ILLICIT ALCOHOL TRADE
HOL O C L A Y G D O D F O S R E THE MANY DANG nge drinking and underage ts encourage bi s Cheap, illegal produc alth risks to consumer he r he ot g on am n io alcohol consumpt
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he South African economy suffered a loss of R6.4-billion in 2017 due to illicit alcohol activities, an industry that generates an annual revenue of R12.9billion and which is unregulated. In addition, cheaper, therefore more accessible, illegal alcohol products encourage binge drinking and underage alcohol consumption and pose a serious risk to the health and safety of individuals as they contain potentially dangerous substances. This is according to a Euromonitor International study undertaken in to determine the impact of the illicit trade of alcohol in seven African countries, including South Africa. The study, which engaged local manufacturers, trade associations and government, among other relevant
stakeholders, highlighted that the largest share of the fiscal loss was attributed to smuggling of final alcohol products and raw ethanol used in the production of alcohol, amounting to R2.4-billion. Tax leakage is the next-highest contributor to the fiscal loss in 2017 at R2-billion. According to the Euromonitor study, consumption of illicit alcohol in South Africa reached 14.5%, or 498-million litres, of the total combined illicit and licit alcohol volume consumed in 2017. This represents an annual growth rate of around 4.3% between 2012 and 2017. Across the globe, the Euromonitor study reported that one in four bottles of alcohol consumed is illicit, representing 25.8% of the alcohol market. The global results include a multi-region report, which compiles findings from 24 countries in Africa, Eastern Europe and Latin America.
In South Africa, Euromonitor notes that the growth in illicit alcohol activity is driven by the challenging economic environment, weak regulation enforcement and taxation strategies driving up legal or licit alcohol prices. From a consumer perspective, it is all about cost and price sensitivity. Often, where an illicit product has the familiar packaging of a popular brand, consumers don’t realise that it is illicit because they lack knowledge and education about legal product recognition. The difference between illicit and licit alcohol prices averaged 51% in 2017. Due to the year-on-year increases in excise rates over the past 10 years, unit prices for alcohol, particularly spirits, have increased substantially. This high disparity between illicit and licit alcohol costs incentivises illicit activity.
(left to right): The Illicit Alcohol Panel Discussion was held among industry experts and officials; Azwimpheleli Langalanga from Tutwa Consulting; Gugulethu Mfuphi, senior broadcaster who also facilitated the discussion; Kimberley Bryant, Associate Consultant at Euromonitor International (who presented the research findings); Udeen Singh, independent Alcohol Industry Specialist; Mogola Makola, Chief Officer: Enforcement at SARS; and Quinton Walker, Consultant at Euromonitor International
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