Liquor law attorney Danie Cronje has warned that South African wine and liquor distributors could face major hurdles if recently proposed changes to the Liquor Act (No. 59 of 2003) are accepted.
Photo: Flickr | James Petts
The Department of Trade, Industry and Competition has given the industry until 6 September to respond to the proposals.
Cronje, who has advised key role players in the wine and liquor industry on legislation since 1998, said several of the proposed amendments risked creating confusion in the industry, with some even contradicting the Act itself.
For one, the Act currently based fees on the monetary value of annual turnover from registered activities, such as manufacturing or distribution. The draft amendments, however, referred to ‘volumes of sales’, a concept that was normally used to determine whether a manufacturer was small and fell under provincial regulation or large and fell under national regulation.
Cronje said the shift “muddied the waters” and could result in businesses paying fees on activities not governed by the Act, leading to significantly higher costs.
“Manufacturers and distributors that previously only had to pay fees based on the volumes sold to licence holders or other traders might now end up also paying for the volumes sold to the public,” he explained.
The draft regulations also attempted to regulate the delivery and storage of liquor; areas not currently addressed in the Act.
Cronjé explained that while the law required liquor to be stored at registered premises, the amendments introduced a new definition of storage, along with references to storage fees in the proposed fee schedule.
“It creates unnecessary uncertainty, and it looks as if businesses may now have to pay separately for storage, which is already part of normal registered activities,” he said.
Along with this, the draft stated liquor may only be stored for distribution purposes. Cronjé warned this could prevent businesses from using the same warehouse for wholesale and direct-to-consumer sales, a practice common among wineries with online shops.
“This is a major blow for businesses and raises barriers to entry,” he added.
On delivery, Cronjé pointed out that the Act regulated manufacturing and distribution and prescribed certain conditions for delivery. The proposed amendments, however, were vague and could be interpreted as imposing additional restrictions regarding the delivery of liquor, creating new hurdles for producers, distributors, and online retailers.
The amendments also confirmed that alcohol may be traded only between 6am and 6pm on weekdays and 9am and 5pm on Saturdays.
Cronjé cautioned this could disrupt supply chains, as deliveries were often more convenient outside these hours.
Another serious concern was the inclusion of “standard conditions” for new licence applications. Cronje explained that the Act required each application to be considered on its own merits, but the draft regulations imposed blanket preconditions.
The draft required applicants to demonstrate a commitment to combatting alcohol abuse by either affiliating with an industry body or contributing 1% of earnings to related initiatives.
Cronjé argued this was impractical, as many of the bigger companies already ran awareness campaigns tailored to their business models.
Taken together, Cronje said the proposed changes to the Act would increase compliance costs and raise barriers to entry, particularly for small businesses and online retailers.
“By introducing definitions and requirements that are not in line with the Liquor Act, the proposals create uncertainty and risk excluding innovative business models that have already proven effective,” he said.
