Alcohol abuse costs South Africa in the region of R10-billion a year, or 1% of GDP, but the excise tax on alcohol collects only about R7-billion. This leaves the country with a shortfall of about R4,5-billion in costs to health services, the criminal justice system, and, of course, human lives.
Tax on tobacco and alcohol is often lumped together in the national budget as “sin taxes”. But although the links between alcohol, crime and road accidents are well documented and well known, the level of excise tax on alcohol, at 18% of the retail price, is far below that of tobacco, at 37% of the price.
Crime and violence, HIV/Aids, and to a lesser extent, road accidents are usually counted as three of South Africa’s biggest killers. Research shows that alcohol abuse is linked to all three, including HIV/Aids, as the intoxicated consumer is more likely to indulge in risky behaviour such as unsafe sex and sex with multiple partners.
One strategy would be to increase the liability of restaurants, bars and pubs serving alcohol. The Western Cape is considering implementing a “last drink survey”. “Following an incident involving violence or drunk driving, the police should determine where the person obtained their last drink,” according to that province’s draft strategy on alcohol abuse reduction. This would allow police to identify problem liquor outlets and the outlet involved could be held civilly liable for damages.
South Africa could also look into a higher tax on alcohol, according to Charles Parry, a researcher for the Medical Research Council and Stellenbosch University.
Direct and indirect costs of alcohol abuse include the costs of substance abuse treatment, increased use of emergency services due to alcohol-related trauma, increased use of mental health services due to alcohol-related psychiatric problems and the cost of medical services due to alcohol-related medical complications. The criminal justice system incurs costs as it houses and rehabilitates offenders and sets aside court time. There are also costs to the victims of crime and losses due to theft, according to an article co-authored by Parry, Bronwyn Myers and Michael Thiede.
There is an economic cost too. Alcohol misuse contributes to lower productivity, increased absenteeism and tardiness, high employee turnover and work-related accidents, according to research cited by the article.
While cost-to-economy studies have not yet been conducted in South Africa, international experience shows that the annual cost of alcohol misuse is between 0,5% to 1,9% of GDP for developed countries. For 2003, the year the article was published, this would translate to R8,7-billion per year, “an amount almost twice that received in excise duties on alcoholic beverages in 2000/01”, says the article. This figure would have grown substantially since then in line with GDP growth and may be an under-estimate. Economist Rejane Woodroffe of Metropolitan Asset Management argues that the cost of alcohol for developing countries is even higher.
The primary justification for the tax would be to correct the external costs associated with alcohol consumption and to fund programmes aimed at reducing the social burden of misuse.
Recent increases in alcohol excise taxes have been in line with inflation, except for wine, cider and alcoholic fruit beverages, which saw higher increases. Before 1994/95, excise taxes for most alcoholic beverages had actually decreased over time, as did the proportion of revenue over time. In 2003, the price of beer was lower in real terms than it was 16 years ago.
The total tax burden (excise tax plus value-added tax) for malt beer, spirits and natural wine in South Africa is below the international average. While we tax beer at 33%, the international average is 37%. Wine is taxed at 23% locally, but 33% internationally. Spirits are taxed locally at 43%, but 54% internationally, according to the article.
While some consumers may reduce their alcohol intake, others may simply switch to cheaper alcohol products or products with higher alcohol content. Decreased alcohol consumption would hit the national beverage industry, thus reducing corporate tax revenue and possibly increasing unemployment, says the article. Smuggling and illicit brewing would increase. Parry and his co-authors don’t suggest that the tax be increased to international levels, because of the large market for home-brewed alcohol and the tendency to trade down in difficult times, but say that there is scope to increase taxes to recoup costs.
But SABMiller spokesperson Michael Farr said SAB carried a disproportionate share of the liquor excise tax burden for several years, contributing 60% of excise tax revenues for the industry.
Parry’s work suggests that strategies dealing with the context in which alcohol is marketed, distributed and consumed in society are likely to have a bigger impact than interventions that target only the alcohol consumer or the alcohol content of drinks.
An article co-authored by Parry and Sarah Dewing in 2006 describes a number of these strategies. Restricting the hours and days of sale for liquor outlets and restricting outlet density have been effective overseas. But because around 80% to 90% of outlets in South Africa are unlicensed, this strategy would have to be accompanied by “innovative efforts to draw the many unregulated outlets into the regulated market”. Parry and Dewing say that existing unlicensed outlets would need to be encouraged to become licensed and to move out of residential areas into business nodes.
“Thereafter development incentives to upgrade facilities could be given to those outlets serving alcohol in a responsible manner. The intention is that this would lead to less responsible retail outlets going out of business. Outlets near schools should also be opposed,” they say.
The researchers’ position on this strategy is also supported by SABMiller. “It is estimated that 70% of outlets currently operate outside of the law. This number will return to levels of approximately 82% should the recent temporary licences awarded in the Eastern Cape and the permits awarded in Gauteng not be converted into permanent licenses … Licensing would result in the sustaining of hundreds of thousands of formal jobs in the economy, improving South Africa’s formal employment figures considerably,” Farr said.
Licensed outlets, unlike illegal outlets, can buy directly from suppliers, become purchase points for shebeens in their vicinity, and no longer run the risk of police raids and stock confiscation, he said. Government would also receive tax revenue from these outlets and there would be scope for more effective policing.
Currently, there is little incentive for shebeeners to legalise as the fees are prohibitive, the process is intensely bureaucratic, tax would need to be paid and there is the potential for extortion by corrupt officials. Licensed outlets also seek to prevent additional licences being granted, he said.
But Farr said that SABMiller and the Industry Association for Responsible Alcohol Use, which it partly funds, supported “focused campaigns and programmes, which target ‘at risk’ groups”. Combined with the need for education is the necessity of greater policing of drunk drivers and a functioning 24-hour public transport system, he said.
While tackling South Africa’s high incidence of alcohol abuse would appear to be a no-brainer, the political will to do so at a national level seems lacking. Perhaps other challenges — such as crime and HIV/Aids — have been seen as more pressing in a culture where drinking is often seen as normal and even expected. SABMiller, the dominant alcohol company, is one of our leading and most well-respected companies; any move to limit binge drinking would be likely to impact on their profits. The liquor industry commands considerable power as a potential lobby group, being a major foreign exchange earner and employer.
So it seems the legacy of South Africa’s infamous dop system, instituted by farmers who paid their workers in cheap alcohol, still endures at a national level.
- Discourage free or heavily discounted drinks.
- Restrictions on alcohol in certain public places, such as a Western Cape ban on beach drinking.
- Restrictions on advertising and product placement.
- Warning labels for products.
- Restrictions on size of beer, wine and spirits containers, with banning of papsakke (five-litre plastic containers of cheap wine) and sachets containing spirits. Only 340ml containers of beer, representing one standard drink, could be permitted. This could help drinkers keep track of their consumption and could help people drink less. Many consumers drink beer in a quart or 750ml bottles and think of the 750ml size as being one standard drink, when it in fact comprises 2,2 standard drinks.
Restrictions could be placed on the alcohol content of beer products, with a limit of 5,5% absolute alcohol.
- Inclusion of the number of standard drinks on the label.
- Using safer materials, including alternatives to glass bottles for beer. This could reduce incidents of injury by beer bottles. Licensed premises with a high risk for violence could dispense alcohol in plastic glasses and bottles only.
- Prohibition or restriction of products with clear appeal to youth.
- Random breath-testing of drivers to be increased.
- Novice drivers could be restricted from having any alcohol for three years after receiving a licence.
- Mandatory treatment for repeat drunk driving offenders.