GOVERNMENT POLICY TARDINESS AND INCONSISTENCY HURTING BUSINESS CONFIDENCE
Gareth Ackerman, Co-Chair, Consumer Goods Council of South Africa
President Cyril Ramaphosa made several promises about how to revive the South African economy in his annual State of the Nation Address.
In his address, the President made several welcome promises to underpin the success of the government’s economic recovery and reconstruction programme. Among these were ensuring reliability of power supply which continues to affect the consumer goods sector and the country through persistent load shedding by Eskom.
The President also spoke about the need to accelerate local production of goods which will not only create employment, but also make South African exports globally competitive. The consumer goods manufacturing and retail sector is already participating in a pilot project where 20 products have been identified for the localisation drive based on proposals the sector made to the government.
The question is how we can ensure delivery.
There have been many discussions with business, labour, and other social partners on how to move SA forward. Many of the suggestions made in good faith by the business sector have fallen on deaf ears without any explanation from government on the continued implementation of policies and regulations that continue to threaten livelihoods. This is frustrating to say the least.
For example, we made several proposals to help revive the clothing industry, create jobs and help the localisation issue, but government has not progressed with their proposals.
We have agreed to participate in the Sugar Master Plan to grow the sector and protect it from imported competition, despite our view that the plan itself was not competitive. Our concern was and remains that the government failed to consider the impact of its policy to introduce the sugar tax, particularly on job creation and employment.
Specific to the imposition of the national state of disaster, the consumer goods sector has supported and implemented every measure put forward by government in response to the outbreak and impact of Covid-19. Where we have not agreed with government – for example, over the ban on the sale of liquor – we have continued to engage in pursuit of common ground.
The current rules on liquor are however eroding confidence in the government’s approach. Currently, retailers selling liquor for responsible consumption at home are restricted to operating from Monday to Thursday. However, those selling liquor for on-site consumption, like bars and taverns can trade for a full seven days.
This makes no sense for a sector that accounts for only 30% of the total liquor throughput. If the reason to restrict liquor sales is to prevent people congregating under the influence of alcohol, then why allow bars and taverns unrestricted trade, while penalising traders that cater for home consumption?
The liquor retail industry – particularly the small and independent traders – is currently in extreme distress with enormous and far-reaching implications for many jobs and the whole value chain, which includes farmers, liquor production, warehousing and logistics, to construction of new retail outlets. The limited restriction is no longer financially sustainable and is now threatening the survival of retail liquor outlets and jobs in the sector.
The sector is losing about 50%-60% of liquor sales volumes on Friday-Saturday and between 10%-18% on Sundays every week, given that consumer spent increases on Fridays to Sundays. These losses are unsustainable and irrecoverable and will have long-term effects on businesses and the wider economy.
It is pertinent to note that 60% of the liquor retailers are SMEs who rely heavily on weekend trade. The SMEs liquor retailers are already retrenching because the four-day trade cannot sustain their businesses. Any additional job loss is one job loss too many and adds to the already overburdened social budget facing the fiscus which will have to provide social grants to some of these employees.
The irony of this situation is that the fiscus directly is losing PAYE, excise duty and VAT and there are several other revenue losses via the multiplier effect such as UIF claims and social grant claims.
We do not understand the logic put forward by the government to restrict trading for off-site liquor consumption to only four days. Its arguments are not backed by scientific evidence that consumption of liquor bought from retail liquor outlets contribute to high trauma cases at public and private health facilities. On the contrary, we believe that home/off-site consumption helps in the fight against Covid-19 by reducing mobility and controlling trauma cases, which in turn reduce the burden on the hospitals and the health sector.
The restriction of off-site liquor is further fueling the already entrenched illicit trade in liquor which is costing the fiscal approximately R6.4 billion per annum. The law enforcement agencies are already over-stretched to be able to react to infringements and enforcement of the rules against illicit alcohol and tobacco. The reality is that these restrictions are also increasing illegal trade while reducing legal trade with the resultant significant revenue losses to both the government and retailers.
The sector is engaging government to re-examine its regulatory regime to create an environment that considers both the health and the socio-economic impact challenges in its containment decisions. Despite these engagements, it is baffling why the government continues with unjustifiable decisions which are mostly impacting the on-site liquor traders.
We therefore call on the government to implement parity and allow retail liquor traders to operate as optimally as possible given the stress facing retail liquor traders.
The government needs to put this right quickly if business confidence is not to be further eroded. And there is no evidence of the urgency required to achieve this, yet the economy desperately needs to grow. In his recent Op-Ed published on News24, President Ramaphosa said companies will need to be innovative in driving methods and processes that secure sustainability and profitability, while ensuring job retention and creation.
We agree with him. But it will not happen as long as the government ignores rational advice from the business sector, and pays lip service to its commitment to implement policies that help in reviving and restoring economic growth.
What is urgently required is a policy direction that balances the health considerations of saving lives, without creating a poverty pandemic that puts pressure on the sustainability of businesses and adds to the social burden facing the fiscus.
The economic crisis facing SA needs action, and now. Already, the International Monetary Fund (IMF) has warned that unless urgent structural reforms are implemented, South Africa risks further economic downturn. The consumer goods sector, which is one of the largest employers of labour and a key contributor to GDP growth and rose to the occasion during Covid-19, is committed to partnering with government. This must be based on genuine dialogue. And policy must be based on evidence and genuine consultation.
The time for honest, committed collaboration is now. The consumer goods sector has never been ready than now to contribute to lasting solutions that will bring economic relief to the sector and complement national efforts to revive the economy. We want to play our part in efforts to achieve inclusive, job-creating and poverty-alleviating growth, limiting inflation which is tending upward in this time of increasing consumer hardship.
We also offered to help with the vaccine rollout and have been snubbed!