Informal Liquor Retailing Informal Liquor Retailing effects, notably on glass recycling and Local densities of liquor outlets are directly food take-away activities such as street correlated to income. Informal liquor Introduction braais, the liquor sector potentially retailers are more densely distributed accounts for 20% of all informal economic in informal settlements and evidently > The Sustainable Livelihoods Foundation’s Formalising Informal Micro-Enterprises activity in these communities. their distribution decreases with the (FIME) project has been conducting path breaking research on ’s informal level of infrastructure investment in the economy. The project has conducted primary research in within Across all sites liquor retailing businesses settlement and housing density, reducing and Gauteng. We have surveyed over 6,000 micro-enterprises in nine localities, are spatially equidistant from each other, considerably in areas of suburbia. The covering an estimated population of 50,000 households. Of the thousands of showing that their spatial distribution high density of liquor retailers in informal businesses we encountered during the extensive field work process, the most frequently (as well as density) is determined by settlements correlates with much higher and widely distributed micro-enterprises were informal liquor retailers or shebeens. Our highly localised forces of economic levels of unemployment and limited research supports the claims that there are at least between 180,000-250,000 persons demand. There is no evidence in any alternative economic opportunities for trading liquor informally in South Africa. This synopsis describes the businesses engaged site of enterprise clustering or strategic self-employment within these localities. in informal liquor trading and the entrepreneurs behind these micro-enterprises drawing positioning in relationship to transport But liquor outlet density is not, as the upon various SLF academic papers (currently under review) and analysis of the FIME nodes, including major and minor research found, necessarily an accurate research findings. roads. Informal liquor retailers are indicator of liquor consumption, as the instead positioned randomly throughout great majority of liquor retailers are THE RESEARCH SITES shebeen and (licenced) traders. residential areas, with no evident intention very small businesses selling less than Although many of the businesses were to occupy corner positions or localities 16.5 crates of beer per week (150L). In Cape Town, where the research operating illegally and in a covert manner, on high streets. Furthermore, neither The density of shebeens is greater commenced, research was conducted in the research was able to identify the great their distribution nor density correlates in settlements where the majority of Brown’s Farm, Sweet Home Farm (Philippi), majority of businesses through a process to proximity to liquor wholesalers. Map households do not own vehicles, thus Delft South, and Vrygrond (incorporating of local familiarisation with enterprise 1 demonstrates the density of outlets in providing further evidence that most the settlements of Capricorn, Overcome characteristics and participant referrals. Browns Farm (a settlement of 14,000 shebeens serve a localised market Heights and Seawinds). These settlements In certain contexts, such as parts of Delft households) in the context of all other of customers who reside within are home to 36,262 households and South, the number of small size liquor informal micro-enterprises. walking distance. approximately 160,000 residents. In retailers has been potentially under- Gauteng, the research was conducted reported as a result of community fears in Ivory Park and Tembisa. The various about policing in a context of territorial sites were chosen to reflect the dynamics control battles by drug syndicates. of informality and marginalisation in poor areas and are representative of MAIN RESEARCH FINDINGS the predominant human developmental challenges within these cities. The Numbers and Spatial Dynamics research method comprised a detailed micro-enterprise census and qualitative Liquor retailers are the single most interviews with every informal liquor numerous category of micro-enterprise in trader. After eight months of research in the informal economy. Together, the City of Cape Town, we had identified the 645 businesses in the Cape Town 645 liquor retailers, with whom we research account for 16.7% of all informal conducted qualitative interviews with 465 businesses. Through their multiplier Interviewing a small sale shebeen owner, Browns Farm.

