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77: Patricia Pillay

CEO – Beer Association of South Africa
The liquor industry has been battered by lockdown bans on the sale of alcohol, with over 8000 licensed establishments declared bankrupt, CEO of the Beer Association of South Africa, Patricia Pillay, is optimistic but under no illusion that it will be a tough road ahead.
5 October 2020

CIARAN RYAN: This is CFO Talks and what a pleasure it is to have Patricia Pillay with us today. Patricia is the CEO of the Beer Association of South Africa. I'm sure, Patricia, there's a joke in there somewhere, that must be the greatest job in the world, right? How are you Patricia?

PATRICIA PILLAY: Great, Ciaran, thanks for having me, and I must tell you, my number of friends has increased since I've taken on this role.

CIARAN RYAN: [Laughing] Well, Patricia represents the interests or should I say the Beer Association of South Africa represents the interests of craft brewers, as well as the larger brewers, such as South African Breweries and Heineken. Now, she has extensive legal advocacy and regulatory experience. She was previously with the Consumer Goods Council of South Africa, she was there for ten years. Currently you're an attorney with the High Court of South Africa, and here's an interesting part as well, in your spare time you work with Home of Hope for Girls, which provides support to girls rescued from human trafficking, I think let's touch on that a little bit later. You're also doing your MBA with Henley Business School. So I guess that takes you out of the realm of the legal environment and gives you a bit of a broader sense of what's happening in the business world, Patricia, is that right?

PATRICIA PILLAY: That's correct, and I think that's one of the benefits of doing the MBA right now is because I totally understand what I'm studying, I can apply it so easily. So it's really been a great learning experience for me.

CIARAN RYAN: I guess one of the obvious questions from the Beer Association point of view, is South Africa is fairly unique in the world in that we had this ban on liquor sales during the lockdown. Now, that was devastating to the industry, it was devastating to restaurants, which rely on that income, to bars, shebeens. Give us an indication of what are your members saying. What has been the impact and was there a legal challenge? I know it's relaxed now, we must emphasise that you can now buy liquor Monday to Friday, but what was the impact on the industry?

PATRICIA PILLAY: The liquor industry, as you've said, it had a devastating impact. If you just look at how it all played out is that we had the first nine-week ban, so it went through from March, all the way to May. When you look at the impact, I’ll talk about taverns, for example, there were over 8,000 licensed taverns that went bankrupt, that shut their doors. There were 15% of craft brewers that literally shut down, jobs were lost. The sad part about taverns is there are women who run these taverns. So there's all these women now who are unemployed, can't feed their families. So then we continue trading and then comes July 13, and I'll never forget that evening of July 12 when the president announced the second ban, and we were just recovering or starting to recover, licking our wounds and then that second ban came and then forced an additional 15% of craft brewers, thousands more taverns, to shut down permanently. These are livelihoods that we’re talking about. In our industry alone, as beer, we support over 400,000 livelihoods in the alcohol value chain, we're looking at just under a million jobs. We contribute 4% to the GDP of the country and we are a huge contributor, as you know, to, to excise. As an industry we really have been crippled through this and a lot of politicians say that these are just numbers that we throw around, but they’re actually not, these are lives that have been impacted and continue to be impacted because we’re still recovering. I know you say we opened and it's over, but actually it’s not because when you look at our trading conditions and our licenses, we’re allowed to trade until seven o'clock, for example, and currently under level one, we’re only allowed to trade until five o'clock as retailers. So you’re losing out on the five to seven trade, which is when people are going home, and on the way they would normally pick up a bottle of wine or whatever their drink of choices is, or beer, and then head home, and they’re not able to do that anymore. So this impacts the retail industry. So we’re still not fully trading as an industry, and this is still a concern. So there may not be jobs that are secured in that industry. So we still really are facing quite a challenge at hand.

 

Knock-on effects of the prohibition of alcohol

 

CIARAN RYAN: Those are quite staggering figures that you just gave us there, 400,000 people, I had no idea. Was that the figure, 400,000 people employed in the value chain for the beer industry?

