BOTTLED, THEN THROTTLED
Wineries out of business, jobs lost – the reality of the booze ban
With alert Level 3 lockdown regulations extended, including the ban on alcohol sales and on-site consumption at restaurants and tasting rooms, wine businesses are reeling. Not all of them will recover.
The underlying reasons for the government enforcing yet another ban on alcohol sales – on- and off-site – are not up for discussion here; there’s a lot of blame and finger-pointing going on already. I was going to say “too much” but perhaps it’s “not enough”.
Last week we looked at how it’s affecting restaurants, along with a 9pm curfew, which drastically curtails their ability to trade with any kind of decent profit. Many have closed, and sadly, many more are likely to follow in the coming weeks as the ban has been extended to 15 February.
It’s not a competition, but this ban has perhaps an even bigger impact on the wine industry, still trying to recover from 2020 and heading into the 2021 harvest. Dr Winifred E Bowman, Cape Wine Master, crunched some numbers.
“As far as wine tourism is concerned, the situation is really scary: 77% of wine tourism revenue is from wine tasting (32%), accommodation (25%) and restaurants (20%), and from March to June 2020 alone R2-billion was lost from wine tourism,” she said. “The outlook for wine tourism is bleak and there was an estimated decline in international tourists of between 60-80% in 2020. The Tourism Business Council of South Africa estimates a R68-billion loss in spend was incurred. Wine tourism makes up a huge portion of this.”
VinPro, an NPO that represents 2,500 South Africa wine producers, cellars and industry stakeholders, estimates that more than 80 wineries and 350 grape growers will go out of business in the next 18 months, accounting for a potential loss of 21,000 jobs, said Bowman.
“In addition, around 250 million litres of bulk wine remains unsold after the previous ban. This is more worrying especially with the new harvest fast approaching. With so many businesses potentially going out of business, and the surplus wine, winemakers will find it much more difficult to survive. Many winemakers do not own their own property or grapes and this situation will make it more difficult for winemakers because they will feel the knock-on price increase from winegrowers.”
That’s the financial side. There are human casualties too, some of whom have been in the wine world for generations, others who are young dreamers. “The impact and ripple effect is massive and will be damaging for some time to come,” continued Bowman. “In hospitality many sommeliers, wine waiters, sales people either had their salaries cut, or lost their jobs. And to put figures to that: 5,809 people are directly and permanently employed in wine tourism, together with 2,655 casual employees. During the peak season an additional 4,414 casual workers are employed. With the decline of most international and local tourists, many or most lost their jobs, and in the case of the casual employees, probably none were employed in 2020.”
If I’m pussyfooting around the reasons the government believes we as a country cannot be trusted to have access to alcohol, VinPro is not. In a press release at the end of 2020 it said: “The wine industry proactively implemented preventative measures to protect employees and visitors to farms and the 533 wineries. Wine farms are now getting the short end of the stick during the peak tourism season because of the blanket policy approach, the behaviour of the general public and non-compliance with Covid-19 regulations.”
It is a very sad situation and we have to acknowledge that the abuse of alcohol has been putting strain on the already heavily burdened health system, said Bowman. “But the way forward, in my opinion, is education in the responsible use of alcohol. That is the next task the health department will have to face. Sadly of course, our own revenue department lots millions in uncollected taxes – money that could have been used for this very necessary project.”
One of biggest concerns for Kevin Swart, managing director at Black Elephant Vintners, at the moment is the “one size fits all” approach to the alcohol restriction. “The producers/consumers following the rules and sticking to the protocols are guilty by association to those that don’t. It potentially sends the wrong message,” he said.
This third ban feels the hardest, said Swart. “I don’t think anyone anticipated we would return to an effective Level 5 lockdown of our industry. The President had actually said that the country would not return to the full lockdown; we assumed he meant us as well.”
Bubbles Hyland is a director of MorVino Wine Merchants which represents 20 family-owned wine farms – the middle tier wine farms which will be most in danger with this extension of the alcohol ban, she pointed out. Hyland got into this industry eight years ago because she is passionate about the history and culture of wine, and is also the editor of Well Red Wine Magazine. “I started it because I felt there was a gap in the industry for accessible, fun wine content that was knowledgeable and on point; that appealed to the masses and not just wine snobs.”
The biggest impact is obviously the restriction of local sales, which not only affects the money coming in but the capability to bring more in as the 2021 harvest is imminent,” said Hyland. “Their storage spaces are full of unsold wine, the barrels are full of unbottled wine, but budgets, lack of sales and cash flow make this impossible.
“Additional financial obligations for independent producers is that they have signed grape contracts and have allocations set – you can’t decrease allocations – you may never get them back. As per Nico Grobler of La Brune Wines: ‘You don’t want to impact the farmer negatively who has already carried financial implications’.”
