Some thoughts on the wholesale distribution of liquor in South Africa

In the South African liquor industry, the sale and distribution of liquor are split into two tiers. At retail level businesses are licenced under the Provincial Liquor Acts and may only sell and supply liquor directly to the consumer. These are restaurants, bars, hotels, liquor stores, supermarkets etc.

The wholesale distribution of liquor is regulated by the National Liquor Authority who issues, inter alia, distribution authorities for the distribution of liquor to the retail trade. Distributors may not sell directly to the general public and retailers may not distribute to the trade. Often liquor stores act as wholesalers because of the smaller restaurants, hotels etc. find it more convenient to buy in small quantities from liquor stores rather than from the major distributors. In order to be able to sell to the trade, a liquor store will need a distribution authority in addition to its liquor store licence.

In recent years, the National Liquor Authority has developed an online system to improve the efficiency of the application processes for distribution authorities. According to the website, the main objective of the online system is to improve accessibility to the web-based Case Management System (CMS).  The application procedure has become faster and applications are now finalised between 6 and 8 months from the date of lodgement.  The following information and documentation are required by the online CMS and all documents uploaded must be certified, scanned and clearly legible:

1. Applicant’s name, registration/identity number, address of the registered office and contact details;
2. Full address including erf number of the premises where distribution activities will take place;
3. Types of liquor that will be distributed as well as whether liquor manufactured abroad will be distributed;
4. Applicant’s anticipated annual turnover for the first year of operation;
5. Certified copies of the applicant’s company registration documents, if applicable;
6. Certified copies of the identity document of each shareholder/director;
7. Certified copy of a compliant B-BBEE certificate or a duly deposed B-BBEE affidavit of exemption as a micro-enterprise;
8. Certified copy of the applicant’s AWARE (previously ARA) membership certificate or proof of membership of a similar organisation having an industry code of conduct;
9. Certified copy of the applicant’s tax clearance certificate (not more than 6 months old);
10. Certified copy of the zoning certificate in respect of the intended registered premises; and
11. Certified copies of SAPS clearance certificates of each director.

Once the above basic documentation has been uploaded the NLA may and usually does, call for such further information and documentation as it may require.

With regard to 7 above, if the applicant is not B-BBEE compliant (Level 8 or better), it may lodge an affidavit stating that the turnover of the enterprise does not exceed R10m in which case it will be exempted from the B-BBEE provisions as being a micro-enterprise. In most cases, applications are in respect of new businesses which have no turnover initially and are therefore exempt. The conditions of the grant of the distribution authority will, however, specify that the registrant must lodge a compliant B-BBEE certificate annually. The applicant, therefore, has 12 months to become compliant. For some years the NLA has not enforced the B-BBEE provisions but for the past year, they have insisted upon compliance.

As far as 10 above is concerned, the regulations require “a business zoning for industrial purposes or a consent letter issued by the relevant municipality.” It is therefore wise to locate a new wholesale distribution business in a unit, with storage facilities, in a properly zoned industrial park. If this is not possible, a consent letter from the relevant municipality must be lodged.

Prior to finalisation of an application for a distribution authority, the National Liquor Authority conducts what they call a “pre-inspection” of the proposed premises for quality assurance purposes and to determine if the premises and business comply with the regulations of the National Liquor Act.

Upon approval of the application, the NLA will issue a set of proposed registration conditions to the applicant. If the applicant accepts the conditions, an NLA 9 registration certificate is issued.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)