PATRICIA PILLAY: Just for beer alone, we employ 400,000. So it's a lot of livelihoods that can be impacted. Like I said, when you think of beer, for example, you just think of the likes of Castle and Heineken, you're not thinking of what we call barley to beer, so you're not thinking of the farm workers who are impacted because if there's no demand for the actual product then the farmers are not benefiting. You're not thinking about Console Glass, for example. You might have read, the CEO of Console Glass was in the media as well, in terms of their investments that they've now had to halt because 80% of their revenue is actually from the glass from alcohol products. So it's the entire value chain that gets affected when a ban like what has happened to us takes place.

CIARAN RYAN: The question I had at the very beginning of this was…and it happened with the cigarettes, and people can't believe what happened in this country in terms of the ban on cigarettes, a ban on alcohol. Other countries in the world didn’t do this. Now, was there a legal challenge or were you about to launch a legal challenge and what is the status of that?

PATRICIA PILLAY: So our view as the Beer Association in particular has always been a non-adversarial one with government. This is the government that we have to work with, it's the legislation that governs us. And so as far as possible, we prefer to have a consultative approach and manner towards everything that we do and the way that we trade. It was coming to a point, though, where we were feeling very hopeless, we were feeling like we were not being consulted with. Like I said, that July second ban there was absolutely no consultation and it really threw us off. But what we've managed to do is take that process through to Nedlac, where all the stakeholders sit, so it's labour, government, business, and community. So at least now we've managed to open up that door where we can get all the social partners to engage in dialogue. That's when that thought of the legal process was then halted. There were some companies in the wine industry that did proceed legally, I'm not sure where that matter is standing at the moment, but as the organised Beer Association, we did not take that decision to proceed. We prefer to rather sit down around the table and think about how do we recover as an industry and what's our recovery plan, but also how do we prevent this from happening ever again in this industry, in this country, we cannot afford for this. You would know as well from your other interviews, we really need to have a proper recovery plan for this country and we are a significant player in this economy, and so we really want to work with government. So that's definitely the way we'd like to move forward.

CIARAN RYAN: So you have found that the non-adversarial approach was more productive, would you say that's correct?

PATRICIA PILLAY: Well, I think for now it is the way that hopefully will work for us and that we’re all at a point now where we understand what the goal is and what we need to work towards.

CIARAN RYAN: In your interactions with government officials, did you find that there was a…did they get the sense of frustration that business was feeling in this country because I'm sure you're having to deal with very angry members. Beyond the angry, maybe even apathetic, we heard about the cancellation of these investments by Heineken and South African Breweries, if I'm not mistaken, very, very large investments.

PATRICIA PILLAY: Correct, absolutely. The project in that Heineken was proceeding with, there were at least 450 jobs, potential jobs, that were lost because that investment didn't proceed. So I think that government does appreciate our sentiments and our positions. We work through the Dtic and I think that they definitely appreciate our position, and obviously as Trade in Industry they are there to ensure that they support us as business and ensure that we continue to invest in this country and the economy. So I do think that they understand the situation. The difference, though, is with Covid is that you have your authority that's across the different departments, and the different ministries. So it's not just up to one ministry that the decisions are made. So as much as this regulation and our regulation happens at the Dtic and that ministry base may be sympathetic towards us. It doesn't mean that the National Command Council would necessarily then pass any submissions that we've made or accept any motivations that have been made. So it has been frustrating in that respect because as much as we can put a motivation forward and a ministry may accept it, we have so many other ministries that have also influence over what happens.

 

‘It's really going to take us a long time to just gain back our strength’

 

CIARAN RYAN: I know that this is from the South African Institute of Business Accountants’ perspective, this is something that SAIBA is very sensitive to because the accountants are also in a sense at the frontline of this lockdown because they're having to deal with the messes, they're having to deal with companies that have lost a huge percentage of their revenue, that have had to lay off staff, that feel completely helpless. Accountants are having to become turnaround specialists at this time. So SAIBA very definitely supported the Beer Association in this because we could see the damage that was being done to the economy. A question flowing from that would be is there a risk that if we go back into lockdown, could we see more beer producers being forced out of business and more investment being frozen.

