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STUDY ON THE SOCIO - ECONOMIC PROFILE OF LIQUOR OUTLETS IN LIMPOPO STUDY ON THE SOCIO - ECONOMIC PROFILE OF LIQUOR OUTLETS IN LIMPOPO

ECONOMIC PERFORMANCE AND DEVELOPMENT ECONOMIC PERFORMANCE AND DEVELOPMENT

Presented on the HSRC Seminar Series Pretoria, South Africa

26 August 2014 Stewart Ngandu; Makale Ngwenya; Yvonne Gwenhure & Jabulani Mathebula

Recommended Citation: Ngandu;, S., Ngwenya;, M., Gwenhure, Y., & Mathebula, J. (2014). Study

• n the Socioeconomic Profile of Liquor Outlets in Limpopo South Africa. Presented on the Human

Sciences Research Council Seminar Series, Pretoria, 26 August 2014.

• 1. Introduction
• 2. Methodology
• 3. Results of the survey on liquor outlets
• 4. Policy Recommendations

• Lots of debates in the popular press that focus on

the liquor industry, very little information on liquor outlets.

• This is also true for the province of Limpopo

where there was a desire by local authorities to better understand various aspects of liquor

• utlets.
• Information is needed for regulatory purposes

and to address broader developmental issues in the province.

• As such this will be the first study of its kind to

assess the economic and socio-economic profile of liquor outlets

• This study is divided into two parts;
• The first gives a comprehensive profile of liquor outlets in the

province which assesses their:

• Ownership structure,
• Employment dynamics,
• Cost of setting up a liquor outlet,
• Compliance to tax and compliance with regulations as

stipulated by the liquor act.

• The second part of the report will explore the socio-economic

impacts of liquor outlets on the province of Limpopo through a focus group discussion.

Objectives

• To assess regulatory issues around compliance as per liquor

act .

• To assess the employment dynamics of liquor outlets with

respect to the relationship of workers with the owner of the liquor outlet and the number of people they employ.

• To determine the VAT/UIF and income tax registration status
• f liquor outlets in Limpopo.
• To determine the cost of setting up a liquor outlet.
• To assess associated social impacts through focus group

discussions with law enforcement and emergency health services officials.

• This study used a qualitative and quantitative survey
• Sample was drawn from the population of licensed liquor outlets

in the province.

• The sample frame was obtained from the Provincial Liquor Board.

Each district formed a single stratum.

• To ensure representativeness, proportionate stratified random

sampling was used.

• The target sample was 260 and final realised sample as 268 ;

given the population of close to 7 800 outlets this sample would give results that have an acceptable 10% level of precision.

• In order to achieve this number of outlets a sample of 450 outlets

was selected. This included a contingency sample of 190 outlets.

• The contingency sample would be used in cases where there was

a non-response due to an outlet being closed or the inability to locate an outlet due to a wrong address.

• Unavailability of socio-economic data on liquor related socio-economic
• utcomes
• The survey used one instrument to interview the different types of

liquor outlets (e.g. restaurants, accommodation, supermarkets etc). Different instruments should have been developed for each of these. Two reasons:

• First, couldn’t tell the different types of outlets from the sample

frame that was supplied by the Liquor Board. Using the outlet’s name would have introduced some level of selection bias.

• Second, when the issue of stratifying according to the different class
• f liquor outlets was raised the Liquor Board responded by saying

their focus is on- and off-consumption outlets. As such only one instrument was developed.

• Focus group: The fact that participant insights were based on

anecdotes limits the significance of some of their inputs.

FINDINGS

• Ownership
• On average, 47% of the respondents were the actual licence holders and 52%

were people employed by the licence holder.

• We would expect outlets run by the licence holders to be more compliant with

regulations than those where the person in charge is an appointee.

Type of licence

• CAPRICORN

MOPANI SEKHUKHUNE VHEMBE WATERBERG Total

Licence holder 60% 33% 53% 35% 45% 47% Person appointed by licence holder 38% 67% 46% 65% 55% 52% Temporary employee 2% 0% 1% 0% 0% 1% Total 100% 100% 100% 100% 100% 100% CAPRICORN MOPANI SEKHUKHUNE VHEMBE WATERBERG Total Off-consumption licence 18% 11% 21% 20% 16% 17% On-consumption licence 82% 87% 79% 80% 82% 82% I don't know 0% 2% 0% 0% 2% 1% Total 100% 100% 100% 100% 100% 100%

Number of years in business

• A significant number of liquor outlets in the province have been in
• peration for a relatively long period of time, with 60%, 4680, of

them reporting that they had been in operation for more than 5 years.

