Liquor Bill proposed amendments: workshop with provinces

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Trade and Industry

03 August 2003
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Meeting Summary

A summary of this committee meeting is not yet available.

Meeting report

4 August 2003

Chairperson: Mr B Tolo (ANC) [Mpumalanga]
Co-chairperson: Mr R Davies (ANC) [NA]

Documents handed out

Liquor Bill [B23-2003]
Presentation by Department on Proposed Amendments to the Bill
Gauteng Province Input
Kwazulu-Natal Liquor Licensing Bill - [Offsite link]
Kwazulu-Natal Input
Free State Province Input

The Liquor Bill is intended to regulate manufacture and distribution, areas of national competence. Under the amended version, there would be separate licences for manufacturing and distribution of liquor, but manufacturers would be allowed to hold distribution licences as well. The latest version no longer outlaws cross-ownership between the three sectors of the industry; namely manufacturing, distribution and retail. The Trade and Industry Minister will have the discretion to impose conditions with the objectives of promoting black economic empowerment and competition and preventing alcohol abuse. The retail licensing has been left to the provincial legislatures. The new Bill also restricts the advertising of liquor products in a manner that is false and misleading, 'and in a manner intended to target or attract minors.

The Department emphasised that there should be legislation uniformity amongst provinces to avoid a situation of crime flowing to provinces with the weaker legal systems. The task team will look into issues raised at the workshop. Provinces were urged to pass liquor legislation to open up the liquor industry to enhance black economic empowerment. Further, the 1989 Act would apply in provinces until they passed legislation and this Act was problematic.

The Department outlined the background to the Liquor Bill and the process followed to date, as well as a breakdown of the key amendments proposed to the tabled Bill.

The Committee heard informal inputs from the provinces regarding their views on the new proposed amendments to the Liquor Bill plus what steps had been taken to implement provincial legislation. In principle all the provinces supported the national Bill. However there were still concerns that the Bill was interfering with the provincial competence.

Many provinces had not progressed beyond draft provincial legislation as they stated that they were waiting for the national Bill to be enacted with a concretisation of national norms and standards.

Introduction by Chairperson
The Chair extended a special welcome to the Deputy Minister of Trade and Industry, Ms L Hendricks and the MECs, Mr S Beloti (Free State), Mr J Mabena (Mpumalanga), Mr R Burrows (KZN). The Chair reminded all present that this is a workshop and not a normal Committee meeting, and the real process of deliberating on the Liquor Bill would commence on Wednesday 6 August 2003. The aim of the workshop was to hear from the provinces what stage they were at with their liquor legislation. He reminded all that a Liquor Bill had been passed by Parliament in November 1998 and was referred to the President for consent. The President doubted the constitutionality of that Bill and referred it to the Constitutional Court, which indeed found that some sections of the Bill were in fact unconstitutional. Of special importance here were the sections relating to regulation and legislation. The Constitutional Court held that the regulation of the South African liquor industry is the competence of the National Parliament, but that the licensing of liquor is actually the competency of the provinces. It is for that reason that the Department had drafted a new Bill, the Liquor Bill 2003, so that it can address the problems identified by the Constitutional Court in the previous Bill.

Parliament has therefore deemed it fit - because liquor is potentially a very dangerous substance - that all nine provinces move in the same direction as far as liquor licensing is concerned. This is especially important for the spirit of co-operative governance. In pursuit of this goal, all nine provinces meet today to exchange ideas as to which direction has to be taken. This is the purpose of the workshop.

Input by Deputy Minister
The Deputy Minister, Ms Lindiwe Hendricks, apologised for Minister Erwin's absence due to a prior commitment. She stated that Ms Astrid Ludin, Deputy Director General: Consumer and Corporate Regulations Division, would outline the process followed since the public hearings had taken place in Parliament. The provincial representatives present today would then be able to indicate the implications of the amendments to the Bill for the provinces.

Proposed Amendments to the Bill - presentation by Department
Ms Ludin provided a high-level overview of the amendments made by the Department to the Bill, highlighting possible implications for provincial legislation and also suggesting possible issues for consideration in provincial legislation (document attached).

