In May 2018 Scotland introduced a minimum unit price of 50 pence per unit (8 grams) of alcohol, with the aim of reducing abusive drinking. Research had shown that a large proportion of very cheap alcohol consumed in Scotland took the form of heavy-drinking, resulting in drunkenness and other socially unacceptable behaviour.
South Africa’s situation is at least as bad as Scotland’s. Although only about one-third of South African adults say that they have ever consumed alcohol, nearly half of those that do, drink at dangerous levels. According to the World Health Organisation, South Africa scores a 4 out of 5 for our “pattern of drinking”, beaten only by heavy-drinking Russia and Ukraine. The pattern of drinking is not determined, primarily, by the quantity of alcohol consumed, but by how it is consumed. For example, drinking is flagged as dangerous if alcohol is typically consumed outside of mealtimes, out of the home, and in order to get drunk. For comparison, the pattern of drinking in the United Kingdom is a 3, and in France and Italy it is a 1.
In a recent study, we categorised drinkers into three groups, namely i) moderate drinkers; ii) binge drinkers, and iii) other heavy drinkers, based on their drinking patterns. Our study was based on data from the National Income Dynamics Study, a nationally representative survey of about 8 000 households. Respondents were asked how regularly they consumed alcohol, how much alcohol they consumed on a typical drinking day, and how much money they spent on alcohol each month. From this information, we could work out how much each drinker spent per unit of alcohol consumed. One can think of this as the price paid for a standard drink. What we found was startling. In 2014, moderate drinkers spent an average of R8.79 per standard drink. Adjusted for inflation, this is approximately R10.90. Expressed in 2019 prices, the median price paid by binge-drinkers was R7.62 and by heavy drinkers a nearly unbelievable R1.48 per standard drink. In other words, binge drinkers and especially other heavy drinkers consume large quantities of cheap liquor when compared to moderate drinkers.
So the question is whether we can reduce the prevalence of heavy drinking in South Africa and its associated societal harm by raising the price of liquor. There is a lot of evidence that an increase in the excise tax will raise the price of alcohol, which in turn causes people to purchase less of it. While this approach has been used in many countries, including South Africa, and has the support of the World Health Organisation as one of the “best buys” in improving public health, the drawback is that it is not a particularly sharp instrument. Our research suggests that a 10% increase in the price of alcohol will reduce alcohol consumption by about 4% among moderate drinkers, but only by about 2%-2.5% among binge drinkers and 1.5%-2% among other heavy drinkers. While this does not mean that a tax increase is ineffective in reducing alcohol use and abuse, it works best for moderate drinkers whose personal behaviour is less likely to harm broader society.
Our research indicates that a more effective way to reduce abusive drinking is to impose a minimum unit price (MUP) on alcohol, similar to the Scottish model. Our modelling indicates that, even though binge drinkers and other heavy drinkers are less responsive to changes in the price of alcohol, the imposition of a minimum unit price is likely to have a much larger impact on their consumption. The reason is that binge drinkers, and especially other heavy drinkers, drink such cheap alcohol that a minimum unit price will substantially increase the price that they would have to pay. Our analysis indicates that, should a minimum unit price be implemented at, for example, R6.00 per standard drink (expressed in 2019 prices), this would decrease alcohol consumption by 6.2% among binge drinkers, by 15.5% among other heavy drinkers, and by 4.6% among moderate drinkers. Of course, should the minimum price be set at a higher level, it would reduce alcohol consumption by a greater amount.
The findings of our study were extrapolated from people’s reported expenditure and consumption in a nationally representative household survey. We can’t say exactly what would happen in practice if a minimum unit price were put in place in South Africa, but we can certainly learn from the experience of countries such as Scotland. One of the oft-cited risks is that higher liquor prices will lead to more illicit home-brewing, which would offset its potential benefit. However, our experience from the study of the economics of tobacco control indicates that the risk of illicit trade is often overstated by industry lobbyists, and is often attributed more to poor enforcement than to the level of the excise tax. It does happen to some extent, but hiking the price still reduces overall consumption.
The practical and legal ramifications would need to be fleshed out, should the government wish to take this route. A minimum unit price would have a limited effect on most alcohol products sold in standard retail outlets. However, it could have a substantial impact on the price of ales and other very cheap industrially-produced sugar-fermented alcohol, much of which is produced in the Western Cape. These products are targeted at those earning low wages, and are nearly always consumed in an abusive way.
Reducing alcohol abuse requires a multi-pronged approach. While we do not suggest that the imposition of a minimum unit price (or for that matter, an increase in the excise tax on alcohol) is a silver bullet, it would indicate that the government is serious about addressing the crisis of alcohol abuse in the country, and would be a strong foundation on which other interventions can be built.
Corné van Walbeek is a professor in the School of Economics and Grieve Chelwa is a senior lecturer in Economics at the Graduate School of Business at the University of Cape Town. The study was done for the Western Cape Government and was funded by the DG Murray Trust.
This article was republished by BusinessLive on 14 April 2019 and most recently by the Sunday Times on 19 May 2019.
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