the bylaws of municipalities. Trading hours had to be regulated. Members asked what awareness was there, that on the process of consultation and implementation even though there were differences at local levels the objective would remain the same.

On consultation, the Department was asked whether it approached civil society or did civil society approach the Department. Another problem highlighted by Members was that retailers sold alcohol to shebeens without checking whether shebeens had valid liquor licences. The Department was asked how it intended to enforce compliance. On the issue of liability, Members pointed out that the briefing only spoke about civil liability and not criminal liability. Members asked the Department to consider having both civil and criminal liability as the average citizen could not afford to take businesses to court. Businesses had to be held accountable if there was non-compliance. Members also felt that the cost of liquor in SA was far too cheap. Liquor was freely available. How did people obtain liquor if they were poor? The issue of cheap liquor had to be addressed. Members suggested that the sin tax on liquor could be increased. If alcohol cost more it would go a long way to curb alcohol abuse. Members were fully aware that increasing the sin tax on liquor was a sensitive matter as it would impact upon the bottom lines of liquor wholesalers and retailers. The Department was asked what amount the sin tax on liquor could possibly be.

Members asked the Department to confirm that the norms and standards proposed were applicable to new alcohol licence holders and did not apply to existing alcohol licence holders. Members agreed that the legislation needed to have a certain level of irritation in order for it to be effective. Members expected a huge outcry on the possible regulation of liquor as was experienced when smoking legislation had been introduced. Great strides had been made on the regulation of smoking and Members expected the same result with the regulation of alcohol. Members agreed that vigorous engagement was needed to flesh out matters.

Outstanding minutes were adopted and the First Term Committee Programme 2017 was presented to the Committee. The Committee agreed that its next oversight visit would be to the Mpumalanga Province. The Committee also agreed that the issue of training of Members would be discussed in the future.

Meeting report

Opening remarks by Mr Lionel October, Director General of the Department of Trade and Industry (DTI)

Mr October explained that the Minister of Trade and Industry, Mr Rob Davies, had asked the DTI to look into liquor policy and legislation. It was a concurrent function. At national level policy, norms and standards would be set. The period for comments had been extended to 15 December 2016. Once comments had been received on the policy it would be referred back to Cabinet. The intention was to provoke a serious debate on alcohol abuse as it was on the increase. The state spent R37.9bn per annum on matters like welfare, crime, accidents, and treatments due to alcohol abuse. SA was ranked in the top three countries in the world on alcohol consumption. The US, UK and SA were right at the top. The liquor policy proposed a range of measures but they were not set in stone. Something needed to be done about alcohol abuse. The last time the DTI dealt with such an immense issue it was on tobacco legislation. Now SA was considered world leaders on tobacco legislation. There had been a massive decrease in smoking in SA. Positive interventions existed. There was big controversy over the issue that a liquor outlet could not be located within 500m of a church etc. He said that the legislative measures would only apply to new liquor businesses and not existing ones. The DTI tried to carry across the message that with the proliferation of shebeens and with alcohol flowing freely the effect was that a certain type of unacceptable behaviour was encouraged. Research done on teenage drinking showed that a teenagers’ brain only became fully developed at the age of 22. Alcohol could damage brains at a young age, which could affect teenagers later on in life.

Briefing by the DTI on its Final National Liquor Policy

The delegation also included Mr Macdonald Netshitenzhe, Acting Deputy Director General; Ms Clementine Makaepea, Director: Liquor Law & Policy; Ms Progeria Muvhango, Director: CCRD; and Ms Prea Ramdhuny, Chief Director: NLA. Mr Netshitenzhe undertook the briefing.

The indirect cost to SA of alcohol abuse was along the lines of R240bn per annum, a figure released by the Department of Health. There was a liquor policy council in place which would set norms and standards. The norms and standards would be turned into legislation. Background on the process of the policy was provided to the Committee. An overview of the liquor regulatory framework was also provided. Liquor regulation in SA 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. The NLPC comprised of the Minister of Trade and Industry, ie national government and relevant provincial Members of Executive Committees (MECs) i.e. provincial government. The Minister chaired the NLPC. The National Liquor Authority regulated macro manufacturers and distributors and Provincial Liquor Boards regulated micro-manufacturers and retailers. Respective legislation would be implemented.