• Furthermore, 33% of these had been in operation for more than 10

years and these made up the bulk of the sample.

CAPRICORN MOPANI SEKHUKHUNE VHEMBE WATERBERG Total Less Than A Year Ago

9% 0% 1% 6% 7% 5%

1 But Less Than 3 Years Ago

14% 11% 10% 3% 4% 9%

3 But Less Than 5 Years Ago

24% 15% 24% 11% 22% 20%

5 But Less Than 10 Years Ago

29% 24% 27% 31% 25% 27%

10 Or More Years Ago

20% 43% 31% 49% 35% 33%

I don’t Know

5% 7% 6% 0% 7% 5%

Total

100% 100% 100% 100% 100% 100%

Main reason for starting the business

CAPRICORN MOPANI SEKHUKHUNE VHEMBE WATERBERG Total

• Cum. %

Unemployed/Have No Alternative Income Source

39% 27% 34% 25% 28% 32% 32%

Retrenched

6% 7% 3% 3% 0% 4% 36%

Inadequate Income From The Other Source

3% 5% 16% 13% 9% 9% 45%

Inherited/Family Tradition

9% 9% 14% 16% 11% 12% 56%

Activity Brings High Income

3% 7% 5% 3% 9% 5% 62%

Unhappiness With Previous Work

0% 2% 2% 0% 2% 1% 63%

I Like The Activity

14% 7% 8% 9% 17% 11% 74%

I Have The Skills For This Business

9% 9% 5% 6% 4% 7% 80%

I Have The Equipment For This Business

0% 2% 0% 0% 0% 0% 81%

Small Investment Needed

6% 11% 6% 9% 4% 7% 88%

Other

3% 5% 5% 3% 4% 4% 92%

I don't know

8% 9% 3% 13% 13% 8% 100% 100% 100% 100% 100% 100% 100%

• LOCATION
• Does this business operate in (a) a residence or (b) in a business

zoned area?

• Implications on compliancy 4 368 outlets in residential areas
• Do you pay for use of this location for business purposes?
• Business does not factor in rental cost.

CAPRICORN MOPANI SEKHUKHUNE VHEMBE WATERBERG Total

A residence 60% 54% 53% 56% 57% 56% A business zoned area 40% 46% 47% 44% 43% 44% Total 100% 100% 100% 100% 100% 100%

CAPRICORN MOPANI SEKHUKHUNE VHEMBE WATERBERG Total

Yes 26% 24% 19% 26% 36% 26% No 74% 74% 81% 71% 60% 72% Not applicable 0% 2% 0% 3% 4% 1% Total 100% 100% 100% 100% 100% 100%

Is it easy to get a liquor licence?

• Some of the sampled outlets said they had experienced challenges with respect to

meeting some of the requirements needed to acquire a licence; they viewed the process as being onerous and overly involved. Encourages informality.

27% 18% 33% 18% 28% 26% 58% 51% 51% 59% 44% 52% 16% 31% 16% 24% 28% 22% 0% 10% 20% 30% 40% 50% 60% 70% CAPRICORN MOPANI SEKHUKHUNE VHEMBE WATERBERG Total YES NO I don't know

What are the challenges involved in the setting up of a liquor outlet?

*Lack of information and not knowing the procedures for applying for the required licence.

61% 56% 69% 64% 60% 62% 3% 7% 7% 0% 0% 4% 5% 0% 0% 6% 2% 2% 5% 12% 0% 3% 4% 5% 15% 23% 18% 24% 30% 21% 10% 2% 7% 3% 4% 6% 0% 10% 20% 30% 40% 50% 60% 70% 80% CAPRICORN MOPANI SEKHUKHUNE VHEMBE WATERBERG Total Information related reasons* Lack of capital Distance to the nearest Liquor Board Corruption I don’t know Other

Did the licence holder of this outlet use a consultant to APPLY for the licence?

45% 53% 63% 66% 44% 54% 33% 13% 21% 17% 24% 23% 19% 29% 16% 14% 24% 20% 3% 4% 0% 3% 7% 3% 0% 10% 20% 30% 40% 50% 60% 70% CAPRICORN MOPANI SEKHUKHUNE VHEMBE WATERBERG Total YES they used a consultant NO they personally applied for the licence I don't know Not applicable

Why was a consultant used to APPLY for the licence?