1 2 Distribution of businesses selling liquor in context of all identified micro- enterprises. Browns Farm and Hazeldean Estate, Philippi, November 2001 Enterprise Size and Characteristics • Low volume = those selling less than the current formalisation process at all. to pursue liquor trading as a survivalist 16.5 crates of beer per week, a volume The issue of formalisation must been seen strategy, enabling them to derive a The research identified four forms of equivalent to 150 litres, the maximum in the context of the highly racially skewed relatively secure income whist looking after liquor micro-enterprises, namely i) permitted volume threshold under the structure of liquor licence ownership within their families at home. Among both male (licensed premises), ii) shebeens Western Cape Liquor Act for home the Western Cape where less than 15% of and female informal liquor traders there is (unlicensed liquor retailers), iii) spaza- consumption. liquor licences have been awarded to black significant longevity in the sector with the shebeens (spaza shops that sell liquor owned businesses. average enterprise in our sample having without a licence) and iv) businesses that • Medium volume = those selling between traded for 5.6 years. micro manufacture traditional beer or 16.5 crates and 65 crates of beer per The history of informal liquor retailing in other concoctions for on-site consumption. week. South Africa is synonymous with the rise There are various reasons why people Shebeens are the most numerous of these in female micro-entrepreneurship. This decided to trade liquor despite the risks. categories. The research found that there • High volume = those selling above 66 is evident in our research were we found A significant number of the research is no archetypical shebeen; rather, there crates per week, equivalent (formerly) that 55% of the surveyed businesses were participants who had entered the sector is a great diversity of shebeen businesses to one pallet, the minimum quantity for owned by women. The data shows that within the past two years cited the growing targeting different market segments. It direct delivery from the manufacturers. women are equally represented across dominance of foreign nationals in the is common for each shebeen to target all three tiers of enterprise size, showing spaza market, compelling them to close different clientele. The niche characteristics In terms of size, the sector is heavily that there are no specific barriers to their shops and turn to liquor trading. For of the informal liquor market have arisen skewed towards businesses selling less the participation of women in the liquor these entrepreneurs, their objectives are through the varying social preferences than 16.5 crates of beer per week with retailing sector. Indeed there are livelihood economic survival, as is encapsulated in within local neighbourhoods for contrasting 60% (273 of the 465) of the surveyed (push) factors that encourage women the following statements: environments, with, as a result, some businesses falling into this category. A shebeens offering music and games and mere 27 businesses sell high volumes of Figure 1: Enterprise Size of Liquor Retailers others not. Some shebeens permitting liquor. The sector structure, in volume women to purchase liquor and others terms, is shown in Figure 1, illustrating not, some shebeens selling liquor to all the pyramidal structure of informal liquor customers, and others restricting entry to retailing with most businesses operating specific age cohorts. Less than 20% of the at the base level. In terms of their legal 400 High volume turnover 465 businesses that we surveyed provided status, 30 businesses held liquor licences, (above 66 crates p/w) entertainment in the forms of games, representing 6.5% of the 465 surveyed 350 television or juke boxes. The political liquor retailers. Eighty three businesses 300 Medium volume turnover stereotype that shebeens generally play (inclusive of those with liquor licences) (16.5-65 crates p/w) (loud) music and attract a youth-based had at some point in the past five years 250 clientele was found to be incorrect made an effort to conform to legislation 200 Low volume turnover (below 16.5 crates p/w) and misleading. by applying for a liquor licence, with 150 many applying in the past 12 months. A In order to distinguish businesses in terms considerable number of licence applicants 100 of their size, the research used weekly have been waiting years for the outcome 50 beer sales as a proxy indicator (using the of their application. Despite the efforts of unit, 1 beer crate = 12 x 750 ml bottles). a minority to formalise, over 80% of all 0 It then categorised all businesses into one informal liquor retailers – primarily the Shebeen / tavern sector categorised by volume of beer sales per week, c May-December 2011 of three size groupings; smallest operators - have not engaged in SAMPLE SIZE: 465

