Raising the drinking age to 21: Pros and cons

Project name:
Evaluating the economic, health and social impacts of the proposed Liquor Amendment Bill, 2017

Service:
Regulatory economics and accounting
Shared value

Sector:
Health
Public and Social

Area of Expertise:
Socio-economic impact assessment
Business impact assessment
Financial modelling

Client:
National Economic Development and Labour Council (NEDLAC)

Date:
2017

Country:
South Africa


Most South Africans do not drink alcohol yet South Africa’s consumption per capita is extremely high by international standards. Those who do drink, drink to excess. Binge drinking is typical and levels of youth drinking are high.

Based on this, government (led by the Department of Trade and Industry and supported by the Department of Health) proposed amendments to the national Liquor Act, 2003. The most notable:

• New restrictions on advertising;

• Raising the legal drinking age from 18 to 21;

• Changes to the licensing requirements in respect of B-BBEE; and

• Extended liability for manufacturers, distributors and retailers of alcohol.

The amendments are significant and will impact on economic, social, health and other public policy interests. In particular, they are likely to be contested by those who favour economic growth, consumer choice and libertarianism, and supported by those prioritise public health, social, children and family issues.

Genesis was asked by the National Economic and Development Labour Council (NEDLAC) to conduct an independent study on the likely economic, health and social impacts of some of the amendments proposed.

We built a team led by our Shared Value practice together with Public Health and Public Private Partnership practices, and the University of Pretoria.

The team produced the most comprehensive review to date of the alcohol industry and consumption patterns. It found that South Africa faced four main challenges.

First was that, while most South Africans do not drink, those who do drink to excess - thus heavy binge drinking was a big challenge.

Second, there is worryingly early uptake of alcohol by children and high levels of binge drinking by teens and young people. This is particularly dangerous for the cognitive development of the brain, which is only complete at 24.

Third, much hazardous drinking occurs in the large unlicensed sector.

Finally, we found evidence that existing liquor laws are poorly enforced.

Using seven approaches to estimate impact, we found that the proposals would reduce consumption of between 3.2% and 7.4%. This was also in line with the views of the major alcohol companies.

The proposals will help to bring down levels of hazardous drinking over time, slow the uptake of drinking by young people and create public health savings of up to R1.9-billion a year. We also estimate that about 185 lives a year will be saved from alcohol-related traffic fatalities.

 We also estimated that the alcohol industry would create fewer jobs (between 645 and 1 500 fewer jobs in the next 10 years). The advertising industry would lose about R400-million (about 1% of its current revenue), and the media would lose about R800-million in revenue. Hardest hit would be SABC, e.tv and Multichoice.

Moreover, advertising spending of the bigger liquor companies will move from above-the-line to below-the-line marketing like store promotions, events, and competitions. This would crowd out smaller firms, who tend to use below-the-line marketing, which would negatively affect competition in the alcohol industry.

Genesis created an economic model to compare a business-as-usual baseline scenario with one incorporating the proposed change in the legal drinking age from 18 to 21 and advertising restrictions.

It evaluated the effect of the proposed amendments on overall output, tax, and employment in the alcohol industry and the economy as a whole for low and high impact scenarios. The immediate impacts on the advertising and media industry were also evaluated.

The assessment also drew on international literature, regional analysis and consultations with industry and health experts to estimate the likely impact on consumption volumes and public health savings.

Genesis’s technical inputs across three practices produced a rigorous, independent and objective study that provided the social partners and government with facts and evidence to further debate the merits of the amendments.

Genesis’s report provides a full view of the pros and cons, in line with our company purpose to help leaders make better decisions, fairly.

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