PATRICIA PILLAY: Yes, absolutely and, like I've said, we were still not on the recovery path and so it's really going to take us a long time to just gain back our strength. I think that we are all just
re-evaluating and all our businesses are re-evaluating their strategy in terms of positions in the country, as well as their infrastructure and their development. I think that also the major logistical and operational challenges that the industry faced with all of the announcements with COVID in terms of stock and supply, it really did take a strain. So for us right now, the push is really to just go back to trading as per our license agreements, and like I said, that's not taken place as yet. We’re in level one already and level one could continue until the rest of the year. So I think that’s our main focus right now, and then, like I said, making sure that this never happens again, but if we go back into some form of lockdown, we will not survive as an industry, we will definitely have to start retrenching. What we've managed fortunately to do, especially bigger industries, is executives had to take pay cuts, bonuses were forfeited, short time work was implemented and many measures were put into place to ensure that jobs were not lost in the major brewers. But if we do have a further lockdown, unfortunately that can't be sustained and that's not a place that we want to go to. So we need to make sure that this partnership with government works, that the Nedlac process works and that we ensure that we can start recovering.

CIARAN RYAN: I'm sure that there's a role for accountants in this, a lot of these taverns, a lot of these shebeens, restaurants and so on that are in these desperate states, they do need some kind of intervention there that will help them in the recovery process. So there's a possibility of an alliance there between some of the SAIBA members and some of your members or downstream members. Now, let's just focus for a little bit here on yourself, if we can, can you give us a little bit of background as to how you ended up here because you come from this advocacy and legal background to running what is really a pillar of the South African economy. The figure I think that you gave there was 4% of GDP, that's quite substantial.

PATRICIA PILLAY: Yes, as you've said, I'm a lawyer by profession, but I think in my heart I always knew that I wouldn't go into practice. I remember in articles going to court and I just thought, I definitely cannot imagine my life here. So when I got admitted, I went straight into corporate and I loved corporate. I loved the difference that you can make being in a corporate and you can impact not only the lives of your customers and your employees, but also the communities around you. So I think my aspiration has always been to make a difference in the people's lives in whatever role that I find myself in. So in every project that I get involved in, that's what I aim to do. So with the beer industry, especially, for example, our focus is on encouraging drinking in moderation, changing the way as South Africans we engage with the substance, so it continues to be a positive experience, which is created for all and not to be abused or for binge drinking, you know. Creating jobs, making sure that we create entrepreneurs and change the beer culture in terms of starting to get people to understand the health benefits, the brewing, there’s such interesting technology and innovation that is taking place. Even when you look at the brewing process, the residue or the waste that we create that is so high in protein, for example, that it can feed the nation and it doesn't have alcohol in it, and that can easily be converted, and there have been trials that have been done, into porridge or to biscuits. So in everything we’re doing it must be a positive change to the environment. So, yes, lawyer by profession, but really driven by passion to make a difference.

CIARAN RYAN: Given your legal background in advocacy and regulatory issues, then let's just talk a little bit about the MBA that you're doing with Henley Business School at the moment. I'm sure that’s introducing you to some of the accounting principles, which we here at CFO discuss quite frequently with people. How does that fill in, do you think, some of your academic gaps, if I can put it that way?

PATRICIA PILLAY: Well, I must tell you, we did do accounting for lawyers in our practical legal training, but the only thing I remember them stressing is that we should never steal from our trust account, so you’ll appreciate that [laughing].

CIARAN RYAN: [Laughing] One probably shouldn't even need to mention that, but I guess they do, right.

PATRICIA PILLAY: Yes, absolutely. But on a serious note, the MBA has really been an amazing experience, and actually right now I'm doing the managing financial resources module. So it's really great because I'm able to practically apply what I do in the business and look at it through a financial lens, and just the decision-making makes so much more business sense. I do believe that it doesn't matter what your profession may be, I think it is so good for us to do a general business course, whether it's an MBA or any kind of grounding course and so on that a university offers because you do need to have an overall understanding of the company processes, finance processes and so on.

