The Department of Trade and Industry has acknowledged that one of the main areas of contention around the new Liquor Bill is the proposed three-tier system aimed at reducing cross cutting interests in the manufacture, distribution and retail legs of the multi-billion rand South African liquor industry.
The National Assembly trade and industry portfolio committee agreed on Wednesday to send the Bill back to the department for revision. The committee, chaired by ANC MP Rob Davies, was told by director-general Alistair Ruiters: “The main areas of contention appear to be the three-tier system, the treatment of the sorghum beer industry, concerns about some of the public interest issues, their phrasing and practical implications as well as the ability of the Bill to effectively deal with matters of concern at the retail level, particularly the formalisation of the still largely illegal shebeen industry”
Earlier in public hearings the Wholesale Merchant Forum of the Wine and Spirit Industry of South Africa told the committee that the Bill contained serious flaws that could impede investment and economic growth.
Aspects of the Bill giving wide powers to the trade and industry minister may, indeed, be unconstitutional, the forum argued.
The forum expressed concern that the Bill prohibited a manufacturer from selling liquor to a retailer except with the permission of the Trade and Industry minister “as a condition of registration”.
“The previous Bill stated that a manufacturer may sell liquor to any licensed person. It is unclear why this section has been replaced with unfettered discretion being given to the minister.”
Opposition Democratic Alliance MP Mark Lowe argued that the Bill was seriously flawed and should be withdrawn “in its entirety”. However, the committee — dominated by African National Congress members — opted instead to allow the DTI to make extensive and material amendments.
Lowe argued that the power of the Trade and Industry minister to make exceptions to preventing vertical integration — allowing a manfacturer such as SABMiller to distribute for example — was unacceptable. Lowe argued that provincial authorities should be given greater powers of determining cross-cutting connections in the industry.
The department promised to engage “with the industry” in making amendments to the legislation before it was brought back to the committee.
Ruiters noted that most submissions during the public hearings phase had raised the issue of the three-tier system. “The primary reason for the introduction of vertical separation between the three tiers was to ensure proper control over the industry at all levels.
“A second reason was to deal with the persistent and historical anti-competitive conduct by dominant industry players.
“The third reason was to promote black economic empowerment in view of the political history of the sector and the policies of the previous government with regard to the involvement of the historically disadvantaged in the industry.”
He noted in particularly that “today … liquor manufacturing remains a highly concentrated industry tier”. SABMiller, he said, still controlled 96,6% of the South African beer market, “while other industry players such as Distell have significant market shares”.
The current high levels of concentration have their roots, he said “in the policies adopted by the apartheid government. SABMiller (then known as SAB), he said was granted a 100% beer monopoly while Cape Wine and Spirits Institute was granted the hard liquor monopoly.” – I-Net Bridge