SAB pulls the plug on its R2.5bn investment due to alcohol ban

Picture for illustration. Alcohol confiscated by Sebenza SAPS at a tavern in Kempton Park West. Picture: supplied.

SAB says it has effectively lost 30% of its annual production due to the ban on alcohol sales.

South African Breweries (SAB) will no longer be investing R2.5 billion in its annual capital and infrastructure upgrade programme this year.

The brewer said this is a consequence of the Covid-19 lockdown-induced ban on liquor sales for the past 12 weeks. It has effectively lost 30% of its annual production.

More than a million livelihoods affected

SAB vice president of finance Andrew Murray says the company has been hard-hit by the lockdown and its stringent regulation on the sale of alcohol.

“This decision is a result of the first, and current, suspension of alcohol sales which has led to significant operating uncertainty for ourselves, our partners, as well as colleagues in the industry, including participants in the entire value chain, and which impacts over one million livelihoods across the country.”

Initially, it had intended to invest R5-billion over the next two years. The R2.5-million planned expenditure for the next financial year remains under review.

READ MORE: Booze ban puts black-owned business development on ice

The investments that were being considered included upgrades to operating facilities and systems, as well as the installation of new equipment at selected plants.

“This decision will also have an impact on the external supply chain companies that had been selected for these upgrades,” SAB says.

It forecasts that the jobs lost across the entire industry as a result of the alcohol ban will soon reach 120,000, while the excise tax lost from the first ban is sitting at over R12-billion.

“The jobs and financial losses magnify considerably when considering the severe impact the suspension is having on communities, as well as the downstream supply chain, including farmers and other raw material suppliers, tavern owners, packaging and logistics companies, among many others that have had to immediately stop operations and are facing dire consequences,” it states.

Government asked to review research report

Last week, SAB and other alcohol industry leaders requested the government to review the South African Medical Research Council (SAMRC) report that influenced its decision to ban alcohol sales.

The industry said: “The incomplete nature of the data used in the modelling makes it difficult to accurately determine the extent of the link between trauma admissions and alcohol abuse.”

It disputed the SAMRC’s finding, saying that the reason for each trauma is not captured by the hospitalisation data provided in the report and there is no information on whether the trauma cases resulted from alcohol use, or from any other cause.

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“The model, therefore, may be able to predict the total number of potential trauma cases prevented; however, it remains uncertain as to the extent of the relationship between alcohol consumption and the number of trauma admissions in SA hospitals,” it said.

Sibani Mngadi, representing the South African alcohol industry, urged the government to review the report on that point.

“We would encourage the government to take note of this independent review of the SAMRC report and of the limitations in the data reported, and engage with our industry to find an urgent solution to lifting the suspension on alcohol sales,” said Mngadi.

“This will enable our industry to return to some form of operational normality.”

This article first appeared on Moneyweb and was republished with permission.

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