I definitely would encourage more people if they’re not even in the accounting profession to have that basic grounding. It’s amazing how so many people think that because they're not in the field, they don't need to understand how to read just your balance sheets and so on, and they don't understand how critical it is for them to understand what is going on. It doesn't matter what their position is in the business to understand what is happening with their share prices. I don't know how many employees that work for a company don't even understand what's happening. So I think part of the responsibility also of a business, for me, is to also educate their staff as to what they’re doing in terms of their company, the strategic decisions they're making, and also how they're doing from a financial perspective.

 

‘We have requested a deferment in terms of the periods that we were not trading’

 

CIARAN RYAN: I guess some of the regulatory issues that you've had to deal with when you were with the Consumer Goods Council of South Africa, and now at the Beer Association of South Africa, there’s quite a lot of education that's required. The laws in South Africa are not bad, but one might question the enforcement, we don't have that, and whether the judicial process is rapid enough and fair enough, but what is your sense of that? Is that your role, has it been more educational and engagement with the politicians?

PATRICIA PILLAY: Well, I think you're spot on when you say that we have one of the best laws, we do, and I think a lot of the countries copy our laws, I know a lot of the African countries do look at our laws and use that as a precedent. I think it’s the enforcement where we fall short and especially from a consumer goods space, when you look at our diverse membership, mostly FMCG, and everything affects the industry and the way you trade. So we would work with things like the road traffic bills, I remember us working on e-tolls and road traffic infringements, which is actually still something that's quite contentious. We'd have to make applications to NERSA when the electricity hikes would take place and, once again, still something that's a challenge for us as South Africans, and then have to work on sugar tax, which was a huge issue for us and still struggling as industries in terms of the ramifications of that. Then all the way through to consumer protection and the Consumer Protection and part of what we had to do there was to look at how do we self-regulate as an industry and then set up a consumer goods ombudsman, which is now in place and it's been running extremely effectively. So with the Disaster Management Act at the moment, a lot of our focus has been on obviously the Covid compliance, but we also have a huge emphasis in terms of our issues of our excise. We have requested a deferment in terms of the periods that we were not trading, and we really are hoping that our motivations in terms of the increases for next year will be considered and concessions granted to us because we really need that support in terms of getting up to trading again, as we need to.

CIARAN RYAN: The sugar tax, yes, we've read about that, that's been years on the go. Just explain that very quickly, what is, what is that tax?

PATRICIA PILLAY: Well, it was actually passed but this is the unintended consequences of every legislation is that are you able to meet the requirements of whatever the board is saying. So for example, are you able to manufacture sufficient locally. When you look at sugar, everybody, most people use sugar as an ingredient in terms of their formulas. So it's one thing collecting the tax and then implementing that into your legislation and imposing a tax because your intention may be to reduce, curb obesity, and that was what the intention was with the tax. But when you don't look at obesity in totality, and you look at it as a specific issue and say, well, it's sugar that's causing the obesity, it's got a whole host of unintended consequences and doesn't actually fix the issue of obesity. So we still have issues of obesity. We have a high tax that's being paid. So you would have seen an increase in things like your Coca-Cola maybe, for example, that obviously uses sugar, you would have seen changes in your formulas. So you would see that there were more products that came out now with no sugar in it, with all sorts of other ingredients that would give you the taste as if it was sugar, for example. So there's lots of changes that come with a legislation change as well.

CIARAN RYAN: There's a lot of issues that you have to deal with, that is quite a lot of regulatory challenges that you've just outlined there, quite apart from the lockdown. Just a thought that occurs to me, when the liquor ban was partially lifted, then they were able to sell, I think, three days a week,

there was this reported spike of drunken-related hospital admissions. I thought about that at the time and you probably did too, there was a bit of binge drinking going on there, but people were so frustrated, I think it was a short-term thing. I think it probably went on for a few days, maybe a week or so and then it settled down, and would that be a fair assessment?