The Committee was given insight into the socio-economic impact of liquor abuse by speaking to challenges and the policy position that had been taken to address them. Alcohol abuse was on the increase, which led to higher levels of family violence, crime and road accidents. SA had one of the highest rates of foetal alcohol syndrome (FAS). On advertising the policy decision was taken to reduce liquor advertising. The Minister of Trade and Industry could determine more restrictions and parameters for advertising and the marketing of liquor products. Research had shown that increases in alcohol availability contributed to increases in alcohol consumption. The policy position on radius was that liquor premises had to be located at least 500m away from schools, places of worship etc. To reduce the availability of liquor there was a need to regulate days and hours when alcohol sales should be permitted. Research had shown that teenage drinking was on the increase. Review of the national minimum legal drinking age from 18 to 21 years was to be done. Age verification had to be done if the person appeared to be under the age of 21. The policy also covered issues of product liability where manufacturers and suppliers for instance had to ensure that liquor products were not supplied to unlicensed traders. There were also provisions that traders should not serve liquor products to already intoxicated persons.

Education and awareness of alcohol abuse and of the liquor legislation would be done. Transformation in the liquor industry was needed as the industry was predominantly white-owned. The policy position was that the National Liquor Regulator was empowered to impose allowed registration conditions as articulated in the amended Broad-Based Black Economic Empowerment (B-BBEE) Codes of Good Practise and implement strict monitoring measures. Another challenge was that differences in provincial and national liquor legislation in South Africa certainly worsened the complexity of enforcement processes. The policy position was, amongst others, to ensure that norms and standards as adopted by the Council should be integrated in both national and provincial legislation and regulations, to ensure coherence and harmony. Provincial and national bodies needed to work together to coordinate regulatory response, share data and ensure the success of enforcement activities.

On regulatory capacity constraints, the National Liquor Authority (NLA) was housed as a chief directorate within the DTI and was currently under resourced to effectively perform monitoring and enforcement roles. The NLA would be restructured to become a National Liquor Regulator (NLR). The NLR would be funded through normal budgetary processes. Currently if there were a dispute with regard to liquor administrative issues it had to be referred to the courts, which were costly. The policy position was to introduce an internal review mechanism to deal with aggrieved applicants. However, if the applicant was still aggrieved he/she may approach a court of law for relief. A policy decision was also taken to improve the effectiveness of the National Liquor Policy Council. The Council should be empowered to take a binding decision on a particular matter if there was no quorum in two consecutive meetings. The Council would take a binding decision in the third meeting whether a quorum was reached or not. In conclusion, the National Liquor Policy 2016 would inform the amendment of the current National Liquor Act.

Discussion

The Chairperson appreciated the briefing as the issue of alcohol abuse was a serious one. Members would work through the draft policy document and encourage the public to make inputs. In 2017 the Committee would deal with the policy and regulations. A decision could then be made if the principal act necessitated a change.

Mr W Faber (DA, Northern Cape) felt that the proposed new legislation had certain lapses and had not been thought through. The legislation was trying to set limitations on age and on times when liquor could be sold. In Eastern European countries 20-24 years ago there was huge alcohol abuse, mainly due to poverty and unemployment. For example, in Poland and in the Ukraine all shops sold alcohol and most of the shops were open from 7am to 11pm. However, in the last 20 years the economies of Eastern European countries had started to thrive and there was a huge drop in alcohol abuse. The countries had essentially emerged from an economic depression. By regulating age and times for the sale of alcohol was not addressing the problem. These were just short term solutions. Would it really make a difference if a liquor outlet had to be 500m away from a church? In the Northern Cape Province liquor stores were open till 8pm. However, in the Western Cape some closed at 2pm whilst others at 6pm. He agreed that trading hours of liquor outlets had to be regulated, but it would not cure alcohol abuse. Improving the economic situation in SA and educating the public about alcohol abuse was key.

