SA loses R6bn in revenue to illicit alcohol trade

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The South African economy suffered a fiscal loss of R6.4-billion in 2017 due to illicit alcohol activities, SAB revealed on Thursday.

Speaking at the discussion held in Sandton, Johannesburg Associate Consultant at Euromonitor International, Kimberly Bryant said the 2018 study revealed that consumption of illicit alcohol in South Africa reached 14.5 percent 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 percent between 2012 and 2017.

Bryant said in South Africa they have noted that the growth in illicit alcohol activity was 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,” said Bryant.

She 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 was the next highest contributor to the fiscal loss in 2017 at R2 billion.

“Across the globe, one in four alcohol bottles of alcohol consumed are illicit, representing 25.8 percent 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,” said Bryant.

“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.”

The study identified that unlicensed outlets, binge drinking of lethal products, legislation and enforcement and taxation strategy were shaping South Africa’s illicit alcohol trade and affecting the initiatives intended to reduce it.

“The groundbreaking findings from the study clearly demonstrate a need to improve tighter collaboration amongst government agencies under a simpler regulatory framework, enhanced enforcement through private and public partnerships for capacity building and training.”

“Creation of an enabling environment to encourage licensing and responsible trading needs to be improved,” said Brynat.

This article was written by Thembelihle Mkhonza and was sourced from IOL/BusinessReport; for the original article, click here