SAB stops R5bn investment because of alcohol ban 'which affects a million livelihoods'

Beer maker has lost 12 trading weeks, or 30% of annual production

03 August 2020 - 17:16 By Nomahlubi Jordaan
SAB says its decision to halt R5bn in investment 'is a result of the suspension of alcohol sales which has led to significant operating uncertainty for ourselves ... and participants in the entire value chain, and which affects more than a million livelihoods across the country'.
SAB says its decision to halt R5bn in investment 'is a result of the suspension of alcohol sales which has led to significant operating uncertainty for ourselves ... and participants in the entire value chain, and which affects more than a million livelihoods across the country'.
Image: 123RF/Vladislavs Gorniks

South African Breweries (SAB) announced on Monday that it had “halted” R5bn in investments in the country over the next two years because of the ban on alcohol sales.

SAB said it had cancelled R2.5bn in investments for 2020 and another R2.5bn was being reviewed for 2021.

The funds, according to the company, were previously scheduled as part of its capital allocation programme for this financial year, while an additional R2.5bn planned expenditure for the next financial year was now under review.

 “The cancellation of this planned expenditure is a direct consequence of having lost, as of August 3 2020, 12 full trading weeks, which effectively equates to some 30% of annual production,” said SAB’s finance vice-president, Andrew Murray.

“This decision is a result of the first, and the 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 affects over one million livelihoods across the country,” he said.

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

It said its decision would have an effect on the external supply chain companies that had been selected for these upgrades.

“It is forecast that the jobs lost across the entire industry as a result of the alcohol ban will soon reach 120,000 people and the tax lost from the first ban is sitting at over R12bn,” said SAB.  

“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.”

Murray added: “As SAB, we are focused on our priority of ensuring the wellbeing and safety of our employees and all members of our communities, and this commitment will remain intact for as long as possible.

“We will continue our attempts at engaging with the South African government to obtain some form of clarity on when we can resume operations.”

SAB said regardless of the decision to cancel capital expenditure, it would continue to implement measures that had a meaningful impact on the health crisis and in support of the country’s much-needed economic recovery.

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