Two weeks of debate on the controversial Liquor Bill in Parliament’s trade and industry committee climaxed last week when the Department of Trade and Industry (DTI) Director General, Alistair Ruiters, led a vigorous attack on monopoly players in the industry.
Ruiters, appearing at the end of public hearings on the Bill, said in a prepared statement that the liquor trade’s history had to be taken into account in understanding the motivation for the three-tier system the law aimed to introduce.
The system would discourage manufacturers from being involved in the distribution and sale of their goods without ministerial permission.
A flurry of protests from the liquor giants, many involved in distributing their products, appears to have been heeded by the government. The DTI asked for three weeks to rework sections of the Bill giving the minister wide discretion over “vertical integration” in the industry.
But Ruiters told MPs: “Liquor manufacturing remains highly concentrated. SAB [now SABMiller] still controls 96,6% of the South African beer market, while other industry players, such as Distell, have significant market shares.”
Concentration had its roots in apartheid policies. Ruiters said that in 1982 the previous government had carved the industry into two large exclusive sectors.
“SAB was granted a 100% beer monopoly, while the Cape Wine and Spirits Institute was granted the hard liquor monopoly … Twenty years later the market structure that was artificially created in the 1980s and the respective market shares have hardly changed.”
SAB would argue, he said, that its dominance “is the result of its efficiency and ability to serve its customers”. Ruiters said the contention had not been tested, as there were no other significant players in the market. Before the current Bill, no allowance had been made for new market entrants “that will ensure a level playing field and greater levels of competition”.
Ruiters said “benevolent monopolists” tried to exlude potential competition at the manufacturing levels”. But in the liquor industry, distribution capacity had contributed to manufacturing dominance “by foreclosing the markets to potential new entrants”.
“The three-tier system seeks to promote the entry of new participants at all levels of the industry, also at the manufacturing level.”
Legal advice indicates that the DTI has heeded industry concerns that thousands of jobs would be lost — even by small players distributing on contract to big manufacturers.
The committee gave the DTI three weeks to redraft the Bill. A more flexible approach within the three-tier system is envisaged. Department officials agreed that further talks would be held with liquor industry stakeholders.