South African Breweries (SAB) on Monday said it was canceling plans to invest up to 5 billion rand ($290 million) in the upgrading of operating facilities and systems, as well as the installation of new equipment at selected plants in the country.
SAB, owned by the world’s largest brewer Anheuser-Busch InBev, said it had canceled 2.5 billion rand-planned expenditure for this financial year, while the other half for the next financial year remains under review.
The decision is down to revenue losses sustained during a near-three-month ban on alcohol sales, according to the company’s vice-president of finance. “The cancellation of this planned expenditure is a direct consequence of having lost 12 full trading weeks, which effectively equates to 30 percent of SAB’s annual production,” Andrew Murray was quoted as saying by Reuters.
In a bid to curb the spread of the novel coronavirus, South African president Cyril Ramphosa enforced strict restrictions in the country among which was a ban of alcohol sale. According to the president, the ban will prevent drunken fights, reduce domestic violence, stop drunk driving, and eliminate the weekend binge-drinking that is prevalent across the country.
Before the ban, 34,000 alcohol-related cases arrived at emergency departments in South Africa every week. But since the first ban, the figure has plummeted dramatically by roughly two thirds, to about 12,000 admissions. The embargo was supposed to be lifted in May but reinstated last month on the grounds of hospitals being over-packed due to what officials claim to be avoidable alcohol-related injuries.
Reports show that the nine-week lockdown led to the loss of R18 billion in revenue and R3.4 billion in excise tax for the South African alcohol industry. The loss of excise tax is a direct result of increasing sales of illegal alcohol products that don’t pay taxes. Information released by SAB shows that the country had lost an estimated excise tax of more than 12 billion rand during the first ban.
According to Richard Rushton CEO of Distell, a company that makes wines, spirits and ciders, the sector had already cut 118,000 jobs and projections show that a nine-week ban now will cost another 84,000 and 15.5 billion rand in gross domestic product. The South African arm of Heineken has also dropped plans of building a 6 billion rand brewery in KwaZulu-Natal. Industry associations have called for the government to drop the alcohol ban, as some restaurants, bars, and tavern owners are considering closing for good due to losses.
The South African government and the brewery industry should have a discussion that would lead to a mutually beneficial solution for both parties, experts have said, calling for a balance whereby there is a set limit to the quantity of alcohol sold to an individual. This should help cushion the blow to the industry and reduce alcohol-related crisis, they said.