Liquor Act Zoning Rule: A Barrier to SME Distributors

South Africa’s economy has long been identified as one of the most difficult in the world in which to start and grow a business. Lengthy approval processes, complex licensing requirements and rules that appear reasonable on paper but prove costly in practice have combined to limit competition, discourage new entrants, and, in many sectors, entrench the dominance of established players.

In April 2026, the Competition Commission took a formal step toward addressing this. It opened a review of regulatory barriers to competition and SME participation inviting businesses, practitioners and industry bodies to identify specific rules that limit market entry without serving a clear or proportionate regulatory purpose and to propose practical reforms.

It is a welcome initiative. And the liquor industry offers a pointed example of exactly the kind of problem it is designed to address: a single zoning requirement which, in practice, stops lean and capable businesses from entering the distribution market – not because they lack the skills or the model, but because they cannot afford to rent a warehouse which they do not need.

The warehouse no one uses — and the law that demands it

A growing number of liquor distributors operate entirely online. They take orders, process payments and coordinate delivery, but never physically store or handle the stock. Liquor moves directly from supplier to retailer. The only premises such a business requires is the office from which it is administered.

To operate legally, these businesses must register with the National Liquor Authority (NLA). Regulation 13(5)(b)(aa) of the Regulations under the Liquor Act 59 of 2003 requires that the application be accompanied by a zoning certificate confirming that the premises are zoned for industrial purposes, specifically, for “the warehousing and distribution of liquor.”

The NLA applies this requirement uniformly, regardless of whether the business will store any liquor at all. A commercial office, appropriate in every other respect, does not qualify. The applicant must therefore lease warehouse space as its registered premises, purely to satisfy a zoning requirement even if that space will never be used.

Who it keeps out

As lawyers specialising in Liquor Law, we have over the years advised a significant number of previously disadvantaged individuals seeking to enter the distribution sector. Their models were lean and viable. What they were not, in most cases, was capitally equipped to absorb the cost of renting warehouse space they had no operational use for.

In several instances, that single cost, an unnecessary overhead imposed by a regulatory misapplication, was enough to make the business case unviable. The established players, who already hold registered premises, were unaffected. The regulation does not read like a barrier designed to protect incumbents. But that is what it functions as.

A fix that costs nothing

The regulatory purpose behind the zoning requirement is sound: premises should be appropriate for the activities conducted on them. A business that stores large volumes of alcohol should operate from a property zoned for it. That principle is not in dispute.

What is in dispute is the application of that principle to businesses that store nothing. The regulation should be amended to require a zoning certificate confirming that the property is appropriate for the activity to be conducted, not one that hardcodes warehousing and distribution as the only acceptable use. The underlying purpose would be preserved. The barrier would be removed.

Red tape with a face

This is the kind of regulatory anomaly the Competition Commission’s review was designed to surface: a rule conceived with legitimate intent, applied in a context it was never designed for, with consequences that fall hardest on those least able to absorb them, often small, black-owned businesses trying to compete on merit in a market that the rules, in effect, keep closed.

A single amended sentence in a national regulation. That is the distance between the current situation and one in which the rules ask only what a business actually does, and regulate accordingly.

The Commission has asked for exactly these kinds of examples. Here is one.