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2 October 2014 02:08 (South Africa)
Opinionista Ivo Vegter

The destructive power of government

  • Ivo Vegter
The regulatory state can be extremely destructive. One owner of a bar and grill discovered this a little too late.

Last week, a popular bar and grill near where I live was forced to stop selling alcohol. The local police discovered its liquor licence had expired, and summarily ordered the shut-down.

Since there is a serious backlog of liquor licence applications, obtaining a new one will take at least three months – a date which falls neatly on the far side of the World Cup tourist season.

That the owner of the restaurant was at fault is indisputable. A manager who used to handle this kind of paperwork had resigned shortly before the annual liquor licence renewal was due, and because of an administrative oversight, the renewal notices were being sent to the wrong address. The owner should have discovered this, and made sure his paperwork was in order. He didn't.

Let us also take as given that liquor licensing is a justifiable intervention in the market, in pursuit of social objectives such as minimising public disturbances or preventing the sale of alcohol to minors. There are good arguments against licensing, in principle, but making them is beyond the scope of this column. At least this isn't a sector, like casinos or broadcasting, where competition and small business is actively stifled by limiting the number of licences available.

Several regulars, upon discovering what happened, muttered imprecations about shebeens that operate with impunity. However, if true, and if they believe this to be a problem, it makes no sense to quibble when enforcement does take place.

So, let's stipulate that the publican in question was in at fault, and there ought to be consequences.

That said, one might expect a more reasonable response from the authorities than summarily ordering a business to cease operations.

This particular establishment has had a liquor licence for over a decade, and has never faced a complaint of a violation of its terms. Now, a single administrative error has caused what might prove to be a mortal blow to the business.

"What gets me is the vast gulf between the offence and the punishment," complains the owner. "I'm a strict landlord. It's not like I sold drugs, or my customers caused a public nuisance. One mistake in ten years, and they shut me down just like that?"

Indeed, there was no reason other than routine for the inspection. No complaints had been laid, and it was clear that the owner's failure to renew the licence was an oversight, and not an intentional infraction.

Yet instead of imposing a fine and giving the owner a fair opportunity to rectify his mistake, the inspector had no mercy.

"I asked the officer for one day's grace for every year this business has operated without any hitch, but he refused," the owner says. "In fact, he warned me that I shouldn't try anything clever while I wait for a new licence. He kept saying, 'We will trap you.' He added that he is the one who will approve or reject my application."

The consequences for the business were immediate and dire. In a way, it was fortunate that it happened at the quietest time of the year. However, this also means that there is little by way of a cash flow cushion to absorb the blow.

Daily, the losses mount, as customers have to be turned away or asked to bring their own beer and wine.

The barman, in tears, accepted a job as a waiter elsewhere: "We're like a family here, but I have to eat, you know? I didn't realise it could be this hard to leave a job, but what choice do I have?"

For his part, the owner has only one option if he wants to stay afloat while he waits long months for the inefficient government bureaucracy to issue a new liquor licence. He can go to his competitors, cap in hand.

Each liquor licence owner has, as part of his licence, a 30-day temporary permit which can be used for up to seven days at a time to cater for outdoor functions or other events off the main premises. The condition of using a temporary licence is that its nominal owner takes all legal risk, and also has to be the major beneficiary. Therefore, even if our unfortunate publican can line up half a dozen generous souls who will help him out, those licences will not come cheap. If he manages to juggle several temporary licences from week to week until his own licence is restored to him, he might just rescue his business.

In the mean time, the livelihood of half a dozen people are on the line as a consequence of the draconian reaction to a simple administrative oversight, and the government's inability to speedily issue a new licence. This speaks volumes for the government's commitment to fight unemployment and promote economic growth.

Remarkably, this is how things are meant to work. The owner was at fault, and the penalty imposed by the liquor licence inspector is as prescribed in law. This is the destructive threat that heavy-handed government regulation poses to the hard-working people of this country, even before corruption, cronyism and crime are factored into the equation.

An ancient precept in law and ethics, dating back to Cicero, says that the severity of a penalty should be reasonable and proportionate to the severity of the crime. It would be reasonable and proportionate to impose a fine upon someone who forgets to renew a liquor licence on time. Repeat offences, or failing to take action to remedy the error, might then incur a more serious penalty.

However, summarily ordering a business to cease trading, for a single slip-up in the paperwork, is a punishment that does not fit the crime.

  • Ivo Vegter
IvoVegterBW

Ivo Vegter is a columnist and the author of Extreme Environment, a book on environmental exaggeration and how it harms emerging economies. He approaches issues from the perspective of individual liberty and free markets. He grew up in the deep south of Johannesburg, and learnt his politics reading the Weekly Mail and Vrye Weekblad at Wits University during the early years of the country's transition to democracy. He recently left the city for the lower cost of living of Knysna, where he continues to write about everything under the sun. He is always right.

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