Govt is here for our beer, but what about the financial hangover?

As with most industries, breweries across the country find themselves in uncertain times as lockdown restrictions continue to throttle the beer industry.

A national state of disaster was declared on 21 March and lockdown started on 26 March. Since then, the sale and transportation of alcohol has been prohibited. A particularly worrying situation involves South Africa’ largest brewery – AB InBev’s South African Breweries (SAB).

A reported job cut threat at the end of January saw the possibility of up to 500 people losing their jobs – an estimated 8% of its workforce.

SAB spokesperson Refilwe Masemola said staff cuts would be linked to the review of the company’s business operations, but jobs would not be cut across the entire business.

Anheuser-Busch InBev, SAB’s owners, at the time warned that the second quarter of 2020 would be worse than the first three months of this year, with shipments dropping by 32%, Bloomberg reported.

But the super brewer will be hit even harder if 132 million litres of beer will have to be destroyed, as is currently feared.

This mass discarding would take place due to the prohibition of alcohol transportation and storage facilities having reached capacity.

SAB is not allowed to legally store brewed beer once it reaches capacity. When capacity is reached, alcohol must be stored on offsite SAB-owned facilities. And because the movement of alcohol is not allowed, the beer needs to be destroyed, SAB corporate affairs vice-president Zoleka Lisa said.

Lisa confirmed to The Citizen that the discarding process had already begun, with some brewers having to discard beer daily.

This very thought has been a major talking point for thirsty South Africans and may be the most extreme consequence of the booze ban so far.

The 132 million litres of beer currently sitting in tanks amounts to roughly 400 million bottles of beer.

But this development will hit government even harder, Lisa said.

This is because the immediate loss to government in excise tax would amount to R500 million, because the state does not collect excise tax for unpacked beer, Lisa said.

“This would literally be pouring that tax revenue down the drain, at a time when government – and the citizens of South Africa – have an urgent need for those funds.”

Severe implications for long-term tax revenue is also a concern.

If SAB is forced to discard its current inventory, it would be forced to operate at 50% capacity for at least four months.

And if SAB lost 400 million litres, this would mean losing out on an estimated R2 billion in excise tax.

“This would cripple the ability of SAB, and the beer industry more generally, to function as a critical engine of economic recovery,” said Lisa.

In June last year, alcoholic beverages, along with tobacco and narcotics, accounted for 4.5% of household expenditure in South Africa, with a growth rate of 2.9%.

The industry is responsible for an estimated R4.2 billion, or 4.4% of South Africa’s gross domestic product (GDP).

Last year, SAB alone contributed to 3.1%, or R66.2 billion, to South Africa’s GDP.

The discarding of SAB’s current inventory would also negatively impact 75 000 jobs across the company’s domestic supply chain.

The company is engaging with government to advocate for home alcohol consumption, Lisa said in an interview with eNCA on Wednesday.

She emphasised that SAB was not intending for gatherings to take place in a setting that could increase the spread of Covid-19, and said that home consumption implied that social distancing requirements could still be adhered to.

– news@citizen.co.za

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