ADDRESS BY THE CHIEF EXECUTIVE OFFICER (MR. K.C MANELI) AT THE EASTERN CAPE LIQUOR BOARD MEDIA BRIEFING IN EAST LONDON.
18 JUNE 2015
It is with great pleasure to welcome you to this media briefing this morning. We are especially grateful to colleagues from various media houses for responding positively to our invitation.
We have invited you today to this media briefing to share with you our recently released research findings on the economic contribution of liquor industry in the Eastern Cape. We also would like to use this opportunity to share with you, the media, some progress made in respect of our mandate, which is primarily to regulate the liquor industry in the province by promoting new entrants into the industry, enforcing compliance with liquor regulations, and mitigating against the harmful effects of excessive consumption of alcohol.
In 2014, The Eastern Cape Liquor Board (ECLB) commissioned a study on the economic profile of liquor industry in the Eastern Cape so as to determine the socio-economic contribution of the industry to the economy of the province. The liquor industry profile indicates that it is a relatively small, but gradually growing industry in the Eastern Cape, in the region of R7, 7 billion that is beginning to demonstrate limited, but significant socio-economic contributions to the province. The need for the study was stimulated by a strong desire to gain an in-depth understanding of the extent to which the industry benefits the economy of the province.
I must indicate that liquor industry is increasingly receiving immense attention from the public and invariably is associated with social ills in our communities that arise from excessive liquor consumption and inconsiderate trading. That being the case, it is expressly important to recognise that liquor industry provides significant socio-economic spin-offs to society, and as shown by findings of this study, the industry makes a considerable contribution to Gross Domestic Product (GDP), adds to the South African tax-base, contributes significantly to the trade account through large export earnings, and is integrated within regional economies; from the poorest to the richest neighbourhoods, irrespective of class or race.
Ladies and gentlemen, let me now turn to findings of the research study.
- Consumption expenditure
The study has revealed that household expenditure in the Eastern Cape in terms of alcoholic beverages is approximately R8, 6 billion that accounts for 9% of total consumption expenditure on alcoholic beverages in SA. This further accounts for about 4, 27% of total consumption expenditure by households in the Eastern Cape.
Nelson Mandela Bay Municipality accounts for the greatest proportion of provincial expenditure on alcoholic beverages at approximately 28%, followed by Buffalo City Municipality at approximately 17%. While the proportion of the provincial population residing in Nelson Mandela Bay Municipality and Buffalo City Municipality is 18% and 12% respectively, it should be noted that the relative provincial proportion of total disposable income in Nelson Mandela Bay Municipality and Buffalo City Municipality is 31% and 17% respectively and therefore expenditure on alcohol is aligned with available disposable income.
The study further shows that Alfred Nzo District Municipality, followed by OR Tambo District Municipality and Amatole District Municipality spend the greatest proportions of total household expenditure, relative to disposable income, on alcoholic beverages.
I should also mention that Eastern Cape is the fourth largest contributor to the total national liquor industry; contributing approximately 8%.
- Employment creation
Ladies and gentlemen, it is also pleasing to announce that about 23 620 direct and indirect jobs are attributable to the Eastern Cape liquor industry annually. Assuming that each employee supports about four (4) family members this means that about 106, 290 people are supported by the liquor industry in the Eastern Cape. Furthermore, the Eastern Cape accounts for approximately 9% of national employment within the liquor industry, which is in line with the 8% contribution that the province makes to national liquor industry GDP. Nelson Mandela Bay and Buffalo City account for the greatest proportion of provincial employment in the Eastern Cape. This is synonymous to the relative economic contribution of these regions to the total provincial liquor industry.
- Fiscal contribution
Eastern Cape liquor industry contributes about R1, 7 billion to total taxation. The total tax is directed to Excise (i.e. SIN tax) and VAT, corporate tax and PAYE. Nelson Mandela Bay Municipality (R733 142 m) followed by Buffalo City (R439, 492 m) make the highest contribution to tax. Municipalities with the least contribution to tax are Alfred Nzo (R46, 500 m), OR Tambo (53 622 m) and Joe Gqabi (R80 400 m). While these contributions are lower than those of the metros, it is still significant.
- Capital investment
In respect of capital investment, the study shows that approximately R17 billion capital investment is made into the liquor industry in the Eastern Cape that accounts for 3, 5% of total capital investment into the province. The study further shows that most significant single investment was in 2001 by SAB in the Ibhayi Brewery in Nelson Mandela Bay.