5 6 with branded fridges. The reluctance of retailers were found to be selling ales. these micro-entrepreneurs to make capital Research by SAWIS shows that ales have investments is apparent in terms of the had a substitution effect on the market small number of businesses that provide share of standard category wine, whose table games (19%), juke boxes (10%), share in the domestic wine market has and DSTV (9%). Again this evidence fallen from 42.5% in 2006/2007 to 32.5% contradicts the idea that all, or indeed in 2010/2011 . even most shebeens play music (most do not) and/or provide an attraction for youth Law Enforcement and Crime through games and television. Through interviews with liquor traders, the Although beer sales – as a proportion researchers learned that there has been of all sales - dominate the informal and an intensification of law enforcement since unregulated liquor market, other categories 2009 corresponding with introduction of of liquor have a wide and expanding Western Cape Liquor Act of 2008. Official footprint. The various categories of liquor police statistics show that the number of within the informal market are listed in drug related crimes in the Browns Farm Table 1. policing sector, for example, rose from 74 in 2009/10 to 447 in 2010/11. This Micro-enterprise businesses, such as glass recycling, benefit from the shebeen economy. The growth in the market share of ales, dramatic increase is largely attributable to which have arrived in the last few years the new emphasis on targeting unlicensed “Currently there are five Somali shops in their unlicensed position and vulnerability – displacing cheap wine - is striking. Ales shebeens. The statistics do not show the area, and all the black owned [South to police action. Our data shows that are sugar fermented beverages or wines an escalation in drug related crime (as African] spaza shops had to close down. I the influence of the liquor industry in of unknown quality for which consumer politicians have mischievously claimed), am a mother with four children with two shaping enterprise characteristics and purchasing motivations are linked to both but the systematic raiding of unlicensed depending on me and my liquor income”. service orientation has been shallow alcohol strength and quantity. The diversity liquor traders whom were previously (Participant in Delft) and is confined largely to licensed liquor and distribution of these relatively new largely ignored. Of the 465 liquor traders traders and high volume outlets. In products has rapidly advanced into the surveyed, 62% had been raided by the “The new tendency is that South three sites where very small businesses township market through direct sales, police within the past 12 months. As a Africans are opening shebeens all over predominate less than 20% of all liquor without public promotion or advertising. In result of arrest and prosecution, 51% of because Somalians [sic] are taking outlets displayed liquor related signage one site, Delft South, over 60% of liquor the businesses were compelled to close, over the spaza businesses...and the and/or posters. In Delft South, by contrast, competition is too high now in the shebeen more than 80% of businesses display some Table 1: Availability of liquor products in Cape Town shebeens and taverns market.”(Participant in Sweet Home Farm) level of signage and brand identification, (N=465 micro-enterprises) a finding which may reflect the much Across all informal liquor traders apart higher number of licensed outlets which, Beer Flavoured Spirits Wines Ales or Micro-manu- Alcohol illegally factured beer from taverns, the FIME researchers as a result may have attracted a greater Beverages manufactured (including witnessed low levels of direct investment intensity of service provision from formal (including concoctions traditional by entrepreneurs in their businesses. In businesses. In all sites combined, a mere ciders) beer) most instances, this can be attributed to 19% of liquor retailers have been supplied 100% 81% 64% 48% 30% 8%

7 8 although the great majority subsequently efforts, although vigorous, have not Despite heightened law enforcement dominant in the sector but have fewer re-opened (usually without significant discouraged new entrants from setting and persistent crime risks, over 95% of overall opportunities to open alternative delay) and continued trading. The case up liquor retailing businesses. There is a the 239 respondents in Brown’s Farm home-based businesses. The dominance of the liquor retailers in Browns Farm is strong link between the establishment of vowed to continue trading. Most of those of foreign run spaza shops precludes indicative of the trends identifiable in all new shebeens and the law enforcement resisting closure have no alternative liquor retailers from diversifying into the sites. In this site, we identified 294 liquor impact. As soon as a shebeen is closed economic opportunities and cannot obtain spaza market. Despite the high risks of retailers and interviewed 239 business down, an opportunity within the same employment. Many respondents have informal liquor retailing, survivalist traders owners (or their employees). geographic space is created for new been operating for too long (more than are unlikely to abandon their businesses, entrants. a decade for dozens of participants) to especially where household livelihoods are at Two thirds of all liquor traders were raided contemplate starting over in a new field of stake, but resist state control, both overtly in the past 12 months, with medium and Where shebeens selling high volumes of business. Liquor retail micro-enterprises through enduring arrest and prosecution large volume on-consumption businesses liquor are closed down, this opportunity is are sustainable and attractive businesses and covertly through reorganising their more heavily targeted. Nevertheless, the extended to several small size businesses precisely because the businesses can business to disguise retail activities. research found that 62% of businesses to fulfil the void in the localised market. operate in market segments, presenting with low volume sales had been raided, These micro-enterprises are better able opportunities for survivalist entrants, with indicating that the targeting of shebeens to survive the risk of police raids because each serving a highly localised customer “When the police come they never was broad based. There is evidence small shebeens carry less stock and base. It is common for shebeeners to get any liquor here, because I that the policing of shebeens in informal are more difficult to police because they personally know their clients, as the store it underground and also by my sister’s place. I will never stop settlements has led to increasing police can operate as a private venues, shutting business provides a venue for socialisation doing this” (Respondent, corruption with a high proportion of down as news emerges of an among friends, neighbours and Delft South). research participants reporting tales of impending raid. countrymen. Increased law enforcement extortion and theft. efforts disproportionally effect female The high law enforcement risks of running entrepreneurs, who are numerically a shebeen is compounded by the threat “I have never been robbed by of crime. The research investigated Figure 2: Shebeens/taverns in Browns Farm (Philippi): raided by police in the past 12 months locals but have been robbed by the impact of crime on businesses. The Sample size 239 the government through criminals results show a strong correlation between wearing the badge of the police.” enterprise size, in volume terms, and (Participant from Sweet Home) incidents of serious crimes. All Outlets

