The illicit alcohol industry in South Africa (SA) poses a huge threat to the legitimate alcohol industry, as well as to public health and the Government fiscus. As illicit alcohol is not taxed, regulated or recorded, there is little information available on the patterns of its consumption and related outcomes.
In addition to evading excise duties and taxes on their products, illicit alcohol blenders and distributors have little regard for sanitation and the safety of consumers. Their products are often toxic and, if consumed in sufficient quantity, can be life threatening.
There are also no firm figures on exactly how much illicit alcohol is manufactured in SA each year, however, it is estimated that illegal alcohol operators generate millions of Rands in tax free revenue. These operators are usually directly involved in the sourcing, manufacturing, distribution and trading of illegal liquor products and are often associated with organised crime.
Illicit alcohol operators employ a number of modus operandi that may include:
- The use of cane spirit and colorants to replace grape spirit in the manufacture of brandy;
- Methanol (a cheap industrial spirit) used to replace ethanol in the manufacture of white spirits such as gin, cane, vodka etc, which can be toxic; or
- Inexpensive cane spirit smuggled into SA from, for example, Swaziland is used in the manufacture of illicit white spirits such as gin, cane, vodka.
The illicit manufacturers then use this alcohol to either produce their own brands or alternatively clone or counterfeit well known legitimate brands. However, cloning a well known brand takes more effort as they have to produce a fairly high quality alcohol and copy the original branding and materials such as the labels, bottles, and bottle caps. Another common way is the practice of refilling old, branded spirit bottles, which are sourced from dumps, with the illicit alcohol. The spinoff is that they are then able to sell their illicit products at below cost of the legitimate brands and avoid having to pay excise duties which all equates to substantial profits.
The excise duty payable on a 750ml bottle of gin, cane or vodka is R27.27. If you then add on the cost of packaging, manufacturing, and product, a bottle of alcohol will cost approximately R38.00 before wholesale mark-up. As illicit alcohol manufacturers do not pay excise duties, they are able to sell their products at below the cost prices, and distribute to legitimate bottle stores and outlets, offering retailers a combination of both illicit alcohol and legitimate brands at a discounted price thereby enticing retailers to purchase their products.
Consumers need to be aware of abnormally low priced products as this is one way of identifying illicit products. Aside from the inexpensive cost, illicit alcohol is usually of a low quality and can also pose serious health threats. Therefore, be suspicious of white spirits on offer at below R38.00 per bottle. These spirits are often advertised as ¡§on promotion¡¨, or a ¡§special deal¡¨ or ¡§loss leader¡¨.
Over the past few months there have been a number of breakthroughs in the fight against illicit liquor operators with key role-players being arrested and currently facing fraud, VAT, excise duty and kite flying (the unlawful generating of
funds in bank accounts by means of depositing stolen or worthless bills of exchange) charges. The South African Police Service (SAPS) together with the South African Revenue Service (SARS), and the Department of Agriculture have raided numerous premises throughout South Africa and closed down a number of bottling plants and confiscated illicit alcohol products.
At some of these illicit alcohol operations it was found that conditions were unacceptable in terms of the Foodstuffs, Cosmetics and Disinfectants Act, 1972 (Act No 54 of 1972) in that most of the bottles containing additives such as colorants and flavourants used in blending the illicit alcohol, were beyond their expiry dates, in some cases by several years. In addition, Tartrazine was contained in some of the additives which but not reflected on the product labels. Floor areas and blending drums where the alcohol was being manufactured were dirty and unhygienic, and unsealed bags of Malic Acid and sugar were stored directly on the factory floor which could potentially lead to dirt or contamination by pests.
With officials taking serious action against illicit alcohol trading and highlighting the dangers that these potentially lethal products pose to the public, there is hope that perpetrators will dwindle and that consumers will refuse to buy cheaper alcohol on offer, thereby decreasing demand for these inferior and often dangerous products. Liquor outlets need to think twice before putting illicit alcohol products on their shelves and consumers have to be sensitive to the dangers of consuming illicit alcohol products. In conclusion, if the price of your next bottle of gin or vodka appears to be too good to be true, it probably is!ý