The emergence of microbreweries continue to contribute to capital investment in the province.
In terms of the transformation of the liquor industry, it is disheartening to report that the study shows that there is a very limited degree of transformation in the manufacturing sub-sector of the liquor industry in the Eastern Cape in terms of ownership, management control and employment of previously disadvantaged individuals. However, I must indicate that the wholesale and retail trade sub-sector of the liquor industry is beginning to show good progress in relation to transformation, particularly as it relates to management control and employment.
Ladies and gentlemen
I am delighted to report that over the past five years there has been a gradual but increasing trend in terms of the establishments of microbreweries in the Eastern Cape. Currently, five microbreweries have been established and continue to manufacture alcoholic beverages. These microbreweries are located primarily in the two metropolitan regions, i.e. Nelson Mandela Bay Municipality (and the surrounding Sarah Baartman District Municipality) and Buffalo City Municipality and produce craft beer, wine and mead, predominantly for sale within the Eastern Cape and for international export to a limited degree.
Whilst we recognise that the liquor industry contributes significantly to the Province’s economic activities, however, this needs to be balanced against the impact that this product has on society if not properly regulated. I must emphasise that we are fundamentally opposed to irresponsible trading and the abuse of liquor – by traders or retailers and consumers, respectively.
Ladies and gentlemen, currently we have about 8311 active licenses in the Province. It is worth mentioning again that as we issue licenses we also make an effort to capacitate liquor traders in business skills in order to ensure sustainability of their businesses. To date about 1103 liquor traders have benefitted from the liquor traders’ development programme.
I must also concede that in regulating liquor industry, we are grappling with the proliferation of illegal taverns in the Province. However, we are working relentlessly to ameliorate this challenge. For example, in the past 12 months we conducted about 140 Blitz Operations across the Province. I am glad to inform you that about 405 illegal liquor traders were identified and referred to the criminal justice system with an estimated value of about R350 450 worth of confiscated liquor. The deployment of a toll-free number has significantly improved the organizational complaints management capacity and the tracking, thereof.
Out of 185 complaints received recently, 162 have been resolved/referred. We continue to urge our people to use this number so as to assist the Board to alleviate the inconsiderate liquor trading, including illegal taverns.
We also do realise the fact that the irresponsible use of liquor has significant negative effects on individuals, families and communities. We, therefore, have taken responsibility to educate people and raise awareness about repercussions of alcohol abuse. We are currently rolling out education and awareness campaigns as a measure to mitigate against the damaging effects of excessive use of alcohol by communities; focusing on underage drinking, pregnant women, drivers and pedestrians.
In fighting the scourge of underage drinking, I am pleased to inform you that we have adopted about 90 schools that have been elected from the district municipalities in which we have introduced school-based activities – such as drama, debate, and sport – as platforms to convey messages on the dangers of underage drinking. The study that we conducted in 2012 showed that about 36% of learners drink alcohol, and we are focusing on schools to alleviate the scourge. Underage drinking is interfering with children’s development, affecting the nation’s ability to respond to economic challenge in the future, therefore, the Board remains steadfast in its efforts to combat this menace.
Fetal Alcohol Syndrome (FAS) continues to affect our society due to women who drink alcohol during pregnancy. Currently, there is no data on the extent of the FAS in the Province.
To address this gap, in collaboration with SAB, we are currently conducting a pilot study at Bethelsdorp (Northern Areas) in the Nelson Mandela Metropolitan Municipality focusing on the prevalence, the treatment and prevention of FAS.
The Foundation for Alcohol Related Research (FARR) has already conducted the study over a period of three years and continues to do so.
I must state that we also remain immensely concerned with people who insistently drive under the influence of alcohol, which invariably poses the biggest threat to road safety in the Eastern Cape. The Board will continue to embark on rigorous awareness campaigns to encourage road users to refrain from drinking and driving.
Ladies and gentlemen
As I conclude, I would like to reiterate the fact that liquor industry remains an important force in the economy of the Eastern Cape as shown by this study. While we recognise its role in economic development, we equally acknowledge the harmful effects that alcohol has on the society. We shall remain extremely committed in fighting the abuse of alcohol in our province and ensure that our people are protected from social ills that result from abuse of alcohol.
We are further urging community members to continue to utilise our toll-free number to report inconsiderate trading in their respective areas, including those liquor outlets that are suspected of trading without a liquor license.
The Toll-Free Number is 080 000 0420 and is available 24 hours.
I thank you.