Added Grobler: “Wine doesn’t wait for a ban to be lifted. Bottling and packaging needs to continue, which is a very expensive exercise.”
Local sales are a disaster, said Jose Conde from Stark-Conde Wines. “In December we were seeing a promising increase in tourism, but that is now dead. However, we will muddle through. I am more concerned about the businesses in hospitality that have zero income and the prospect for the season is very poor. These are businesses that we have in many respects grown up with over the past 20 years and it is very sad to see the devastating impact they face. And they employ a lot of people.”
With this tragedy unfolding on our doorstep, the walking wounded among the heartbreaking daily litany on social media of people, family, friends and colleagues who have succumbed to the virus (Cyril hit the nail on the head when he said numbers have become names), what can the able-bodied do to help?
Luckily SA wine producers are still able to export, so overseas buyers can put their money muscle and spending power behind the campaign to Save SA Wine.
“No country as far as I know has had a blanket ban on the sale of alcohol. In the UK no deliveries are allowed at present, but liquor outlets are viewed as essential businesses and therefore open for collection, as are supermarkets,” said Bowman.
“Local wine consumers should support their favourite brands, buy online for later delivery – that worked very well for the previous lockdowns. The discounted prices make it more attractive, however that really cuts the cloth very fine for the producers at the end of all this.”
Said Swart, Black Elephant: “Buying online helps the most as it gives us the cash flow, oxygen for a company, to stay alive. Unfortunately, delivery is still to be determined. During both the previous two lockdowns this has been a form of inspiration and hope for us as we saw our online sales rise dramatically.”
In other news, small restaurants have another hurdle to contend with: paying upfront for their annual liquor licences – at an increased cost – when they are not able to sell alcohol. This on top of reduced trading in 2020.
Julia Hattingh of Reverie Social Table approached the Western Cape Liquor Authority with this request:
“Please consider my plea for a reduction in liquor licence fee for 2021. This year has been incredibly tough with a strong restriction not only on alcohol sales but on restaurants operating in general. I have a small, 18 seater restaurant so operating at 50% capacity is not a viable option and I actually lose more money than staying closed. It’s not a restaurant where guests come to drink as much as they wish, we host (not since March) curated wine pairing dinners. I don’t think I’ve even sold R4,700 worth of liquor this year.
“My small business is self-funded with life savings, I do not have a bank loan or financial backer of any sort.
“I’ve had my licence for Reverie Social Table… for over four years now and have always paid on time and kept to the rules. Please consider my request. I would like to pay as soon as possible.”
The reply was a form letter.
“The Western Cape Liquor Authority (WCLA) as the provincial liquor regulator, aims to lead the reduction of alcohol related harms through effective regulation of the retail sale and micro-manufacture of liquor in the Western Cape and is also required to implement the relevant liquor legislation for the Western Cape Province. The renewal process (which takes place on either an annual or biennial basis) is one which is legislated in terms of the Western Cape Liquor Act, Act 4 of 2008 (the Act) and Regulations. This process is therefore a legal process which occurs on an annual or biennial basis.
“The work of the WCLA relating to the regulation of the retail sale and micro-manufacture of liquor in the Western Cape has continued during all stages of the lockdown, more so during the stage where the sale of liquor was prohibited. As of the start of the national lockdown, the Compliance and Enforcement unit of the WCLA specifically has needed to intensify its efforts, since in terms of the National Disaster Management Act and Regulations the WCLA Inspectors are appointed as Peace Officers and are accordingly classified as an essential service.
“The renewal fee paid by license holders is utilized (sic) to fund the costs of regulating the liquor industry in order to reduce alcohol related harms. These costs continued being incurred even during the early stages of the lockdown and the alcohol ban. Renewal fees are payable in terms of section 63 of the Act and as such is not linked to the ability of a license holder to trade in liquor, the volumes of liquor sold nor their turnover.
“The renewal process as prescribed in the Act is an automatic statutory imposed obligation and process. The WCLA therefore does not have the discretion to waive or negotiate the payment of any fees in this regard. The renewal fees for all valid licenses (sic) in the Western Cape has been published by the custodial department (being the Department of Community Safety) on 29 October 2020 and was subject to a public participation process which granted all relevant parties the opportunity to provide inputs.
“We urge our license (sic) holders, as responsible corporate citizens, to be cognizant (sic) of the harms associated with alcohol and show commitment to improving the material well-being of communities in which they operate by continuing to make a contribution towards the reduction of alcohol related harms through the payment of renewal fee as prescribed. The WCLA is aware of the fact that Covid-19 has had a severe economic impact on many businesses and as such, all license holders in financial distress are encouraged to approach the Western Cape Government Covid-19 Content Centre for Business on [email protected] or www.supportbusiness.co.za for business support or disaster relief funding.”
