South African Breweries cancels R2.5 billion in plant upgrades due to alcohol ban

SAB and Heineken have been hit hard by the alcohol ban.
SAB and Heineken have been hit hard by the alcohol ban.
Yuki Shintani / Getty

South African Breweries has pulled the plug on billions of rands in planned operational investments in South Africa due to the impact of the alcohol ban.  

On Monday, the Ab InBev-owned alcohol producer announced it had cancelled R2.5 billion in capital and infrastructure upgrades for 2020 and is reviewing another R2.5 billion for 2021. 

"The cancellation of this planned expenditure is a direct consequence of having lost (as at 3 August 2020) 12 full trading weeks, which effectively equates to some 30% of the SAB’s annual production," said South African Breweries' (SAB’s) Vice President of Finance, Andrew Murray, in a statement. 

Alcohol sales were prohibited as part of the country’s initial lockdown that started in late March. The ban was later relaxed, but was reintroduced in mid-July following a rise in trauma cases. 

Murray said the cancelled investments include upgrades to operating facilities and systems, as well as the installation of new equipment at selected plants.   

SAB said 120 000 people in South Africa's alcohol industry risk losing their jobs due to the ban. It added that the initial ban had cost the state about R12 billion in lost taxes.  

The state meanwhile, has said the ban is necessary to keep SA's hospitals free from trauma victims as Covid-19 cases rise. 

SAB is not the only alcohol producer to put its plans for upgrades on hold in light of the ban. Beer producer Heinken confirmed to Fin24 on Monday afternoon that it has also put plans for a R6 billion expansion in Durban on hold. The expansion was meant to create 400 jobs.

ZAR/USD
16.96
(-0.23)
ZAR/GBP
21.78
(-0.02)
ZAR/EUR
19.90
(-0.14)
ZAR/AUD
12.07
(+0.17)
ZAR/JPY
0.16
(-0.28)
Gold
1887.63
(-0.47)
Silver
23.86
(-1.52)
Platinum
877.01
(-0.48)
Brent Crude
41.31
(-3.06)
Palladium
2320.00
(+0.58)
All Share
54506.88
(-0.39)
Top 40
50319.94
(-0.51)
Financial 15
10003.88
(+0.72)
Industrial 25
73358.17
(-0.86)
Resource 10
54053.58
(-0.58)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Do you think it was a good idea for the government to approach the IMF for a $4.3 billion loan to fight Covid-19?
Please select an option Oops! Something went wrong, please try again later.
Results
Yes. We need the money.
11% - 1390 votes
It depends on how the funds are used.
73% - 8999 votes
No. We should have gotten the loan elsewhere.
16% - 1986 votes
Vote