Africa Drink Economy Governance Government South Africa

South Africa Risks US$742M in investments on alcohol ban

South Africa’s ban on alcohol sales has put investment projects worth at least ZAR 12.8B (US$742M) on hold.

A day after Anheuser-Busch InBev SA unit South African Breweries said it’s halted plans to spend ZAR 5B on scheduled plant upgrades, glass manufacturer Consol Holdings Ltd. said it’s suspending building a ZAR 1.5B production plant in the country.

Heineken NV also confirmed Tuesday it’s stopped work on a ZAR 6B brewery. Wine and spirits maker Distell Group Holdings Ltd. has stopped all discretionary spending and shelved ZAR 300M of South African capital projects because of the ban, it said in a statement. It’s also looking to sell two of its premium wine farms.

The announcements are a blow to President Cyril Ramaphosa’s drive to lure US$100B in new investment to the country by the end of 2023. His administration is facing increasingly vocal criticism over the ban on liquor sales, which the government says it introduced to curb hospital admissions while it fights the coronavirus pandemic.

Pick n Pay Stores Ltd. Chairman Gareth Ackerman said at the grocer’s annual general meeting on Tuesday that the alcohol prohibition, as well as a ban on the tobacco trade, have hurt sales and cash flow.

“The government has on several occasions reassured us that they are listening and consulting, but we see little evidence of this,” he said. “We need government to take us into their confidence when it comes to decisions that affect us all.”

Also read: South Africa’s net foreign reserves rose to US$50.5B in August

South Africa is among a handful of countries globally that outlawed alcohol as part of an effort to curb the spread of Covid-19. The ban, initially imposed from March 27 to the end of June and then reinstated in July, has cost the industry about 117,000 jobs, according to manufacturers.

The bans have come with “no explanation as to why South Africa is right and so many other countries are wrong,” Ackerman said “What explanations we have been given have been confusing and contradictory. And, sadly, everyone knows that tobacco and liquor remain readily available through the black market.”

Government data shows the alcohol moratorium cost the government 5.46 billion rand in lost revenue in the first three months of the financial year, compared with 2019-20.

The ban on sales has led to “significant operating uncertainty,” SAB Vice President of Finance Andrew Murray said in a statement. The investments that were being considered included upgrades to operating facilities and systems, as well as the installation of new equipment.

Consol, the biggest glass manufacturer in Africa, said the alcoholic-beverage industry accounts for about 85% of sales in the glass-packaging industry. Consumption at restaurants and other hospitality venues — also barred under the government moratorium — comprises about 55% of alcohol consumption volumes.

“The combined effect of Covid-19, the current alcohol ban, ongoing restrictions on on-premise consumption, and lost compound growth will see the South African glass industry decline by an estimated 15% over the next 12 months,” it said.

The 76-year-old company had warned in May that it may be forced to shut some of its furnaces, which cost ZAR 8M a day to keep running, unless the ban was lifted. That would mean a six-to eight-month wait to restart and require international expertise to fire them up again, it said.

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