One would think, since holders of liquor licences have great responsibilities and the right to enforce them, we wouldn’t need an alcohol ban to keep drinking under control…
Hattingh had some strong words with the authority, which remained impervious to her pleas (basically “sorry, try for disaster relief funding, it’s not our problem”), and of course paid the fee otherwise the licence would lapse and it’s several months’ work to get one of these babies.
Massimo Orione of Massimo’s in Hout Bay has just just launched a range of three liqueurs, and has two licences: one for the restaurant and one to produce and sell the liqueurs.
“The restaurant one I paid for 12 months but used probably for only seven or eight months during the last year. I was lucky to get the second licence in mid-December (I started the application process in February 2020).
“I was able to do a big pre-Christmas sale of over 400 bottles and we were planning to start selling in many shops but now it is all on hold … we will also miss Valentine’s Day, when my orange-chocolate liqueur would have been a winner. Shame as this new part of the business would have helped me to keep my 20+ staff. Now I might have to rethink the future. I understand and support the need for regulation but with this complete ban they are killing a whole industry.”
Trudie Broekmann is an attorney specialising in Consumer Law and believes her area of law provides much-needed legal relief for restaurateurs, hoteliers, liquor retailers and others affected by the prohibitions on alcohol sales which form part of the Covid-19 emergency regulations.
“The Consumer Protection Act’s section 2(9) makes it clear the Act overrides the provisions of the laws which entitle the State to levy fees for liquor licences, since it extends greater protection to consumers (such as the liquor licensees) than the various liquor acts, whether national or provincial,” she said.
“So what I am recommending for liquor licensees is not tax revolt, which is generally illegal, but rather making use of the legal remedies in the Consumer Protection Act. The stated purpose of the Act is to protect consumers from unconscionable, unfair, unreasonable, unjust or otherwise improper trade practices, including those by Government, and providing for an accessible, consistent, harmonised, effective and efficient system of redress for consumers.
“The Consumer Protection Act was written primarily to protect individuals from service and quality problems, but it also serves to protect a business from defective service or unfair treatment by the State. If your business is a company or close corporation or other legal person, and your turnover and asset value are under R2 million, or you are the sole owner of your business, then you can claim a pro rata refund of your liquor licence fees paid for 2020 and 2021.
“You should be able to deduct the credit amount for 2020 from your 2021 liquor licence fees. This is in terms of sections 48, which prohibits the State from treating licensees unfairly, unreasonably and unjustly, and section 54 which requires a service provider such as the State to ensure its services (such as authorising liquor sellers to supply liquor to members of the public) meet expectations, and if they do not, the licensee can claim a refund of a reasonable proportion of the fee paid.
“The State cannot give with one hand and take away with the other. In other words, since it is the State which prohibited the liquor licensees from exercising their rights under the licence, the licensees cannot be expected to pay for the periods during which the liquor licence was ineffective due to being overruled by the emergency regulations in response to the pandemic.”
Theo Nel is an advocate and hotelier. “I had to pay R4,750 for each of my two liquor licences last week,” he said. “The one is my hotel liquor licence – which I only used January to March 2020 – and then when we reopened in November 2020 for six weeks before it was closed down.
“The other is my off-sales liquor licence that I had to wait two years to get and cost me a lot of money but never used as the economic decline made it impossible to open a bottle store or wine shop in Barrydale – but I had to pay these full licence fees for 2019 and now again for 2020, simply to prevent them from lapsing.
“At the very least the Liquor Board should be compelled to refund to licence holders the pro rata licence fees for those periods they were banned by government decree from selling alcohol. It will be fair and correct to do so. The same should occur for days in 2021 licence holders are prohibited from selling alcohol.”
Amid all this doom and gloom, there are the daytime trading places which don’t serve alcohol in the first place. A few weeks ago, you could have taken your own bottle of bubbly to Quince to have with your breakfast, but us good citizens are not permitted to transport booze. Not even to our next door neighbour, it’s that crazy.
“We are very fortunate to have narrowly missed most of the ‘harmful’ regulations that have affected the hospitality industry,” said Quince co-owner Graham Isaacson.
“We don’t yet have our liquor licence, and very few customers have expressed aggravation with us not even allowing them to drink their own booze. We have decided to not even make exceptions, as we understand the consequences.
“We do feel fortunate but we don’t take it for granted, as the unpredictability of the virus and regulations don’t provide any sense of security, at this stage of the spread…”
It’s times like this that many of us need a stiff one more than ever. DM/TGIFood
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