Eastern Cape Province
Mr M Mtimkulu (Eastern Cape Department of Economic Development and Tourism) noted that he would be representing the MEC, who could not attend due to prior engagements. He stated that the Eastern Cape has a provincial Liquor Bill which, at this stage, has been submitted to the Standing Committee on Economic Affairs. Public hearings have been held and Mr A De Wet, a Member of that Standing Committee, would explain that process.

Mr De Wet apologised for not having prepared a written report but a verbal update could however be given quite easily. He noted that his Standing Committee was under the impression that the discussions today would focus only on proposed amendments to the national Bill.

Extensive public hearings
The Bill has been tabled and the Standing Committee has held extensive public hearings. It has probably held about 72 hearings throughout the province. In some cases 200-300 people attended these hearings, or a specific hearing. Even the "less popular" hearings were still attended by 20 or 30 people. It is the opinion of the Standing Committee that the tabled national Bill has to be amended quite substantially.

Illegal retailers
The major flaw is that the Bill does not really create an opportunity for the present illegal retailers or operators to be brought into the system. In fact, the Standing Committee had received quite a degree of input from illegal operators. It was surprising to see how keen these operators are to become legal. The main problem they foresee is being able to comply with many of the requirements prescribed by the legislation.

The informal feeling of the Standing Committee is that a window of opportunity has to be created for the illegal operators, for three reasons: firstly, to identify them, secondly to register them and thirdly to introduce a moratorium where these operators would be guarded against prosecution due to trading without a liquor licence. They have to be given the opportunity to apply for a liquor licence, and perhaps a new category of licence could be created for them specifically. This new category of licence would contain a "development arm". This essentially means that instead of simply rejecting the application, the applicant would commit itself to a development programme so that over a period of time it could be guided into developing its business. This would create greater capacity and allow it to build the necessary infrastructure to be able to comply with the legislation. Each specific case would have to be determined on its merits.

This would also apply for existing taverners who are so popular that there is a spill-over into the streets. A strong issue which came forward from the hearings held by the Standing Committee is that these people should also be granted a period of time within which to comply with the legislation.

Licensing process
The Standing Committee feels that this process spelt out in the Bill is far too complicated, and the application for a licence has effectively been made more difficult instead of easier. The inspectors have to take on a supporting role and not merely a monitoring role, so that they are almost the first point of contact to anyone wanting to apply for a liquor licence. The inspectors should actually be the ones who assist in filling out and even submitting these application forms for the applicants. The informal view of the Standing Committee for the Eastern Cape Province is to create an "easy in, easy out" approach. This means that it should be made as easy as possible for people to apply for and to be granted a liquor licence. But if there is non-compliance with the basic norms and standards, then those licences should be withdrawn almost as easily as they were granted, for a period in which those persons would then not be able to apply for a new licence.

Prohibited premises
Mr De Wet stated that he doubted government would really want to put an end to premises that do sell liquor, but that do not pose a real threat. A perfect example here would be the "Castle Corner" at the cricket grounds. Even though the norm prohibiting the sale of liquor within a certain distance from schools is understood, there are however some schools that have developed "Past Pupil Clubs" or "Parent Clubs" in a confined area of the school. These could even resemble a closed off box suite where liquor is consumed and sold - as is common at cricket grounds, which is a totally secluded area away from the crowd. The income made from these supporters clubs in fact go a long way in generating much needed income for the sporting codes. This issue has to be addressed to consider ways to accommodate this, because it should not be simply done away with.

Consumption of liquor in a public place
There is a need to get the consumption of alcohol off the streets. There are people who purchase liquor from an off sales, but who then consume it in the streets because they have no place to consume the liquor. Rather than simply prohibiting this practice, an effort has to be made to find ways to address it.

Mr De Wet stated that government has to take note of the realities in South Africa. By far, most of the liquor outlets in the Eastern Cape are not currently licenced. They have to be licenced.