Of all identified liquor retailers, 17 Armed robbery has a profound impact on businesses (5.8% of the total), had liquor businesses as these enterprises are permanently stopped trading for reasons cash based and carry a readily disposable that are largely unknown. Whilst the product. Within the past five years, 23% Off Consumption heightened state of law enforcement of all liquor traders in Brown’s Farm were could have influenced the owners’ victims of armed robbery. 050 100 150 200 250 decision to close, the data also revealed that 46 shebeens (19% of on-going Taverns were more severely affected, Off Consumption All Outlets Raided concerns) had commenced trading being the largest and most profitable 12 157 Not Raided 21 78 within the past 12 months. This would businesses, with 67% robbed within indicate that current law enforcement this timeframe. 1www.sawis.co.za/info/download/liquor-consumption-article-feb-2012.pdf.

9 10 POLICY CONSIDERATIONS about to meet economic demand. The policy objectives set out in the National The current liquor policy in the Western Liquor Act (59 of 2003) to incorporate Cape to restrict the formalisation of unlicensed traders within a regulatory micro-enterprises selling liquor in the framework cannot succeed if formalisation black townships will not succeed. The does not acknowledge these simple policy intention to prevent the sale of economic and social reasons of shebeen liquor in residential areas stands opposed endurance. Current policy measures to to basic economic principles - the FIME restrict informal liquor trading will not research reveals that shebeens operate work, as the FIME research shows, but will in localised geographic areas, responding instead perpetuate illicit retailing of liquor to culturally differentiated markets. by black business, reinforcing cultures of The proposal for creating ‘high streets’ drunkenness and abuse of liquor. within the township where liquor trading is permissible has no economic basis in terms of the state of knowledge on informal micro-entrepreneurship and reflects inappropriate and Eurocentric development concepts. In the context of poverty and economic marginalisation, the realities of township life will ensure that shebeens retain their position as businesses providing local access to liquor and spaces for interaction and entertainment. Our extensive research has shown that the enforcement of current legislation on unlicensed liquor traders has made police corruption and abuse endemic in Cape Town townships.

As the economic activities associated with liquor trade account for about one fifth of all informal businesses in townships, policies that criminalise shebeens (without providing alternative opportunities) will result in black economic disempowerment. This policy fundamentally ignores the reasons why people drink to excessive levels, instead targeting retailers of legally Shebeens provide a business incubation for local DJs, musicians, designers and marketers in the manufactured products who simply set informal township knowledge economy.

11 12 Informal deliveries provide a link between the Shebeen owners resort to various micro-control South African run spaza shops have resorted to selling liquor to maintain competitive against shebeen and licenced liquor retailers. strategies to manage their customers and foreign businesses. minimise conflict and harms.

Shebeens provide places where people can socialise: A small shebeen in Delft. Traditional beer and concoctions are an important component of the informal liquor economy. The Sustainable Livelihoods Foundation acknowledges The South African Breweries (SAB) for their contribution to the FIME research process. www.livelihoods.org.za