President Cyril Ramaphosa's 5-year plan to raise R1.2 trillion investment was dealt a blow this week after South African Breweries pulled the plug on yet another multi-billion rand capital investment. Photo: Leon Nicholas African News Agency (ANA)
President Cyril Ramaphosa's 5-year plan to raise R1.2 trillion investment was dealt a blow this week after South African Breweries pulled the plug on yet another multi-billion rand capital investment. Photo: Leon Nicholas African News Agency (ANA)

SAB goes on an offensive on alcohol sales ban

By Siphelele Dludla Time of article published Jan 17, 2021

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JOHANNESBURG - PRESIDENT Cyril Ramaphosa's 5-year plan to raise R1.2 trillion investment was dealt a blow this week after South African Breweries (SAB) pulled the plug on yet another multi-billion rand capital investment.

SAB on Friday cancelled a further R2.5bn of investment following the third ban on alcohol sales in December which has been extended indefinitely.

The cancellation brings the brewer’s cancelled expenditure in South Africa to R5bn for its annual capital and infrastructure upgrade programmes since alcohol sales bans were introduced in 2020.

SAB said that the cancelled investments for 2021 related to upgrades to operating facilities, product innovation, operating systems, as well as the installation of new equipment at selected plants.

The brewer said this decision would impact on the profitability of and number of jobs created by the companies that would have worked with SAB to execute the capital investment plans.

SAB vice-president of finance Richard Rivett-Carnac said while the brewer was in support of all reasonable and responsible measures to curb the spread of the pandemic, an outright ban on alcohol sale was not the best option.

“We strongly disagree with the introduction of yet another outright ban on the sale of alcohol,” Rivett-Carnac said.

“Given the material impact that this third ban on the sale of alcohol has on our business, and the possibility of further bans, we have no choice but to halt these investments for the foreseeable future.”

The liquor industry has been arguing that the government should permit off-premises trading with restricted trading days and hours, coupled with an earlier curfew, to keep the economy open.

Ramaphosa last week extended the State of National Disaster by another 30 days to 15 February, further extending the adjusted Level 3 lockdown restrictions.

This includes an earlier curfew to limit movement, reduced indoor and outdoor capacity at gatherings, as well as a ban on alcohol sales and heightened law enforcement.

The disruption in activity saw South Africa’s 3rd Investment Conference in November drawing the lowest monetary pledges of R109.6bn since the annual investment drive was initiated three years ago.

Old Mutual’s chief economist Johann Els said SAB was playing politics and trying to manipulate the government into lifting the ban.

Els said both parties needed to engage meaningfully about the impact of the ban of alcohol sales.

“I think that R2.5bn is not much of an investment when you look at a broader picture, but since the economy is under such pressure R2.5bn is every cent that we need,” Els said.

“I also think that once Covid-19 figures start going down, we might have an economy that grows 5 percent as economic variables might be strong. So maybe this is a delay in the investment and not a total cancellation.”

Els said disinvestment had a wider impact in the economy that could be prevented if alcohol was sold for limited hours to avoid losing as many jobs as those being lost right now.

“Excise taxes is a big chink of tax revenue and we have lost a lot of it with these bans. My personal opinion is we are shooting ourselves in both feet with the alcohol ban.”

BUSINESS REPORT

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