Kwazulu-Natal Province
Mr Roger Burrows, Kwazulu-Natal MEC for Economic Development and Tourism, conducted the presentation which contains the concerns raised by the Kwazulu-Natal Province about certain provisions of the tabled Bill. He added that some of the concerns can now simply be ignored, because they have been addressed in the amended version of the Bill made available at this workshop.

Licensing process
Mr Burrows agreed with the sentiments raised by the Eastern Cape, and stated that the interests of those currently outside the industry have to be balanced with the interests of the community. The Kwazulu-Natal government has tried to achieve this by making the licensing process an extremely simple one. Thus a liquor licence will be granted via a very simple application, but it has to be accompanied by a local authority trading licence. This licence would require that the local authority or the applicant advertises for a period within the local authority's area, and should one or more complaints be received, a public hearing must be held. This then gives the local community an opportunity to present its view to the local authority for the declining of a trading licence, not a liquor licence. The liquor authority would then consider the application together with the trading licence and, unless there were patent irregularities, that licence would be granted. This is the point made earlier by Mr De Wet of the Eastern Cape regarding "easy in".

Provision is however made for an "easy out" process, whereby penalisation can and should occur where there are gross violations of the norms and standards laid down nationally or provincially. Provision has also been made to cater for the situation in which the local authority withdraws the trading licence, which can be done in terms of local authority legislation, if complaints are received from the community. The withdrawal of the local authority trading licence would lead automatically to the Liquor Licencing Board questioning and possibly withdrawing the liquor licence. An appeal mechanism is also provided for in the draft provincial legislation in the form of a liquor appeals tribunal. This is an entirely separate body to which applicants may appeal, or any person who loses a liquor licence. This is the "easy in, easy out" approach followed.

Mpumalanga Province
Mr Jacob Mabena, MEC: Finance and Economic Affairs, noted that Mpumalanga has provided input throughout the legislation process. A concern for the province remains the continued unconstitutionality of the Bill. It can have a negative impact on the maintenance of the very same economic unity, when arguments involve Section 44(2) of the Constitution.

Retail licence
The Mpumalanga Province believes that the failure of the Bill to even mention this type of licence results in a vacuum in the licensing process, when dealing with norms and standards.

Three tier system
Government should not make the mistake of creating the impression that both manufacturers and wholesalers would now be allowed to enter the retail sector. This relates to Mpumalanga's concerns around the prohibition of the development of SMMEs in the liquor industry, especially in meeting BEE policy interests. The main issue regarding the liquor industry was the need to increase access to it. A related concern is the matter of "concoctions", and a number of instances have been reported in which people have died after consuming these "concoctions". A balance has to be struck here between meeting BEE policy interests and increased access to the liquor industry on the one hand, and the regulation of the liquor industry on the other.

Thus if Minister Erwin is allowed to exempt certain manufacturers and wholesalers by allowing them to become players in the retail sector as well, this will create problems. These three terms must have very clear definitions.

Proximity of schools and sportsground zones
Mpumalanga's concern here lies with the competences of the provincial legislatures in this matter. This matter is however being dealt with in the amendments, to some extent.

Role of national inspectors in public disturbances
Mpumalanga believes that allowing national inspectors to become involved in public disturbances in retail outlets violates the provinces' legislative competence. This issue has to be dealt with. This is important because capacity has to be built, even at provincial level. There has to be convergence on the issue of inspectors.

Norms and standards applicable to provincial legislation
Mr Mabena proposed the deletion of the entire section as it attempts to prescribe to provincial legislatures the nature of their own competence. It is agreed that there has to be consistency and uniformity, but provinces must be given the power to also assist in the regulation of the liquor industry.

Delivery, storage and display of liquor
It is proposed that no reference be made to micro-manufacturers, since it imposes on the provincial legislatures to legislate for micro-manufacturers. Moreover, they are dealt with by provincial legislation.

Supply of liquor in excluded areas
This is also a provincial competence, and should thus not be included in the Bill. The proposed amendments cover some of these issues. The resolution of any dispute that may arise between a provincial authority and the Minister, clearly undermines the authority of the provincial Minister. This is so because it does not allow for the MEC of a province to disagree with the resolution of the national Minister. Mpumalanga believes that room has to be allowed for provinces to also play a part in the regulatory field.