PATRICIA PILLAY: Look, I always believe that when you prohibit people from a behaviour, a product and so on, people will actually binge or abuse it. So they’ll either go underground, so they'll still obtain it if they need it, which is what happened in our industry is that the illicit and black market just sprung up, and the problem that we’re having at the moment is that it's still on the increase, so it hasn't gone away. There are still people who are trading illicitly and that's something now we have to deal with. But yes, I'm sure that the cases were valid, we unfortunately were not able to get any data in terms of the actual hospital beds issue. But I think the concern for us as an industry is what behaviour are we trying to promote. We as the beer industry talk about drinking in moderation, but if you're going to then prohibit people from accessing a substance, all you’re doing is then encouraging them to binge when they do get access to that substance. So it's not a solution to ban and I think that's what we've been saying all along is that's not the kind of behaviour that we want to try and develop amongst our consumers.

 

‘We have a lot of scars, but I think working together, we can get through this’

 

CIARAN RYAN: Yes, it's difficult with alcohol, I guess, because it is its own unique thing but it's as ancient as mankind itself. Are you optimistic for the future? There are some serious obstacles there but are you optimistic?

PATRICIA PILLAY: So I think if I had done this interview and you'd asked me that question three weeks ago, my immediate answer would have been no. We were actually robbed at home, it was during the day, we were safe, thank God, we weren't hurt. So it was our things that were gone, which can be replaced, but then at the same time, obviously, I was facing these challenges with the continual lockdowns, recovering as an industry and this pressure, and so I was feeling extremely vulnerable, extremely exposed. My immediate thoughts with my family was exploring options for emmigrating.  But recently when I reflected on the deaths of two very inspirational figures to myself, Ruth Ginsburg and George Bizos, both of them having been lawyers, I really reflected on the reason that I chose law as a profession and the principles that I chose to live by, principles of justice and fairness for all, irrespective of gender, race, culture, things that we have challenges with in South Africa, and to be the voice of those who actually can’t speak up for themselves, whether it's industry, whether it's individuals, and to be brave and bold and step forward when others are too afraid to do so. It’s then that I realised that Ruth and George, God bless their souls, they had given up a lot of themselves and they could have also fled and not stuck it out. But then that would not have resulted in me being on your podcast today, a black woman, lawyer. So I have so much to be grateful for and it's this gratitude that I speak to you today with and that's what makes me optimistic about the future is of what more can we achieve as a country, what more can I achieve as a person and how can I contribute to continuing their legacy, and to do better for us as a country. I think we do have hope, I think we can make it through, I think we've been through a lot, we have a lot of scars, but I think working together, we can get through this.

CIARAN RYAN: What a beautiful answer that is, it’s just fantastic and inspirational. Thank you for that. I’m very sorry to hear about the break-in, but great that you were okay, and it was just material things that were taken, right?

PATRICIA PILLAY: Absolutely. 

CIARAN RYAN: Just talk for a minute about the work that you do for the Home of Hope for Girls, which is involved in rescuing girls from human trafficking and just lay the table there, if you may, how big a problem is that?

PATRICIA PILLAY: It's a bigger problem than we think it is. We were just chatting before we started the podcast and I was saying to you that people think that it's not a South African issue, and they think that these girls are foreigners and so on,  and they’re not, they’re actually our South African girls. Often they are taken away from their families in the rural areas, their parents may die and their relatives may sell them off and they’re brought to the city or they’re promised jobs and then they come to the city and then they’re trafficked. They're led into selling drugs and each one has their own story. So the work that myself and a few other people in the community do is we really form a little committee that helps to look at fundraising for this organisation. There are over 800 girls that have been through the system, and when I say that, there are two homes and there are a group of younger girls and then older girls who are in high school, and then some who have graduated. But  800 girls who have been rescued off the streets and then have moved on, they have families, they have graduated, they are lawyers, accountants, auditors, they are successful, and they have actually been rescued through this process. Mam' Khanyi Motsa, who's actually the founder of this organisation, and who still lives at the home, who runs the home, who has her own family, but who has dedicated her life to these girls. They are out in Cyrildene and Kensington is another home. There’s just wonderful work that's being done to ensure that they are given an opportunity in life. They get sent to the schools in the area, wonderful schools. It's been tough because they get very little funding from government, so a lot of it is self-funding that we have to ensure. They are celebrating their 20 years this year, so it's quite a milestone year. So there's quite a few celebrations that we’re trying to plan within a Covid structure. So it's just ensuring that we give the girls an opportunity and they don't have to end up back on the street and they really can just achieve all the dreams that they have had in their minds and have success.

