The above has reference

Kindly receive a submission on the Liquor Bill for the parliamentary hearings by FAWU to be held on the 13, 14, 15 May 2003.

If granted a slot, FAWU will be available to verbally present its submission before your audience. For more information do not hesitate to contact the writer at 082 4509 593.

Thanking your understanding in anticipation,

Kind regards

1. BACKGROUND

Food and Allied Workers Union was a participant in the process of stakeholder consultations when the previous Liquor Bill (B131 – 1998) was initiated. Further in that process FAWU made comments on the contents of that Liquor Bill, including concerns on employment.

In summery, the process that produced the final version of the 1998 Liquor Bill, which was finally presented to the state president, was characterized by stakeholder participation and consultation on the contents of the Liquor Bill itself.

However, the "new" Liquor Bill (B23 – 2003) has not elicited the same transparent stakeholder participation, and as a consequence, its contents may not receive thorough inputs and comments from interest groups.

Having said the above, we however thought it prudent to submit our comments on the content of this Bill and its implementations to our members in particular.

2. INTRODUCTION

This submission will reiterate our concern on the lack of participatory process when this Bill was introduced. Further, this submission will raise two concerns regarding the contents of the Bill that is the implication of the three-tier system and the implied promotion of small business and or black economic empowerment through the creation of competitive environment.

Having said the above, FAWU broadly supports the objectives of the Bill, including promotion of competition and promotion of small companies and economic empowerment.

3. PROCESS OF REINTRODUCTION OF THE BILL

The speed at which the bill has been resubmitted to parliament for processing and the accompanying tight deadlines for written and verbal submissions is in conflict with the meaningful stakeholder participation, as this requires a reasonably adequate time to make comments on the contents of the Bill.

In fact stakeholder consultation process through forums such as NEDLAC is ideal to ensure that transparency is characteristic to legislation formulation in line with the spirit of our country’s constitution and the practice of social dialogue.

In summary, our proposal will be to see the Bill undergoing stakeholder discussion at an appropriate forum such as NEDLAC. By implication, this suggests a slowdown on the formulation of the legislation to regulate the liquor industry.

4. CONTENTS OF THE BILL

The Bill proposes to break the liquor industry into three tiers (i.e.) manufacturing, wholesaling (including distribution) and retailing and to prohibit players from participating in more than one tier of this industry. The presumed reason for such a view is said to be the need for the promotion of new entrants (particularly of small and black companies) or removing barriers to entry into the liquor industry.

In other words the three-tier industry will promote small and or black business to participate in the industry through unbundling vertical integrated participation and ownership within the liquor value chain.

As pointed out earlier, we support promotion of competition, as this will ultimately benefit a consumer. However this does not make the three-tier system an appropriate vehicle or viable option for the following reasons:

1. Vertical integration, particularly of a manufacturing with distribution is not inherently anti competitive. In fact, distribution is not always a ‘non-core’ function for some of the manufacturers as it plays a critical role in competitive advantage. A manufacture may gain efficiencies by in-sourcing distribution and save on cost or may cross subsidize costs of distribution thereby benefiting a consumer.
2. Related to the above, if the function of wholesale (distribution) is to be out-sourced and assets divested (or disposed off) by manufacturers, then new wholesalers (distributors) would want to markup their prices in order to get profits. This implies that ultimately the new cost will be passed on to the consumers.
3. Divestiture or out-sourcing of wholesaling (distribution) assets and functions by manufacturers may lead to unionized and ‘quality jobs’ being replaced by low wage contract or casual jobs, as new wholesalers (distributors) employ services of labor brokers in a quest to remain ‘competitive.’ To pick up a concrete example, when the SAB outsourced some of the distribution to Driver Owners about 280 former drivers were empowered but at the expense of three or four crew members per driver – more than 1000 former SAB workers.

1. Small business promotion and black economic empowerment

4. CONCLUSION

In conclusion we do not see the Liquor Bill as an appropriate vehicle to promote competition and to promote small and black business. The three-tier industry system is likely to destroy quality-unionized jobs at wholesale (distribution) level, particularly if divestiture and out-sourcing are not to be carried out on a going concern basis.

We are of the view that the competition authorities are best capable to deal with competition concerns in the liquor industry and to deal with public interest matters, such as promotion of small business and black economic empowerment, as legislated by the competition act.

Lastly a process similar to the empowerment plans of oil and fuels industry and minerals and mining sectors can best achieve small business promotion and black economic empowerment

We hope that a need for a slow down on the formulation of this liquor legislation will be recognized and a space allowed for a meaningful stakeholder engagement.