Pick n Pay chairman Gareth Ackerman says that the government’s decision to ban the sale of alcohol and tobacco in South Africa has done far more harm than good.

Alcohol and tobacco sales have been banned in the country since the start of lockdown on 27 March 2020. The prohibition on alcohol sales was briefly lifted in June, but trading hours were still restricted to four days a week, with no on-site sale and consumption at restaurants and taverns allowed.

However, since entering into the peak infection window of Covid-19, alcohol sales have again been banned. The ban on tobacco sales has not been lifted during that time.

Ackerman said that while he acknowledges and supports many of the difficult decisions government has taken in dealing with the Covid-19 pandemic, there has been little to justify the prolonged banning of alcohol and tobacco.

“The government has on several occasions reassured that they are listening and consulting. But we see little evidence of this,” he said. “We cannot afford decisions that are poorly made or poorly explained. They create confusion and cynicism and erode the togetherness on which we all depend.”

The Pick n Pay chair said that while the prohibitions on alcohol and tobacco sales hurt the group’s sales and cashflow – an obvious sore point – the damage being done goes far beyond just the numbers and financial impact.

“More than any other decision taken by the government during this pandemic – these prohibitions risk creating cynicism and division that we cannot afford,” he said.

Ackerman said that South Africa is virtually the only country in the world that has prohibited the sale of these products during the pandemic, and there has been no explanation as to why South Africa is right, and so many other countries are wrong.

“What explanations we have been given have been confusing and contradictory. And, sadly, everyone knows that tobacco and liquor remain readily available through the black market.

“So the policy achieves no end other than to fuel illegal activity which ignores any regulatory safeguards and contributes not a single cent to the beleaguered tax service which desperately needs the revenue for the state to meet its socio-economic obligations,” he said.

This has been echoed by the alcohol industry, tobacco industry and even SARS itself, which have all pointed to billions of rands lost in taxes due to the ban, while the illicit market thrives. Excise revenue lost as a result of the bans is around R18 billion, SARS said.

Research has shown that the tobacco ban in particular has failed, with 93% of South Africa’s 11 million smokers still lighting up – sourcing their cigarettes from the black market which now dominates trade.

“Whatever the reasoning put forward by government, it is inordinately outweighed by the cynicism that it has created. I implore the government to review its decision, and to look at the issue in the spirit of responsibility and togetherness that (president Cyril Ramaphosa) has so rightly upheld,” Ackerman said.

Earnings warning

Pick n Pay warned in a trading update on Tuesday, that headline earnings per share (HEPS) for the 26 weeks ended 30 August, would be down more than 50% (or more than 42.52 cents) on the reported 85.03 cents of the previous corresponding period.

The group said it also launched a voluntary severance programme (VSP) in March 2020. “Its objective was to ensure that further improvements in the efficiency and productivity in Pick n Pay store and support office functions were translated into permanent employee cost savings,” it said.

Participation in the programme was entirely voluntary for colleagues, who were offered 1.5 weeks of pay per completed year of service, plus four weeks of notice pay. “Over 1 400 colleagues have voluntarily left the business,” Pick n Pay said.

Chief executive officer, Richard Brasher, said: “Through skill and tenacity, our stores have remained open and safe for staff and customers. This is a tribute to our management teams, store colleagues and franchise partners across the country. By working closely with our suppliers and service providers, our stores have remained stocked with the food and groceries that customers need and want.

“We have shown innovation, for example re-engineering our digital platforms to meet the large expansion in demand for online and click-and-collect shopping.”

Recovery

Ackerman said that managing South Africa’s economic recovery will require “a great deal of finesse and extraordinary focus on rapid implementation of reforms which the government has already committed to”.

However, he said the government will have to be far more deft in getting the economy back on its feet.

“It will have to recognise its limitations and withdraw from controls it has put in place, play to its strengths and allow citizens and the private sector to play to theirs, unleashing the creative energy of the whole society.

“We have to learn to live with the virus while we grow the economy, and for this to happen, the government will have to rely more on persuasion and co-operation, and less on control.

“We must harness the energy and innovation of all South Africans, with a focus on critical reinvigoration, not over-regulation,” he said.