Sifiso Skenjana | How liquor could be used to improve health and economic outcomes post-coronavirus

The coronavirus
pandemic has brought numerous health and economic challenges that have resulted
in the imposition of a ban on the sale of alcohol and cigarettes in the
economy.

The South
African Revenue Service (SARS) has estimated that the economy lost
approximately R1.5 billion in April as a result of the alcohol and cigarette
sale restrictions, and the illicit trade in the black market is estimated
conservatively at R100 million per day.

This not only places a tax leakage
burden for the fiscus, but also poses a health risk for the consumers of the
illicit goods.

Business
Leadership South Africa (BLSA) and Business Against Crime South Africa (BACSA) have
been at the forefront of working towards understanding the extent of the
illicit trade in South Africa, having looked specifically at Alcohol, Tobacco
and Textiles with a view to extend their analysis into other sectors like the
pharmaceutical and food retailing sectors.

At a
recent webinar they hosted on the topic, one of the suggestions I made was for
government to explore ways of socially compacting with communities, and private
sector for the creation of new economies that can make use of liquor and
tobacco.

For
example, government can partner with the likes of Pioneer Foods (makers of
Sasko bread), or Tiger Brands (makers of Albany bread) to build bakeries in townships
in South Africa, and sign off take agreements to sellers of beer and use that
to make beer bread in whole wheat or sourdough variants.

Having
these bakeries in the townships would enable them to price the break cheaper
given lower logistics costs and likely cheaper cost of using local land.

More
importantly, the benefits of this would be 1) bringing a much-needed financial
reprieve to the tavern owners and beer merchandisers in the townships whose
revenues have dried up, 2) township economy investment and build food
manufacturing capacity into the economy that could absorb jobs and support economic
growth and 3) improve the nutrition outcomes of township economy by bringing
cheaper and fresher bread for daily consumption in their households.

Bread
and staples

Bread is
reportedly the second-most important staple food in South Africa after maize
meal. According to the Food Advisory Consumer Service (FACS), the per capita
bread consumption in South Africa in 2017 25.8kg, considerably less than the 40.2
kg in 2006. This equates to roughly 2.28 billion loaves sold (49{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2} white and 51{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2}
whole-wheat) versus the 2.75 billion loaves sold in 2006 (60{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2} white bread and
40{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2} brown bread).

The four
major bakeries, Pioneer Foods, Tiger Brands, Premier Foods and Foodcorp, make
up approximately 70{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2} of the domestic bread market, according to research
company ReportLinker. The decline in consumption has largely been a result of
lower household income and rising poverty and inequality levels marginalised
communities in the country.

The
proposed township model would be an opportunity to democratise the access to
the manufacturing technology, infrastructure and capabilities to ensure more
broad-based participation by smaller, in-community bakers while building
manufacturing capacity in the country as a whole. Government would in return
explore tax and trading incentives for the large bakeries who would play a
leading role in building an inclusive in-community bakery industry.

Beer
for manufacturing

Beer can
also be used for the manufacturing of other foodstuffs like sauces, and this
could potentially be explored given the already burgeoning market for chakalaka
and atchar in townships.

This is an
opportunity to take the current crisis by its scruff and pivot towards an
economy with broad-based productive capacity. This pivot will not only help
struggling beer sellers stay afloat in the wake of an alcohol sale ban, but
also look  to future proof the economy
for a post-coronavirus labour and economic context.