PROPOSED LIQUOR LEGISLATION

I confirm that I am the Chairperson of the Sub-Committee of Liquor Affairs of the Law Society of South Africa. This sub-committee has the following comments to make on the draft Liquor Bill. Should you wish, we would be prepared to discuss these several points with you at a place and on a date appointed by you.

The comments are as follows:

Definitions clause:

"beer" – As there will no longer be wine and malt establishments and most outlets will sell all kinds of liquor, we wish to know if it is necessary to define "beer". Would it not be sufficient to define liquor as any liquid containing x percentage of alcohol.

"Micro-manufacturer" – In terms of this definition wine farmers will have to hold a registration for "micro-manufacturing" if production is below the determined volume. However in terms of the first paragraph of Schedule 5

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they will also hold the registration for consumption for three (3) years after commencement of the act due to the conversion of the exemption in terms
of the old Section 3(1)(f). There seems to be a clear conflict between these two registration.

"premises" - This definition seems to be very wide and can be open to abuse.

"registered premises" – This definition refers only to premises which has been registered in terms of the National Act. Should this not be amplified to include "this or any Provincial Act".

"sell" – Part of the definition of "sell" means "supply". This definition which is current in terms of the Liquor Act 27 of 1989 has caused substantial confusion on account of the fact that the supply of liquor should contain specific reference to a chain of events culminating in a sale. There are many entities in supplying liquor where the activities do not constitute the sale of such liquor in the strict sense.

"registered person" – This definition refers to any person who has been registered. However, the definition of "person" is not given. Does his mean that natural persons, trust and legal persons are to constitute Applicants seeking a registration. Section 12(1)(d) obliquely refers to persons other
than natural persons, but we believe that this omission should be addressed.

Section 6 – Sales to minors:

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Section 6(2) only refers to the sale of liquor to minors and does not also include the supply thereof to the minor. The definition of "sell" does not assist us in this regard as the reference to "supply" in the definition of "sell" is surely linked to the qualification "for sale". We believe that the intention of Section 6(2) is also to prevent the supply of liquor to a minor.

As the definition of person is not given the question is asked whether this should not refer them to a "registered person" as it is surely not the intention of the Act to prevent a parent from giving his child a glass of wine at table at home.

Section 7 - Prohibition of sale of liquor near schools

As the sale of liquor at unlicensed premises will in any event be an offence, is this prohibition necessary? Is it not sufficient to prohibit the granting of registrations within the prescribed distance from a school.

As this may make the granting of licenses impossible in small towns, it is suggested that the competent authority be given the power to depart from this provision under suitable circumstances.

Section 8 – Prohibitions regarding employment

We believe that this prohibition should be expanded to prohibit the deduction of the cost of liquor supplied or purchased on behalf of the employee from the employees wages.

Section 9 – Prohibited behaviour on registered premises
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Section 9(3) refers to "any person who is drunk and disorderly". Is it necessary for him to be drunk and disorderly, is it not just sufficient for such person to be drunk.

Section 10 – Prohibited behaviour in public place

What is meant by "vacant land in an urban area"? Would this include beaches and if so is it intended to ban the consumption of liquor consumption thereon.

Section 11 – Provincial powers to vary prohibitions

It is unclear as to why reference is made in Section 11(c) to specifically sports grounds.

Section 12 – Qualifications to be registered as a manufacturer or distributor of liquor

The three tier system appears to be peremptory provided that Section 7(2) of Schedule 2 provides for a ministerial exception "if that registration is consistent with the objects of the Act". As Schedule 2 will not apply to provinces with their own legislation the question should be asked if this exemption should not be taken out of Schedule 2 and put into the main Act.

Section 14 – Determination of Application

This section provides for the Minister to invite public input and to consult with the applicant and then to "consider the merits of the application". The tried and trusted test of public interest would appear to have been dispensed with, both in respect of registration in terms of the whole sale / manufacturing tier as well as the retail tier.
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It is submitted that the test of public interest has been a corner stone of the liquor act resulting in substantial case law precedent and it should therefor not easily be discarded. It is suggested that both Sections 14(3) and 14(4) should reflect that the Minister should consider the merits of the application and make a decision incorporating consideration of public interest.

Section 16 – Transfers

Here it is not known on what grounds the Minister will be entitled to refuse a transfer where the transferee is not disqualified in terms of the Act.

Further no provisions have been made relating to changes within a legal entity. By way of example: the current provision of Section 38 of the Liquor Act relating to controlling interest applies in an event of sale of a membership interest in a close corporation. It would therefor appear that the provisions of Section 14 as they are now proposed, could be circumvented by legal entities not transferring the licences but the shares in the legal entity which holds the licence being transferred.

Section 17 – Variation of terms and conditions of registration

This section includes the prohibition against the extension of structural alterations of the premises without consent. Should it similarly not include the prohibition against the change in the nature of a business.