61% 60% 80% 68% 66% 68% 3% 7% 4% 16% 6% 6% 5% 0% 0% 8% 0% 2% 5% 7% 2% 0% 0% 3% 24% 27% 14% 8% 25% 19% 3% 0% 0% 0% 3% 1% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% CAPRICORN MOPANI SEKHUKHUNE VHEMBE WATERBERG Total Did not know the procedures No time to apply personally Long distance to the nearest Liquor Board To avoid corruption I don't know Other

Did the licence holder of this outlet use a consultant to RENEW the licence?

11% 38% 25% 23% 16% 22% 59% 47% 69% 71% 69% 63% 9% 7% 3% 3% 4% 5% 20% 9% 3% 3% 11% 10% 0% 10% 20% 30% 40% 50% 60% 70% 80% CAPRICORN MOPANI SEKHUKHUNE VHEMBE WATERBERG Total YES they used a consultant. NO they personally applied for the licence. I don’t know Not applicable

Was it easy to obtain funding?

51% 60% 52% 42% 56% 53% 14% 23% 21% 21% 15% 18% 35% 17% 27% 37% 29% 29% 0% 10% 20% 30% 40% 50% 60% 70% CAPRICORN MOPANI SEKHUKHUNE VHEMBE WATERBERG Total Yes No I don't know

Total expenditure profile of liquor outlets

R 6 268 R 7 000 R 12 045 R 12 327 R 45 350 R 69 430 R 85 100 R 88 772 R 134 296 R 137 785 R 143 707 R 146 171 R 161 954 R 184 995 R 270 550 R 422 665 R 1 040 468 R 0 R 200 000R 400 000R 600 000R 800 000 R 1 000 000 R 1 200 000 Interest on loans Other, specify Rental of machinery and equipment Licences, permits Repayment of loans Business services (accounting, legal, advertisement,… Spare parts Insurance premiums, mortgages/bonds Postage, telephone, printing and stationery Protection agencies Income tax/ levies Water Transport of raw materials/supplies Repairs and maintenance Fuel and lubricants Rental of premises Electricity Expenditures on fuels, materials and services

Perceived levels of market concentration. What is your opinion on the number of liquor outlets in this area?

58% 60% 66% 51% 70% 62% 37% 38% 31% 46% 30% 35% 5% 2% 3% 3% 0% 3% 0% 10% 20% 30% 40% 50% 60% 70% 80% CAPRICORN MOPANI SEKHUKHUNE VHEMBE WATERBERG Total Too many liquor outlets in this area Number of liquor outlets in this area is okay I don’t know

EMPLOYMENT DYNAMICS OF LIQUOR OUTLETS

• The results indicate that the sampled liquor outlets employed a total
• f 7 534 people.
• However, there are significant differences across the sample with

some outliers contributing significantly to this total.

• 76% of the outlets employed 1 to 3 workers whilst the bulk of the

people appear to be employed in 4 outlets which accounted for 6 700 workers, that is, 89% of total employment (e.g. big retail chains that conflated employee numbers of the retail business and the liquor

• utlet)
• The majority of outlets in the rural and urban areas of Limpopo were
• perated by one or two employees, the owner and an additional

family member or employee.

• After accounting for the outliers total employment of the sampled
• utlets stood at 834.
• Based on the reported employment patterns from the sample we

estimate that these liquor outlets could possibly contribute over 14 000 jobs to the provincial economy.

Number of employees by sex

Permanent Temporary Casual Female 455 70 56 Male 252 70 31 Total 707 140 87 455 70 56 252 70 31 707 140 87 100 200 300 400 500 600 700 800 Female Male Total

Is the income generated from the liquor outlet the licence holder’s main (primary) source of income?

50% 39% 46% 40% 47% 45% 44% 59% 41% 46% 45% 46% 6% 2% 13% 14% 7% 9% 0% 10% 20% 30% 40% 50% 60% 70% CAPRICORN MOPANI SEKHUKHUNE VHEMBE WATERBERG Total YES NO I don't know

Is the income generated by this liquor outlet reliable and sufficient?

• Outlet revenues are linked to outlet density and have implications on compliancy

with respect to opening and closing hours, selling to minors and those who are already intoxicated.

55% 69% 60% 55% 72% 62% 43% 27% 39% 45% 26% 36% 2% 4% 1% 0% 2% 2% 0% 10% 20% 30% 40% 50% 60% 70% 80% CAPRICORN MOPANI SEKHUKHUNE VHEMBE WATERBERG Total Yes No I don't know

Is your business registered for Unemployment Insurance Fund, UIF?

22% 27% 15% 32% 21% 22% 65% 67% 75% 59% 68% 68% 13% 7% 9% 9% 11% 10% 0% 10% 20% 30% 40% 50% 60% 70% 80% CAPRICORN MOPANI SEKHUKHUNE VHEMBE WATERBERG Total YES NO I don't know

Is this liquor outlet registered for VAT?