In conclusion Mr Mabena stated that the core issue underlying the matters raised is ensuring BEE policy interests are realised.

The Co-chair, Dr Davies, commented that one of the major issues that had come out of the Portfolio Committee's public hearings on the Bill was that 95% of the retail liquor trade in South Africa takes place outside any formal structure. The fundamental issue is thus how that area can be regulated. While the "easy in, easy out" approach outlined earlier is sound, it cannot create a situation in which every corner shop, convenience store or any formal supermarket is massively expanding its sale of liquor. This is major conundrum facing liquor regulation in South Africa.

Secondly, is the ring-fencing that would take place between retailers and micro-retailers. Micro-retailers would have a very basic level of compliance, and their licence would be revoked if they fail to comply with this basic good conduct. This procedure would be ring-fenced from that followed by the big supermarkets for example, which have much stricter conditions.

Thirdly, the sale of liquor on garage forecourts is an important issue, which has not yet been discussed. Drivers are able to purchase liquor from the store and set off on the road, thus enabling them to "tank up in two senses". This cannot be allowed.

These three concerns deal with the retail and micro-manufacturing sectors, which the Constitutional Court has held to be exclusively a provincial competence. Thus Parliament can only comment on it in a workshop such as this, but cannot legislate on it.

Ms F Hajaig (ANC) [National Assembly] referred to Clause 3(2) of the Kwazulu-Natal Liquor Bill and asked Mr Burrows to explain the nexus between that Bill and the national legislation.

Mr Burrows, in his reply, noted that the Kwazulu-Natal Bill is still in draft form, and could thus be amended. Clause 3(2) had been included which has been drawn largely from the Constitution itself. Any dispute which arises between national and provincial legislation has to be settled in terms of the Constitution. As the Constitution is absolutely explicit regarding the provisions of exclusive provincial competence, the Kwazulu-Natal Province believes that if a provincial Bill deals with a provincial matter then a national Bill cannot overrule it.

An ANC Member asked Mr Burrows to explain what is meant by the "local authority" involved in the licensing process. Has this term been defined at all?

Mr Burrows replied that he is not sure whether the Kwazulu-Natal Bill contains a definition. The term is however defined both in terms of the Constitution and the Municipal Structures Act, to include Category A, B and C municipalities. As to where these powers reside at this particular moment, is a bit of a moving target, because within provinces certain powers are being shifted at any particular time. This is why the decision was taken to include the all-encompassing term "local authority", rather than referring specifically to a Category A, B or C municipality, or even to a Metro.

Mr Hlahla Mkuthlane, Chairperson of the Free State Legislature Committee on Economic Affairs, asked whether the Eastern Cape's proposal that inspectors give support would be done over and above their monitoring role. If this is the case, would this not result in a conflict of interests?

Mr De Wet replied that he did not believe this would be an issue. It would however play a positive role in assisting the industry, as well as monitoring the industry. The understanding is that the fundamental task of the inspector is to monitor and ensure compliance. But in this process of compliance the Eastern Cape feels that a break has to be made away from the type of compliance monitoring taking place at the moment within SAPS. It is very hard-handed, and has been quite traumatic in many instances. A move has to be made towards a user friendly approach where the person granted the licence would approach the inspector in the first instance, should the licencee have any problems.

Northern Cape Province
Mr Tebogo Ragale, Legal Advisor in the Office of the Premier of the Northern Cape, noted that the Northern Cape was involved in the National Working Group, and the province is fully conversant with the provisions of the national Bill. The Northern Cape Liquor Bill is still in draft form, and is currently with the drafters and the MEC for Economic Affairs and Tourism. The reason for this is that the drafters are awaiting the concretisation of the national norms and standards through legislative enactments, before the province can even move to public participation. The second reason is to avoid legislation done piecemeal. The aim is that in the interim the Northern Cape would fall in line with the national suggestion that, in the case of the default legislation being removed, the Northern Cape would approach the Minister to bring in the legislative enactment as suggested earlier.

