The purpose of this document is to submit the company's own comments on the Liquor Bill number B23/2003 which was published in Government Gazette number 24628 on 27 March 2003.

1. AAF is a public company, the ultimate shareholders of which are Anglo American Corporation of South Africa Limited and De Beers. It is active in the certified wine segment in the liquor industry [i.e. wines certified in terms of the Liquor Products Act No. 60 of 1989] and is the proprietor and owner of the high profile, well-established brands "Boschendal", "Vergelegen" and "Le Pavillon".
2. AAF owns two wine farms in the Western Cape, Boschendal Estate at Groot Drakenstein near Paarl and Vergelegen at Somerset West. Both of these farms also have wine production facilities in which quality branded wines are made from grapes grown on AAF's own lands, and in the case of the "Vergelegen" and "Le Pavillon" wines, from grapes grown by selected viticulturists.
3. On each of these farms AAF also owns historic homesteads, restaurant facilities, wine tasting centers and gift shops all of which cater for the very many local and international tourists who visit the Western Cape. Over the past 12 months in excess of 150 000 and 60 000 local and international tourists visited Boschendal and Vergelegen respectively.
4. AAF also has a wholesale distributorship based at Groot Drakenstein with distribution depots established in terms of Section 51(2) of the existing Liquor Act in Linbro Park, Durban, Port Elizabeth, Kimberley and Nelspruit.
5. AAF currently produces in excess of 350 000 cases of certified wine a year, some 130 000 of which are exported. It sells 14 000 cases of certified wine per year from its gift shops and 3 100 from its restaurants. 51% of all its sales occur in Gauteng, 27% in the Western Cape and 18% spread over the other provinces in South Africa. This aligns with similar producers of high quality wines. In order to maintain this level of distribution, it is essential that high quality wine producers be afforded storage or depot facilities around the country.
6. In exporting its wines, AAF has attracted interest and investment in the South African wine industry and has promoted the country as a tourist and wine destination and an investment prospect.

1. AAF wishes to state clearly that it, in the main, supports the objects of the proposed Act as set out in Section 2 of the Bill.
2. In particular, AAF wishes to record its appreciation for the establishment of the "micro manufacture" category so as to cater for the participation in the liquor industry by wine farms, microbrewers and micro manufacturers of other liquor products. Further reference will be made to this category hereunder.
3. Whilst the objectives set out in Section 2(1)(b) are endorsed by AAF and will be pursued by AAF in the conduct of its business, AAF is concerned that these objectives may not be satisfactorily achieved through the proposed prohibition of vertical integration in the industry.
4. AAF believes that the entry of new participants into the industry and diversity of ownership in the industry can and should be achieved in a simplified and more effective manner than is envisaged by the proposed legislation. In particular, AAF is concerned that:

 

1. economies of scale achieved through vertical integration and which enable participants in the industry to reward their employees competitive rates may not be achievable under the proposed "three tier" regime;
2. vertical integration is an integral part of and essential to the effective growth and development of high quality brands which require the manufacturer to be active in the production, distribution, sale and marketing of its products.

1. As indicated above, the introduction of the micro manufacture category and the ability of micro manufacturers to sell liquor direct to the consuming public are welcomed. The importance of wine farms and microbrewers to the burgeoning tourism industry, particularly in the Western Cape, cannot be over emphasised. Wine farms and estates play a crucial role in promoting and growing tourism in the Western Cape and it is therefore essential that the volumes provided for in the Bill defining a micro manufacture from a manufacturer are such that producers of high quality wines are able to continue selling their product to the public at large and, in so doing, continue to promote tourism and growth in the Western Cape economy.
2. Although the creation of the micro manufacturer category is welcomed and is crucial to the continued welfare of wine farmers and the tourism industry, it should be borne in mind that the segment of the wine industry in which AAF and other high quality wine producers operate represents approximately 9% of total wine production in South Africa and less than 2% of all liquor sold. The impact of supporting this segment of the industry and ensuring its continued contribution to tourism and the economy as a whole is therefore insignificant in relation to the liquor industry as a whole.
3. AAF eagerly awaits the promulgation of the regulations whereby the manufacturer and micro manufacturer volumes will be determined and welcomes the fact that, in terms of Section 53, AAF and other wine farms will be notified of the proposed regulations and their comment thereon invited.
4. The above notwithstanding, there are a number of provisions in the Bill relating to micro manufacturers which give cause for concern. These are:

1. No definition of "deal" is contained in the Bill. The definition of this concept is essential in determining the distinction between a manufacturer and micro manufacturer as defined in Section 1. It is suggested that the definition of "deal" should include "sell", "supply" and "buy", but should exclude export, given the significant percentage of the business of high quality wine producers which exportation comprises;
2. There appears to be a contradiction or lacuna in the Bill in relation to Section 25(1)(a) [which provides that a registered micro manufacturer may sell liquor to any registered person] and Section 27(1) [which precludes a registered seller of liquor for consumption from purchasing liquor from a micro manufacturer]. It is assumed that the purpose of the provisions relating to micro manufacturers is to permit micro manufacturers to sell their product direct to sellers for consumption [such as restaurants, bottle stores, hotels and clubs] and to the general public. Section 27(1) precludes restaurants, bottle stores, hotels, clubs etc. from purchasing liquor from a micro manufacturer. This would obviously be fatal to any wine estate's business. It is therefore suggested that the appropriate amendment be made to Section 27(1) so as to permit the purchase of liquor by a seller for consumption from a micro manufacturer;
3. It is submitted that a contradiction exists between the provisions of Section 12(2)(a)(iii) and Section 24(6). In terms of the former, a manufacturer may not simultaneously be registered as a seller whereas the latter envisages such a situation. AAF regards this as being particular relevant in the light of Section 24(5) which, it believes, will have application where, in a particular financial year(s) the volume of liquor in which a wine estate "deals" exceeds the prescribed volume. In such a case, it is submitted, the registration of the wine estate as a micro manufacturer should automatically revert to that of a manufacturer, but with the enjoyment of the permit envisaged by Section 24(5). Unless Section 24(6) is amended or deleted, this conversion will render the ability of wine estates to continue selling their product to sellers for consumption and the public at large meaningless. AAF would like to make further submissions regarding the conversion of existing licences and the transitional provisions relating thereto as provided for in schedule 5.

AAF would like to comment on certain further provisions of the Bill which have raised concerns. These are:

1. It is submitted that the omission of the definition of "distribute/distributor" in the Bill is material. The concepts of "distributor" and "distribute" are utilised extensively throughout the Bill. A definition of these concepts in necessary in order to determine the rights of distributors vis a vis manufacturers, micro manufacturers and sellers for consumption. It is suggested that he definition of "distribute / distributor" should include "transport", "convey", "deliver", "provide" and "supply", but should exclude "store" and "hold".
2. It is submitted that a definition of "person" should be included in the Act and that such definition should include a company, close corporation and trust.
3. The phasing out of existing Section 51 depots will materially affect the ability of wine farmers to distribute their product throughout the country. It is suggested that the Act make provision for the ability of wine farmers to obtain registration of storage premises wherever necessary to facilitate the distribution of their product.