Covid-19 takes toll on South Africa FMCG as firm scraps $290million investment plan
In a bid to curb the spread of the novel corona virus in the country, South African President, Cyril Ramaphosa, has enforced strict restrictions in the country among which was a ban on alcohol sale. The policy was aimed at not only preventing drunk driving and fights and reduce domestic violence, but to also eliminate weekend binge-drinking prevalent across the country.
Though the ban achieved some positive results with weekly alcohol related cases arriving emergency departments dramatically dipping from 34,000 to 12,000 admissions, the measure has taken a negative toll on the brewery industry leading to loss in revenue in the near three months the ban had been in place.
With the imposed strict restrictive measures, SAB has announced plans to cancel an investment worth about 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 the current financial year, while the other half for the next financial year remains under review.
According to the company’s vice-president of finance, Andrew Murray, “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.”
“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.
South African arm of Heineken has also dropped plans of building a 6 billion rand brewery in KwaZulu-Natal.
Chief Executive Officer of Distell, Richard Rushton, a company that makes wines, spirits and ciders, reportedly stated that the sector has witnessed about 118,000 jobs cuts with projections of another 84, 000 job loss and 15. 5 billion rand in gross domestic products in nine weeks.
The alcohol ban has also affected related industries like bars, restaurants, and taverns as most of them are about to close shops leading to industry associations calling on government to review the alcohol ban.
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