The need to curb the socio-economic ills associated with the availability of liquor will be dealt with, balanced against the need to create an opportunity for the entry of new participants into the liquor industry. This will be dealt with through public participation, so that a balance is struck between the two interests. It is hoped that this can be dealt with through the provincial regulations, in the sense that there is a difference between the realities of each province.

Free State Province Input
Amongst other matters, the Free State MEC, Mr S Beloti, (accompanied by the Legislature's Committee Chair, Mr M Mokitlane) noted that the Bill should provide a clear and unambiguous definition for a shebeen and a tavern. A failure to do so would result in the confusion being created between the two. It is important to note that most people drink in the shebeens as they provide a better environment as everybody knows each other and this is not the case with taverns since they are big outlets. The Free State province also proposes that a provision regarding funding be created within the Bill since this would ensure that adequate funding is allocated for the realisation of the objectives of the Bill.

Ms C September (ANC) asked for the Free State's view on the restriction posed by the Bill on youth entrepreneurship. She also asked what co-operative government issues the province has taken into account with regard to the manufacturing and consumption of liquor.

The MEC said that the province fully supports the restriction since it seeks to encourage morality and above all it is in line with the constitutional restriction for one to qualify as a voter, that is 18 years.

Mr B Tolo (Chair) said that the department would indeed have to provide a definition of a shebeen and in so doing it should take into account that there are people who buy and sell one to three cases a week with the intent of being financially able to send their children to school.

Ms B Ntuli (ANC) while acknowledging that fact, expressed concerns regarding shebeens noting that, unlike taverns, they are not regulated.

Dr R Davies (Co-Chair) said that the law would regulate the use and consumption of liquor whether it be in the shebeen or tavern. However it is important that complications be avoided for those people selling a case of beer per week - to have money to send their children to school - since indeed their case is different from those of big outlets.

An ANC member cautioned members that there are people's lives involved here and experience has taught us that even those people who sell one to three cases per week in order to educate their children, do so at the expense of their neighbours' children. Members should not forget that there are numerous people who have either been stabbed or shot in shebeens.

Mr Tolo (Chair) said that it should be noted that this is a complex issue, which would need further deliberations before a decision could be reached. However there seems to be an agreement that even those who sell liquor with the intent of sending their children to school would need to be regulated.

Limpopo Province Input
Ms S Sithole (Committee chairperson, Limpopo legislature) noted that the Limpopo Provincial Legislature supported the Bill and said that all other provincial legislation on this matter should be in conformity with the national Bill. The finalisation of the Bill would ensure that consistency is created throughout the country and there is uniformity in all provinces. For the Bill to be properly implemented and its objectives realised without any conflict, it would be important that the higher level of government capacitate the lower one. It was noted that the Bill should state what would happen to the licence when its holder died, would it form part of that person's estate or cease to exist?

Mr B Turok (ANC) commented that it is important that a balance be drawn between the consumer's easy access to liquor and the safety of the communities. Since liquor is hazardous in nature it would be important that communities be given an opportunity to decide this matter.

North West Province Input
Ms Z Sebekedi, North West Legislature Committee chair, noted that their province also supported the Bill and proposed that it would be proper that all licences that have been issued to date be audited. Although they acknowledged that this would definitely cause havoc, it would be important that all those who have flawed licences or that were issued under false pretences be identified and businesses too close to prohibited areas be relocated. People should be made to understand that notwithstanding the transparency in the process of issuing licenses, liquor is not the only retail business that can be implemented. North West intends to initiate a public programme teaching people about the effects of liquor. However to ensure that provinces do their best in implementing the Bill and realising its objectives, it is proper that they be afforded the opportunity to legislate their own laws, which would regulate the manufacturing, retailing and consumption of liquor within their own provinces.