44% 68% 59% 60% 67% 59% 51% 28% 37% 37% 31% 37% 5% 4% 4% 3% 2% 4% 0% 10% 20% 30% 40% 50% 60% 70% 80% CAPRICORN MOPANI SEKHUKHUNE VHEMBE WATERBERG Total YES NO I don't know

What kind of records do you keep for this business?

47% 41% 59% 63% 67% 55% 30% 57% 26% 29% 29% 33% 20% 2% 10% 6% 4% 9% 3% 0% 4% 3% 0% 2% 0% 10% 20% 30% 40% 50% 60% 70% 80% CAPRICORN MOPANI SEKHUKHUNE VHEMBE WATERBERG Total Informal Records Full annual accounts No accounts kept I don’t know

REGULATION

• Another objective of the study : To assess the extent to which liquor
• utlets in the province were compliant with some of the following

regulations:

• The licence and renewal receipt
• Structure of the outlet
• Trading Hours Off-site 8AM & 8PM Mon to Friday. Sat 8AM to
• 5PM. On-site 10AM to 2AM
• Responsibilities of On/Off - Consumption Licences
• Selling of groceries
• Leasing of Licences,
• Removal of Licences,
• Noise
• Selling/ supplying liquor to intoxicated persons,
• Minors, under 18
• Key responsibilities of the Provincial Liquor Board is to make sure that

liquor outlets comply with the Liquor Act

• Liquor outlets are required by law to abide by these laws which govern the

selling of liquor

Is the licence and renewal receipt for this year on the premise right now?

• With over 7800 registered outlets 18% translates to 1260 non-compliant outlets

84% 80% 81% 69% 85% 81% 16% 20% 19% 29% 13% 18% 0% 0% 0% 3% 2% 1% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% CAPRICORN MOPANI SEKHUKHUNE VHEMBE WATERBERG Total Yes No I don't know

Do you have challenges around selling/ supply liquor to people who are already intoxicated?

Potentially 3 150 outlets have challenges selling/supplying liquor to people who are already intoxicated. Management: ‘We don’t sell more to them as most of those people bring too much trouble’ ‘We just sell to them what they want and they go away ,we are doing business’ ‘People who are intoxicated send their friends to buy beer for them so it is difficult to control’

38% 50% 43% 57% 43% 45% 60% 50% 55% 43% 57% 54% 2% 0% 1% 0% 0% 1% 0% 10% 20% 30% 40% 50% 60% 70% CAPRICORN MOPANI SEKHUKHUNE VHEMBE WATERBERG Total Yes No I don't know

Do you have challenges selling/supplying liquor to any person who is under the age of 18?

Potentially 2 660 outlets have challenges selling/supplying liquor to people who are already intoxicated. Management: ‘…It is difficult to judge the age of [a] person by looking at the person’ ‘Sometimes the parent sends them but I tell them to go tell the parents that the police will arrest us’ ‘I look at them and if they look very young I don’t sell to them. Some guys who are young but are always drinking we sell to them’ - On-site

38% 42% 34% 46% 37% 38% 63% 58% 66% 54% 63% 62% 0% 10% 20% 30% 40% 50% 60% 70% CAPRICORN MOPANI SEKHUKHUNE VHEMBE WATERBERG Total Yes No

How are you managing the requirements for this type of licence?

• On-Consumption:
• Complaints of intoxicated patrons insisting on leaving premise with liquor
• Consumption of alcohol outside on-consumption premise
• ‘Its difficult to manage the people at the bar as some of them insist on taking

alcohol to their homes.’

• ‘We allow them to take because they are local community members’
• ‘Old people prefer drinking at home so when they send children we sell to

them as take always.’ Double violation.

• ‘People are allowed to buy and leave with beer and if they want to do drink

inside they are allowed to do so’

• Management: Respondents resorted to opening the bottle before handing it to

the customer. However, this became a problem in cases where the customer was buying more than three/four bottles.

• Off-Consumption:
• Management: Respondents did not provide furniture inside the premises, thus

the customers were forced to buy and leave.

• Complaints of patrons drinking outside but in the yard of the off-consumption

premises (Giyani, Vhembe, Sekhukhune)

SOCIOECONOMIC OUTCOMES

• A semi-structured focus group discussion was conducted in

Polokwane, Limpopo, in December 2013 to examine the nature of the socio-economic issues associated with liquor outlets in the province of Limpopo.

• Participant recruitment was based on people whose occupations dealt

with liquor related outcomes.