CIARAN RYAN: These girls, I can understand that they're particularly vulnerable girls from rural areas, parents may have died, as you said, for some reason or other. What is the mechanism involved, are there pimps going around scouting these areas for girls, how does that actually happen?

PATRICIA PILLAY: Yes, so I'm not very involved in terms of that part of the organisation but my knowledge of it is yes, there are syndicates and there are operations that work in this. It's very high-risk work, and in the home we don't divulge pictures of the girls and so on. They’ve been targeted before, there have been break-ins before, they actually come and try to get the girls back because obviously it’s money for these pimps. So they would get people to go out into these areas and get these girls out from their homes. It’s a whole industry that’s thriving in this country and we don’t do enough about it, we don’t talk enough about it. I think there are many organisations that do good work but I don't think we have enough visibility in terms of making people aware of exactly how bad this crisis is in our country.

CIARAN RYAN: Is there a website if people want to donate, for example, and support this cause, is there a website that they can go to?

PATRICIA PILLAY: Yes, the website is www.homeofhopeforgirls.org.za and you can absolutely donate. They’re also on Facebook, as Home of Hope for Girls. They’ve just launched a lovely new logo with a beautiful yellow butterfly.

CIARAN RYAN: Beautiful, thanks for that. Final question, Patricia, any books you'd recommend, we ask this of everybody, I want to know what you’re reading and what you'd recommend?

PATRICIA PILLAY: This is my favourite question because I love reading. I've been reading, I think, before I could even walk, so I've been told. So my grandmother, I miss her, but she used to say that if there was a bomb that would go off, I'd be so engrossed in my book that I would not hear it and I would carry on reading. So I love diverse genres. I collect classics, so I have a whole host of them. I also collect children’s classics, so Enid Blyton and Hardy Boys and Peter Pan, I collect them. I don’t have my own kids, so I don't know why I'm collecting them, but I do, I just love them. Then in South African literature, I think there's great authors that are coming up, but biographies and autobiographies, I think for me…I read a few books at once, my attention span is a little bit limited. So currently I'm rereading Odyssey to Freedom by George Bizos. Then what I do keep next to my bed is a lovely book called Women who Run with the Wolves: Myths and Stories of the Wild Woman Archetype by Clarissa Pinkola Estés, and she is a great writer and for any woman out there, whether you’re in the corporate world, whether you're a housewife, it doesn't matter. But if you've ever needed to understand your deep desire, passion for success, for life, for protecting your family, you should really get that book. I mean, it's quite a thick book, but it really explains a woman's spirit and a woman's soul.

CIARAN RYAN: Very interesting and  I'm with you also on the Enid Blyton, I used to love that as a child, she had such a magnificent way of creating drama and it was always positive, there was always a positive message that came out of her books.

PATRICIA PILLAY: Absolutely.

CIARAN RYAN: Patricia, let's leave it at that, thanks so much for coming on to CFO Talks. I really wish you the very best in your endeavours, both with the Beer Association and with the Home of Hope for Girls. Please, let’s stay in touch, I really would like to speak to you again because this is something that's an evolving story. Perhaps before the end of the year let's have another chat, if that's okay.

PATRICIA PILLAY: I'd love that, Ciaran. Thanks for the time and thanks to your industry for always supporting us and making sure that we keep all of us honest as well. I think it's a really an important role that you all play and that your show plays as well, so thanks so much.

CIARAN RYAN: You’re most welcome and I’m sure the accountants will appreciate that pat on the back coming from the Beer Association of South Africa. So Patricia, you have yourself a great day and we'll be in touch again for sure.

PATRICIA PILLAY: Thanks, Ciaran.

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