Gauteng Province Input
Mr D Mohapi, Gauteng Legislature Committee chair, noted that Gauteng had just passed a Liquor Act. Its objects are to encourage socially responsible drinking in the province and a number acts have been criminalised such as selling or supplying liquor to an intoxicated person or a minor. . The Act provides that independent inspectors should be appointed and thus the function of enforcing its provisions is not left to the SAPS. It stipulates the conditions for the issuing of licences. After considerable discussion, the provincial standing committee decided that a shebeen should refer to someone selling one to three cases of 350ml beers per week. The decision of the committee is based on the reality on the ground since the majority of our people sell liquor so as to evade poverty and also to be able send their children to school.

Mr S Mbatha (KZN) asked who would constitute the Liquor Traders Association (LTA).

Mr Mohapi said that since the people who are selling liquor are in the communities, therefore in order to encourage public participation it is proper to develop them so they could be part of the LTA.

Mr Mohapi said that the people who are selling liquor in the community should be the ones participating in structures such as LTA. This would develop the people who are involved in the industry.

Mr M Mthimkhulu (EC) asked whether the Liquor Traders Association would be autonomous and if not, to which level of government would it be accountable.

Mr Mohapi said that it is proposed that this LTA be at the provincial level since this would ensure that the industry is better regulated.

Mr Molefe (Gauteng) also noted that it should be understood that the duty of the local authorities would be to recommend to the Board, which would have a final say on liquor matters.

Western Cape Province Input
Mr S Andersen, Western Cape Legislature committee chair, noted that his provincial legislature fully supports the current draft of the Bill. In line with the Bill, they have developed a proposed liquor policy so as to regulate the use, consumption and manufacturing of liquor in the province. They believe that there should be incentives to encourage those who have unregistered outlets to register those outlets. Municipal authorities should be given some form of discretion to decide, amongst other things, the appropriate days and hours for trading.

Mr Andersen addressed a question asking for clarity on the municipal function in the proposed provincial legislation. There was no intention of allowing municipalities to issues licences. Applications for licences and appeals would be lodged with Municipalities. A forum comprising municipal, liquor trader and community representatives would make recommendations on applications to the Board which would take the decision on licensing. It is necessary to supply licences where there is a legitimate demand and where applicants meet objective standards. If achievable standards were set, they could act against those that do not meet them. The Taverners association supported the regulatory mechanism proposed, albeit with some reservations.

Mr R Burrows (MEC: Economic Development & Tourism, KwaZulu-Natal) asked what the age of majority for alcohol purchases is under Gauteng's Act. He was concerned that it might be twenty-one.

Mr Mohapi (Gauteng) replied that it is eighteen.

Mr Burrows asked if the Gauteng Department would fund the Local Committees.

Mr Mohapi replied that the Provincial Department had provided for training. Between October 2003 and 1 April 2004, the board and inspectors would be trained. The Department would pilot the scheme prior to its full implementation on 1 April.

A Department official asked if the Gauteng and Western Cape systems were not overly complex. Since local authorities were involved, would it not be better to have the expertise at local level rather than the proposed tiered structure - with local authorities accepting applications, forums for recommendations, the board to decide on licensing and a body for appeals.

Ms Andersen replied that Schedule 5b of the Constitution requires local input. Appeals in the Western Cape would be adjudicated by the High Court.

Mr Mohapi stated that they shared the Western Cape's view, hence they had involved local authorities. Community involvement was also necessary otherwise it was as good as having no legislation.

Dr R Davies (Co-chair) stated that whilst there were overlaps, there were also differences. This was not necessarily a bad thing since it allowed for experimentation. Gauteng, for example, allowed a two year moratorium for the informal liquor trade before the standards applied fully, other provinces had a more permanent eased route for informal liquor trade.

Mr K Durr (ACDP, Western Cape) stated that he could not see the need for a new Act. The objectives of the Bill could be met with minor amendments to the current Act. He stated that whilst he did not dispute the objectives of Black Economic Empowerment (BEE), he could not see why the Bill addressed these when the matter was already covered by the BEE legislation. He noted that it cost approximately R240 million per year to regulate gambling. He asked what the cost of administering the current Act is and if the costs of regulation under the Bill had been determined. What is the benefit of the new legislation over maintaining the status quo with some amendment?

