Duty-free booze sales to diplomats: Distell and Nu Africa in court

South Africa | Those striped pants types cannot get enough. Drinks firm Distell and one of its customers, the black-owned duty-free business Nu Africa, are facing each other at the Competition Tribunal.

NU Africa is crying foul after Distell cancelled supplies over claims that some of its booze, which Nu Africa sold to diplomats, ended up in the open market. Hearings began on 25 November.

Duty-free liquor is one of the big perks which the cookie pushers enjoy in South Africa. But they must purchase reasonable or moderate quantities and are not permitted to resell them.

“Tax leaks” galore

However, some diplomats must have peddled the booze at a large profit. Last year, South Africa expelled diplomats from Malawi and Lesotho for illicitly selling alcohol that reportedly cheated the taxman out of ZAR 100 million (USD 6 million) a month.

Suspecting that Nu Africa turned a blind eye to these shenanigans, Distell stopped supplying to Nu Africa. Nu Africa, for its part, denies that it is part of the problem and instead accuses Distell of abusing its dominant position.

Currently, the excise tax rates for wine, beer and spirits are 11 percent, 23 percent, and 36 percent of the weighted average retail prices, respectively. This represents a significant discount, particularly at wholesale prices in large quantities.

Diplomats sell booze through the back door

Nu Africa sells most of its alcohol into seafaring and diplomatic circles. By bringing the matter before the tribunal, Nu Africa is hoping to compel Distell to resume doing business with them, saying Distell’s unwillingness amounts to abuse of dominance that is undermining Nu Africa’s profits.

Nu Africa has since resorted to purchasing Distell’s products from other wholesalers, which means it is losing out on wholesale duty-free deals.

During the hearings, Distell accused Nu Africa of being complicit in the illicit sale of alcohol to diplomats. By tracking its products, Distell found out that they turned up in the open market at least four times.

What is more, Nu Africa has sold more liquor to diplomats than stipulated in its risk implementation plan. This plan is an undertaking between Nu Africa and the South African Revenue Service (SARS) that limits tax-free customers to buying just two cartons of cigarettes and one mixed box of alcohol each.

Alcohol lubricates diplomacy

In one instance in 2017, the Burundi embassy bought 50 cases of spirits – that is 600 bottles – in a single day, Distell contends.

Nu Africa has since admitted to selling more liquor to diplomats than stipulated in its risk implementation plan, but it claims it has no responsibility to keep tabs on the liquor and whether customers resell it.

Let’s see how this affair will pan out.