A report by market research company Euromonitor International has indicated that illicit alcohol trade in South Africa has grown at a compound annual growth rate (CAGR) of 17% since 2017 and now stands at 12% of the R177.2-billion total industry market value.

In volume terms, illicit trade made up one in every 6.67 litres traded in 2017, and it has now escalated to one in every 4.54 litres traded.

The report, titled ‘Illicit Trade: Alcoholic Drinks in South Africa in 2020’, documents the growth of the illicit alcohol trade in 2020 as a direct consequence of the prohibition of alcohol sales, and was jointly commissioned by the South African Liquor Brandowners Association (Salba), the Beer Association of South Africa (Basa) and Vinpro.

Salba CEO Kurt Moore says the expansion of the illicit trade has had “a devastating social impact on citizens' health and wellbeing, is stalling economic recovery and fuelling the engines of organised crime”.

Basa CEO Patricia Pillay notes that the report confirms “a clear correlation” between the sales ban and the increase in the demand for illicit alcohol.

She explains that the illicit trade market has almost doubled in the last three years and, was worth R20.5-billion in 2020, accounting for 22% of alcohol consumption.

“The tragic indirect consequence of this has been the rise in illicit homebrew consumption-related deaths and an increase in criminal activities, which are now firmly entrenched,” she laments.

The report indicates that growth in illicit trade indicates that the sales ban, together with a lack of punitive measures and enforcement, incentivised crime syndicates to ramp up smuggling and counterfeit operations to take advantage of the depressed legal market.

Illicit alcohol trade sales by volume have overtaken the entire combined wine and cider sectors (665 431 hectolitres of alcohol equivalent vs 627 758 hectolitres of alcohol equivalent).

Vinpro MD Rico Basson laments that "not only does this confirm what the alcohol industry has being communicating to government about the futility of banning legal sales but also confirms the World Health Organisation position that alcohol policy must take into account the national context”.

In South Africa’s case, the existing rampant illicit market is compounded by stringent regulations on the legal sale of alcohol, including alcohol excise taxes that are almost double what they were across all categories in 2012, combined with a weakening macroenvironment, where real disposable income contracted by 4.5% in 2020, and unemployment increasing to 29.2%, that have subsequently fuelled the market for cheap illicit products, Basson elaborates.

The report also points to the disastrous economic impact of illicit trade, seen in 2020, when the South African Revenue Services lost R11.3-billion owing to the illicit alcohol trade.

Moore points out that this was enough to pay for more than two-million child support grants for a year or put an additional 34 000 police officers on the streets.

"The loss to the fiscus has several repercussions," Moore stresses, noting it places an additional burden on the state's ability to combat Covid-19, and that it makes it difficult to enforce regulations, while seriously hampering attempts to stimulate the country's economic recovery.

Pillay says the South African alcohol industry and its stakeholders share the government's concern over the pandemic and will continue to support meaningful measures to flatten the curve and halt a possible third wave of infections.

"We stand by our commitment to being part of the president's economic growth plan. The alcohol industry can — and does — play an important role as an engine of economic growth and job creation across the value chain," Pillay adds.

"We can do this by operating within a well-regulated space. We do not support outright bans on alcohol sales, which have tragic and disastrous consequences while alternative, effective and targeted interventions are available."

The sector has continually sought ways of collaborating with the government to re-examine alternatives to prohibition and find viable and better alternatives that address alcohol misuse while maintaining the livelihoods of a significant number of people whose jobs and access to income are dependent on the industry.