This pricing policy can reduce heavy drinking — UCT study

If the government were to introduce per-unit-of-alcohol pricing and implement it successfully and effectively, this could drastically decrease consumption of heavy drinking and binge drinking in communities, University of Cape Town (UCT) researchers say.

In a study published in the SA Medical Journal, researchers said if the minimum unit price (MUP) is levied at a level of R10 per standard drink, this could reduce alcohol consumption by:

• 21.8% among regular heavy-drinking households;
• 11.6% among occasional drinking households;
• 15.9% among intermediate drinking households; and
• 6.1% among moderate drinking households.

Based on the current data, researchers are convinced that introducing the pricing policy would be more effective than increasing the excise tax.

Lead researcher Prof Corné van Walbeek, who is also the director of UCT’s research unit on the economics of excisable products, and his colleague Dr Grieve Chelwa, who is an economist and  senior lecturer at the UCT graduate school of business, said a MUP levied at an appropriate level would substantially reduce households’ alcohol consumption. 

In the study, researchers calculated unit values, defined as total monthly alcohol expenditure per household, divided by the household’s total monthly alcohol consumption, using data from the 2015 National Income Dynamics Study.

A number of hypothetical MUPs were imposed, and the impact of these MUPs on the consumption of the different categories of drinking households was estimated, taking cognisance of the fact that the households respond differently to price changes.

Van Walbeek said: “We found that moderately drinking households tend to be more price sensitive than regular heavy-drinking households. Occasional and regular heavy-drinking households comprise a quarter of all households (and half of all drinking households) in SA, but consume 84% of all alcohol consumed in the country.”

There are large differences in the calculated average price of alcohol between different categories of drinking households, ranging from R12 per standard drink among moderate-drinking households to R1.53 per standard drink among regular heavy-drinking households.

A MUP of R3 per standard drink is estimated to reduce alcohol consumption by:

• 11.9% among regular heavy-drinking households;
• 3.1% among occasional heavy-drinking households;
• 2.3% among intermediate-drinking households; and
• 0.3% among moderate-drinking households.

Van Walbeek said while an excise tax increase will cause the prices of all alcoholic beverages to increase, a MUP would only target low-priced products, which are disproportionately heavily consumed by regular heavy-drinking households, and to a lesser extent by occasional heavy-drinking and intermediate-drinking households.

He said this did not mean that the government should de-emphasise the role of excise taxes in its alcohol policy.

“Both excise taxes and a MUP on alcohol are important components of an effective alcohol policy. The World Health Organisation [WHO] encourages countries to use both.

“The impact of an excise tax is more broad-based, whereas an MUP is specifically targeted on drinkers who consume cheap alcohol, which tend to be the heavy drinkers.”

The Western Cape is one of the provinces considering the introduction of the alcohol pricing policy to curb binge drinking. Minimum unit pricing, which stipulates a floor price for a unit of alcohol, would push up the price of the cheapest products on the market, and has been introduced in several countries, including Scotland and Canada.

It is one of a host of changes to the Western Cape Liquor Act being considered by the provincial government, with the aim of reducing the harm caused by alcohol while incentivising law-abiding businesses.

According to the WHO, SA’s pattern of drinking is categorised as “most risky” — in the same category as the Russian Federation and Ukraine, among other countries.

There is an important caveat, warns Van Walbeek. Because the demand for alcohol is price inelastic, especially for heavy-drinking households, he said a large increase in the price of alcohol will increase those households’ total alcohol expenditure and therefore the share of alcohol in the total budget.

“Other expenditures would be increasingly crowded out by alcohol. While this does not nullify the effectiveness of an MUP as a policy to reduce alcohol use, especially by heavy-drinking households, it may deepen the financial hardship of such households.”

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