Mr October responded that the process on the liquor policy was at a discussion stage. The main objective was to regulate public bad things in society i.e. gambling and liquor. There had to be norms and standards. Every country’s history would determine its level of growth. Given SA’s history it had one of the highest levels of foetal alcohol syndrome because of the Dop System. Russia and Eastern Europe had its own circumstances which caused people to drink excessively. It was for this very reason that policy had to address circumstances that were prevalent in SA. Hence the age limit on the sale of alcohol and the 500m limitation on liquor outlets from churches etc. The problem was there were way too many liquor outlets in townships. The abundance in availability of liquor contributed greatly towards alcohol abuse and domestic violence etc. The policy would try to balance things. Some norms and standards would be set when new liquor licences were issued. Existing licence holders were not affected.

Mr V Magwebu (DA, Eastern Cape) appreciated the efforts of the DTI on regulating liquor. The DTI was however, asked how it intended to enforce compliance. On the issue of liability, he only heard the DTI speak about civil liability. What about criminal liability? Would persons be found guilty of a criminal offence?

Mr October, on enforcement, said that a greater number of inspectors were needed. Good laws and regulations were needed. It all depended on every country’s circumstances. In parts of Europe the legal drinking age was 16 but there was low alcohol abuse because in those countries drinking was linked with having a meal. In the United Kingdom, however the legal age for drinking was higher at 18 but there was huge teenage binge drinking. The US had increased its drinking age limit from 18 to 21. The US immediately saw a drop in road accidents caused due to alcohol. It was debatable whether similar attempts would work in SA. Civil liability was used as a deterrent. The intention was for the liquor outlet to be afraid to be sued.

Mr Netshitenzhe stated that New Zealand had also increased its drinking age limit from 18 to 21. There was an immediate drop in alcohol related accidents. When New Zealand reduced the drinking age limit to 18 again alcohol related accidents increased. Enforcement was done by inspectors and the South African Police Services (SAPS). Where there was non-compliance the licences of liquor establishments could be suspended. The policy spoke about civil liability and not criminal liability. The prospect of being sued would act as a deterrent.

Mr M Shabangu (EFF, Free State) felt that municipalities needed to reconsider their by-laws on liquor. There was a need for amendment. There was inconsistency as shebeens closed different times. The problem was that retailers sold liquor to shebeens that did not have liquor licenses.

Mr Netshitenzhe explained that bylaws of municipalities were not the same. The bylaws for example for Pretoria and Johannesburg were different. The DTI was trying to work on the matter. There was a policy council and the Department of Cooperative Governance and Traditional Affairs were on board.

The DTI only intervened on areas where it had jurisdiction. Places like Makro acted as both a wholesaler and a retailer. If a shebeen sold more than 25 litres of alcohol it should be checked when it purchased alcohol whether there was a valid liquor licence. This was one of the things included in the norms and standards.

The Chairperson said he supported to ensure firstly that there was responsible drinking, and secondly that there was a huge cost to SA due to alcohol abuse which should be addressed. It would seem that the DTI had concern at local retail level. The problem was that municipalities had different regulations at local level. What assurance was there that on the process of consultation and implementation that even though there were differences at local levels the objective would remain the same. The DTI was asked whether on consultation they approached civil society or did they wait on civil society to approach them. One civil society organisation was the National Religious Leaders Forum. Not all tavern owners were against responsible drinking.

Mr October assured the Committee that points made by Members would be taken into discussions.

Mr Faber felt that the cost of liquor in SA was too cheap. There was a need to increase the sin tax. In Dubai for instance a single beer cost R140. It would go a long way to solve the problem if alcohol cost more.

Mr October, on the cheapness of alcohol in SA and the possibility of a sin tax, assured Members that it would be discussed. The cheapest alcohol gave one the greatest kick.

Mr B Nthebe (ANC, North West) responded that the issue of a sin tax on alcohol was a sensitive one. Increasing taxes was not ideal as it would affect businesses. He wished to confirm that the norms and standards were for new alcohol licence holders and did not apply to existing alcohol licence holders. He noted that there seemed to be agreement that there had to be a certain level of irritation in the legislation in order for it to be effective. At the time when smoking legislation was dealt with there was also a huge outcry. Great strides had however been made. The same could be done on alcohol. The burden should be placed on manufacturers and suppliers.

