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Liquor licensing in South Africa – improving credibility and compliance

13th December 2012

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The liquor industry occupies an interesting policy position, in the crossroads between industrial and health policy. While the domestic industry plays an important role in providing employment and export opportunities (particularly as regards the wine industry), which should be supported, the costs of alcohol abuse to health, human capital development and social stability are significant and need to be minimised.

South Africa has a relatively well developed regulatory system in liquor. However, its efficacy has been damaged by the legacy of apartheid and the legal systems which preceded it, and not enough has as yet been done to repair such damage. From 1928 to 1962, the state prohibited the sale of "European liquor” to Africans, leaving sorghum beer as the only legal alcoholic beverage for this market. When this prohibition was lifted in the 1960s, the government then granted itself a monopoly on the production of sorghum beer. In order to stamp out shebeens, liquor licenses in townships were only granted to municipal beer halls, and the profits from such beer halls were then earmarked to fund the building of township amenities and finance the homelands. By 1976, municipal beerhalls were being targeted by protestors as symbols of oppression.

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Thus for most of the 20th century, it was either impossible or extremely difficult to obtain a liquor license for on-premises consumption in an area designated for black, coloured or Indian occupation. As a result the industry went underground, and on-consumption of alcohol largely occurred at unlicensed shebeens. Given the size of the township market, this implies that for many years, the majority of alcohol consumption in South Africa has occurred at outlets which have none of the regulatory constraints (for example on sale to minors, or venue crowding) which help to ensure the safety and security of patrons.

Efforts are currently being made to increase the proportion of licensed shebeens, and by doing so to reduce the harm they cause. However, progress is not being made rapidly enough. A major problem is the lack of commercial zoning in township areas – without proper demarcation of commercial areas suitable for on-licenses, there is little to prevent tavern licenses from being issued where they are most likely to cause distress and disruption (for example, next door to families with small children). There are also issues with the structure of tavern licenses, which are a holdover from apartheid legislation. In particular, tavern licenses seldom require the licensee to also provide food on the premises – which is a key means of reducing binging behaviour.

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Improving the quality of on-license liquor regulatory compliance is a thorny task. The abuses of the apartheid regime have likely reduced the credibility of regulation in this space for many communities, and overcoming that heritage will take many years. However, the enormous toll that alcohol abuse can take on communities means that the effort must be made.

This analysis draws heavily on a report recently completed by DNA Economics, in conjunction with the University of Cape Town, for the National Liquor Authority. It is available in full from the download above.

Written by Sarah Truen, DNA Economics

DNA Economics is a specialist economic and development consulting firm, which provides clients with the in-depth expertise and analysis necessary to make the right choices. Founded in 2004, the company combines a deep understanding of the Southern African business and policy context with specialist skills in international trade, public finance, competition and regulation and climate change economics.

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