Section 22 – Cancellation of licences



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The word "must" in sub-section 3 should be replaced by "may". Where a licencee is convicted of a relatively minor or technical offence in terms of the Act it should not be compulsory for the Minister to cancel the registration. The reference to Section 12 in sub-section 3 is incorrect and should refer to sub-section 13.

It also would appear that the provisions of Section 22(1) seem to be in conflict with the provisions of Section 18(1)(b). This also begs the question as to why a deceased estate should be treated differently to an insolvent estate.

Section 24 – Registered Manufacturers

It is provided that manufacturers may only sell to or purchase from a specified group of people. This would imply that in order for wine farmers who are members of co-operatives to be able to continue manufacturing and selling to the co-ops they will have either to be registered as manufactures or micro-manufacturers.

Section 27 – Sellers for Consumption

Once again a registered seller may only buy from and sell to a given group of people. Does this mean that wine estates and co-operatives who are registered as
micro-manufacturers cannot sell wine directly to liquor stores but could on the other hand be licenced to sell to the public for off-consumption.

It will also mean that a restaurant which only sells a few bottles of wine a day will not be able to buy his supplies from a liquor store. Can a restauranteur who is a registered person be able to enjoy a class of wine at another restaurant or have a whisky in a local hotel?

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This provision also seems to prevent liquor stores from selling to shebeens.

Section 28 – Producers of liquor related products

Does this mean that a person who sells sweets containing liquor may do so without a licence?

Section 51 – Health Notices

As the Minister may prescribe notices to be displayed on registered premises and premises licenced in terms provincial legislation, does this mean that the provincial authorities themselves cannot prescribe such notices.

Schedule 1

Section 2(2) provides that a registered manufacturer or distributor, or a corporate entity in which a manufacturer or a distributor has an interest can only be licenced as a micro-manufacturer or a seller for consumption with the approval of the Minister. "Interest" however is not defined and we believe it should be.

Schedule 2

Section7(b) would seem to disqualify most shebeens.

Section 7(d): The directors or executives are of little consequence if the shares are owned by criminals. Surely the test should be who owns a controlling interest in the corporate entity as a Director or executive may be nothing other than a front.
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Section 7(2) – permits the Minister to allow cross-holding between the tiers. But what is the position if schedule 2 does not apply?

Section 9 – Does not furnish any criteria for the approval or rejection of applications.

In section 9 the term "education institution" is used as opposed to the term "school" in section 7 of the Bill.

Section 9(12) – May make it impossible for most taverners to become registered as most of these businesses are conducted in areas not zoned for the sale of liquor.

Section 10 – Should make provision for the change in the nature of the business to prevent the very prevalent practice of converting a sedate restaurant into a night club soon after the grant of the application.

Schedule 3

Transitional Provisions - Disposal of interest referred to in Section 3 is extremely punitive to those existing liquor interests. By way of example, a manufacturer in the wine industry operating off an estate in the Western Cape would be required to dispose of a licenced restaurant which may be operating from such estate. Likewise, a manufacturer who is a brewer and who establishes a facility at the brewery will not be entitled to apply for registration to permit the sale of liquor from such facility.

Schedule 5
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20.1 A wine farmer's licence converts to a registration as a manufacturer. This is based on a misunderstanding of the nature of a wine farmers licence. It is not a licence to manufacture but a licence to sell on a retail basis from premises located elsewhere than upon the farm where the wine is produced.

A producer's licence converts to a registration as a manufacturer. One presumes that a further licence will be required to enable the co-operatives
or estate to continue selling to tourists and visitors as it was authorised to do under the producer's licence.

There is confusion with what is to happen to a special liquor licence. Item 9 on page 37 and in Item 7 on 38 are quite clear. However, Item 3 on page 39 conflicts with Item 9 on page 37 and where does this leave Item 7 on page 38?

The Schedule envisages the conversion forthwith of the holder of a Grocers Wine Liquor Licence to a registration for the sale of liquor for consumption
off the supermarket premises. Provincial legislation to date indicates that former liquor stores will be required to continue their businesses with the prime focus of such businesses being on the sale of liquor. This would imply that there is acceptance that the sale of liquor and general foods stuffs do not "mix" well. Although certain Provisional Bills envisage the phasing in of the sale of beer and other liquor within time periods, such time periods would appear to be included to afford breathing space to liquor retailers to close down their liquor store operations. This is particularly so in the case of those liquor stores situated in proximity to current national supermarket operations. Furthermore, the inclusion of supermarkets to the extent

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envisaged will serve to accommodate a multitude of new potential Applicants in the form of Spaza shops and smaller General Dealer businesses. With the provisions of the Constitution and the extent of deregulation envisaged, it is safe to assume that the sale of liquor will be available in most instances where the sale of food stuffs and basic commodities are sold. This departs from the objectives of the Act .


Yours faithfully


ISRAEL & SACKSTEIN ING/INC
RB CLOETE

cc DR ROB DAVIES, CAPE TOWN
FAX: 021 – 403 3614