Ms A Ludin (Deputy Director General, Department of Trade and Industry) replied that the underlying philosophies of the Bill and the 1989 Liquor Act differed. Since 1994 responsibilities had been allocated differently under the Constitution and the Bill took account of this. Further the Act only addressed retail licensing, not manufacture and distribution. Regulation of liquor requires separate legislation at national and at provincial level. Minor amendments to the Act would not be enough. The 1989 Act did not address small traders. The existence of illegal traders could be attributed to the Act.

Ms Ludin addressed questions raised about the definition of a retailer. She stated that there is a distinction between a definition that clarifies and one that restricts activities. The definition of a retailer in the Bill was for clarification and did not restrict registration as a retailer at provincial level.

Summary by Deputy Minister
Ms L Hendricks (Deputy Minister for Trade and Industry) stated that she had no ready answer to Mr Durr's questions around Black Economic Empowerment (BEE). Although BEE is part of the Bill, it is not the main thrust of it. Since the liquor industry was being restructured, it made sense to make the Bill developmental.

The central question facing provincial legislators was balancing easy entry into the liquor industry with managing the impact on communities. The challenge lay in getting the balance right, and provinces could learn from one another. Matters had been raised that would be considered by the technical task team, such as licensing distinctions in terms of the size of retail outlets and selling of alcohol on the streets.

The Bill does not prohibit or require registration if one produces sorghum beer for personal consumption. It is only if the beer is to be sold that registration is necessary. The regulatory mechanism covers all alcohol. Regulation is necessary or there will be chaos as under the current system.

Although it falls under national competence, the Department would like provincial input on the suggestion that a distinction be drawn between manufacturers that distribute to wholesalers and those that distribute to retailers.

Questions had been raised about dishonesty as a disqualifier for obtaining a licence. This had been removed from the Bill. The term is a legal one, signifying that one had been found guilty of certain offences involving dishonesty and should not be construed more broadly than that.

Sellers of alcohol had a duty to ascertain the age of anyone that appeared young to ensure that they did not sell alcohol to under-aged persons. Minors who purchased alcohol would also be guilty of an offence.

The cost of administering the legislation had not been determined. The new legislation was intended to open access to people that had been excluded from the liquor industry. It presented interesting opportunities for new micro-manufacturers.

The Department was seeking uniformity not because it wished to usurp provincial power but because unless legislation is strong on compliance, policing and regulation, criminals and cartels will migrate to provinces with weak legislation. Provinces had to be vigilant on micro-manufacturing and should check who owns whom and what in issuing licences so that cartels could not use micro-manufacturers as fronts. There are major vested interests and provinces would be lobbied by them. National and provincial legislation must complement one another. The process will help to clean up the present chaotic state.

Mr P Nel (NNP, Free State) commented that he wondered what the purpose of the Bill was. If its purpose is to promote Black Economic Empowerment, then it is not the right route since this is addressed by the new Broad Based Black Economic Empowerment (BEE) Bill. However even if such was the case he did not see the rationale for choosing liquor out of all the retail outlets available.

He was supported by Mr K Durr (ACDP, Western Cape) who asked why the objectives of economic development could not be achieved through the BEE legislation.

Ms Ludin replied that the BEE policy required that BEE be considered wherever government issues licences. The BEE legislation itself dealt with separate issues from those in the Bill.

Dr Davies (ANC) added that there were a series of criteria in the Bill, of which BEE was one.

Ms Sithole (Limpopo) asked how new entrants to the liquor industry would be protected.

The Deputy Minister replied that the Competition Commission would ensure fairness, though she could not say how they would do so.

Mr Andersen (Western Cape) asked if Clause 24(5) had any impact on micro-manufacturers, which fell under provincial competence.

Ms Ludin replied that the clause was intended for consistency. The primary issue it addresses is distributors, a national competence. She stated that he might be pointing out an unintended consequence of the wording.