Mr October noted the comment that the legislation needed to have bite.

Mr Magwebu was concerned if no provision was made for criminal liability. There needed to be civil and criminal liability. Civil liability alone was not good enough as the victim could not afford to go to court. Criminal liability for alcohol outlets would be a better deterrent. In his previous career he worked on enforcement with the South African Social Security Agency (SASSA) and the problem they encountered was that loan sharking had not been criminalised. Luckily the National Credit Act was an impressive piece of legislation and it allowed for loan sharks to be prosecuted. He asked the DTI to reconsider having both civil and criminal liability.

Mr October said that issue of both criminal and civil liability would be looked at.

Mr Netshitenzhe, on civil liability, said the burden of proof was on the person that had sold the alcohol to prove that he was not guilty.

The Chairperson said Members did not appeal to departments to reconsider. Members as legislators instructed departments on what they should do. Vigorous engagement was what was needed to flesh out things. Foetal alcohol syndrome was a huge problem in impoverished communities. How did people obtain liquor if they were poor? The issue of cheap liquor needed to be addressed. The manufacture of liquor also had to be looked at.

Mr October said that at the Indaba that the DTI had hosted non-governmental organisations (NGOs) and churches had been invited. South African Breweries (SAB) and the likes of Distell owned almost 90% of the alcohol market in SA. There were thus two or three producers that had 100% of the market. They had the money and manpower to oppose such legislation. The higher the alcohol consumption, the higher the profits. Government need to hear the voice of communities. The Committee had made very positive suggestions. The usual feedback that the DTI received on the issue was to drop everything.

The Chairperson asked what the sin tax on alcohol would be. He understood the sin tax on cigarettes to be 50%. He also spoke about tariffs and who was collecting them if Lesotho was exporting goods to and importing goods from the United States. Swaziland was also importing goods from India. Who collected the tariffs since the goods must be passing through South African ports? The DTI could provide written responses to the questions at a later time.

Committee Minutes

Minutes dated 9 November 2016 were adopted unamended. The Chairperson asked the Committee Secretary, Mr Hlupeka Mtileni, to make a follow up with the Department of International Relations and Cooperation (DIRCO) to provide the information that the Committee had requested on the African Renaissance Fund (ARF) by Friday, 2 December 2016.

First Term Committee Programme 2017

The Chairperson took Members through the Committee Programme, pointing out specific meeting dates and the items that were on the agenda for specific meetings. The Committee Programme had not yet been distributed to Members. Given the number of departments over which the Committee did oversight, the numbers of entities within those departments made up quite a substantial list. In 2017 the Committee would consider using video conferencing to perform oversight over the entities. He asked what the stance of United States was on the World Trade Organisation (WTO). He had heard rumours that United States had wished to withdraw from the WTO.

Mr Mthimunye wished it to be placed on record that the Committee’s next oversight visit would be to the Mpumalanga Province.

The Committee officially agreed that the next oversight visit would be to the Mpumalanga Province.

Mr Mthimunye asked that Committee Researchers assist Members on the types of training that would be beneficial to them. On oversight over the DIRCO, he felt that an independent organisation should make a presentation to the Committee on best practices internationally. The Committee needed to be provided with a list of entities of departments that the Committee had to do oversight over. Indications could be made as to which entities oversight had been done over and which ones were still to be done.

The Chairperson said that the issue of training of Members would be looked into. He recalled that he had asked Ms Shamila Peer, Personal Assistant to the Chairperson of the Select Committee on Economic and Business Development, to compile a list of entities.

Mr Faber requested Mr Mtileni to email the Committee Programme to Members. Secretaries of Parliament needed to acquaint themselves with the new parliamentary application that was now available even on one’s cell phone. It made things easier administratively.

The Chairperson understood that the new application could be useful but members were still struggling to get Wi-Fi connections in their offices. Information Technology staff had to get things in order.

 

The meeting was adjourned.

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