• These included participants from
• the Provincial Department of Social Development,
• the Provincial Department of Roads and Transport (Traffic),
• the South African Police Service (SAPS),
• Netcare 911, 24 Hour Emergency Services and
• participates from the Provincial Liquor Board.
• Although two liquor licence holders were invited to participate they

unfortunately could not make it due to business related reasons.

• The focus group had several objectives as follows…

• Participants viewed causality as uni-directional flowing from liquor to some

negative socio-economic outcome. Such as; i. workplace issues, where alcohol abuse led to absenteeism; ii. family related issues, where the excessive consumption of alcohol include foetal alcohol syndrome, impaired household functioning, and domestic violence; iii. poverty - which was associated with job loss due to absenteeism; iv. crime - which was seen as increasing the likelihood of criminal activities, and v. traffic accidents which arose from peoples impaired ability to control their automobiles under the influence of alcohol.

• None of the participants saw the possibility of causality as flowing in the
• pposite direction which would introduce a bi-directional relationship between

socio-economic challenges, that is, flowing from negative socio-economic circumstances to alcohol abuse.

• 1. To understand the perceived severity of the social and socio-

economic issues around liquor outlets within the province relative to

• ther social and socio-economic issues.

• SAPS observed a link between the two (spatial location &

accidents) especially in areas where taverns operated. Data Available from SAPS

• Example by Traffic Department: R71 highway Polokwane accident

hotspot

• The Department of Transport noted that the prominent cause of

road traffic accidents in the province was drunken driving. Estimated R105 billion annually lost (SA as a whole) therefore there was a link.

• DoT there needs to be an MoU between Liquor Board and other

departments in terms of issuing licences. Garages and clubs located close to highways

• Liquor Board - Considers density in issuing licences but overall

location determined by Liquor Act.

• Traffic Department noted that the increased visibility of road traffic

enforcers played an important role in minimising the number of road accidents.

• 2. To understand the perceived nature of the relationship between the

location of liquor outlets and traffic accidents.

• Under-age drinking in the province appeared to be an

issue and was related to not enough inspectors checking for compliancy.

• They were cases were minors purchased alcohol by

sending an adult – already drunk - to purchase the alcohol on their behalf in exchange for money (to enable the older person to further purchase more alcohol).

• One participant highlighted that part of the problem

arose from liquor outlets that operated a grocery store alongside the liquor outlet.

• SAPS and Netcare 911 said they was an observed

correlation between the closing of liquor outlets and traffic accidents and crime.

• SAPS was concerned over the shortage of resources to

ensure that liquor outlets comply with stipulated opening and closing times.

• There was a disproportional allocation of resources

between the number of Liquor Designated Police Officers (DPOs), relative to the number of outlets. According to the Liquor Board there are 94 DPOs and 13 liquor inspectors in a province where there are 7 800 licensed liquor outlets; 83 outlets per DPO & 600 outlets per

• inspector. Implications on opening and closing times.

• From the discussion there was generally no perceived difference

in social and socio-economic impact between on-site and off-site liquor outlets.

• This result is interesting given the general location of each outlet

as outlets located in residential areas tend to be associated with more issues than off-site.

• The Department of Social Development felt that geographical

areas played no role in terms of the social impacts because whether one drank in an outlet or outside an outlet they could still leave the outlet drunk and cause or be engaged in consequential problems such as traffic accidents, domestic abuse, work absenteeism etc.

• There was consensus that there was a need to manage liquor in the

context of a multi-disciplinary approach where all the departments worked together with one goal in mind:

• “…liquor is there it will not go away...crime will not go away, we must

work together...I have a budget, everybody has a budget, if we integrate all our budgets together then we can manage the social impacts of the

• utlets” - Focus group participant
• DSD - programmes mplement that would instil a sense of responsibility

amongst citizens with respect to the consumption of alcohol and its social and socio-economic impacts.

• Strengthen the family as a basic unit of socialisation for children, where

children should be in a position to differentiate between right and wrong; and information needed to be provided to this end.

• Some of the recommendations:
• The issue of limited resources that seems to constraint effective

monitoring of liquor outlets should be solved by reviewing the budgetary allocations of the various departments that deal with liquor and through a more coordinated approach from the same stakeholders.

• The situation with liquor outlets with respect to VAT/UIF

registration is an issue that needs to be addressed, as it leaves a number of liquor outlet employees without any employment cover in the event of a job loss.

• Given the high number of on-consumption licenses in the

province, 85%, 6 630, the liquor board should allocate more resources to the monitoring and supervision of compliance issues around this type of outlet. POLICY RECOMMENDATIONS AND KEY FINDINGS

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