Mr Burrows stated that the KwaZulu-Natal draft Bill addressed the issue by allowing micro-manufacturers to hold retail licences.

Ms Ludin responded by noting that retail is a provincial competence. The Minister could not review retail licences, only manufacturing and distribution licences. The clause clarifies the role of a distributor and does not regulate micro-manufacture.

Mr Mohapi (Gauteng) noted that it appeared that the Minister would be the person responsible for assessing licences, with no intention to establish an independent body to do this.

Ms Ludin responded that the previous draft of the Bill had required that provinces set up independent bodies to administer licensing, the new draft did not. Provinces could decide whether to keep the function in or outside government. The Minister had decided to keep the function within government.

Ms Ludin stated that traditional African beer could be produced without a licence if it was produced for personal consumption. A licence was only necessary for selling it. A question arose of what sort of licence was appropriate. There are issues of manufacturing standards.

The Deputy Minister added that persons considering selling alcohol must get a licence. Testing of the product would come into play - the product must be healthy. The task team would have to consider this matter.

Dr Davies stated that a central concern expressed in the public hearings related to the short shelf life of sorghum beer.

Mr Mohapi (Gauteng) asked if the Minister would establish a national liquor licensing authority. Would it be possible for the Minister to attend to the number of licence applications that would be received? Would it not expose the Minister to unnecessary litigation?

Ms Ludin replied that whether there was an independent authority or the department performed the function, what is crucial is that there are adequate resources for the task. The national Department's functions are different from those of the provincial departments. At national level there were only about five to seven manufacturers and not more than 500 wholesalers. There would not be many new entries. The only challenge was the transition to the new system and the Bill allowed three years for this. A separate institution was not warranted. Whether the task was undertaken inside or outside of government, there would be legal challenges.

Mr Burrows expressed concern at the National Liquor Policy Council's powers. Clause 49(6) and (7) appeared to allow the council to prescribe to provinces by majority vote plus the Minister.

Mr Andersen (Western Cape) responded that the council could not prescribe to provincial legislatures. At most it could impose on MECs a requirement to try to sway the legislature to the council's view.

Ms Ludin responded that the National Liquor Policy Council would discuss and take decisions on national norms and standards, so there was no need for consensus. The council could not impose requirements on the provinces. The aim of the council was to resolve disputes and get provincial input on national issues.

The Gauteng Government Representative asked how the sale of liquor from an outlet that was not licenced for on-premises consumption to one that was licenced for on-premises consumption would be classified.

Ms Ludin replied that horizontal trade from one registered retailer to another is distribution and so falls under national competence. Since retailers could not always be clear why liquor was being purchased, they would not be liable where liquor was sold in good conscience for consumption not resale.

The Gauteng Government Representative asked about the importation of liquor by retail outlets. Who regulates this?

Ms Ludin replied that the Bill did not deal explicitly with importation of small volumes of liquor. The department did not want to regulate such importation at national level.

The Western Cape Government Representative stated that there were no large manufacturers of sorghum beer in the Western Cape. Paragraph 83 of the Constitutional Court decision indicated that the manufacture of sorghum beer is a provincial competence. There should be a distinction between sorghum beer production and its mass production. The Western Cape treats all sorghum production as micro-manufacture.

The Deputy Minister replied that they would look into the claim that that the Court's decision held that sorghum beer manufacture is always a provincial competence.

Ms Ludin added that it was probably simply a matter of differing readings of the Court's decision. It did not make sense to licence a national manufacturer at provincial level. Sorghum beer would be treated as any other alcohol, but its short shelf life had to be taken into account. The national manufacturer was not concerned about their own licence, but about the ability of the retail sector to become formalised. Many of the outlets for their products are unregistered.

Dr Davies stated that the Bill dealt with the regulation of manufacture and distribution. Other processes - retail and micro-manufacture - were the domain of provinces. The national process did not prescribe to provinces except that the status quo, under the 1989 Act, applied if the provinces did not pass legislation. Such legislation should be passed since everyone, aside from Mr Durr, agreed that the 1989 Act was problematic.

The meeting was adjourned.



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