As glass manufacturer Consol became the latest company to suspend planned investment due to the alcohol ban, the biggest players in the R140bn liquor industry are pushing for talks with the government on how to end the prohibition.
Consol’s decision to suspend construction of a new R1.5bn plant in Ekurhuleni, announced on Tuesday, came a day after SAB, owned by AB InBev, said it had cancelled R5bn in planned investments. Heineken has said it was rethinking its “expansion ambitions” in SA.
The moves come at a time when President Cyril Ramaphosa, who made attracting investment a centrepiece of his agenda when he took office in 2018, is facing criticism from the industry, which says the ban has already cost at least 100,000 jobs and R18bn in revenue. The local industry group, unlike peers in tobacco, says it wants to avoid a legal confrontation and is seeking dialogue instead.
“Legal action is something of a last resort, and we are not considering it right now,” SAB CEO Ricardo Moreira said during a liquor industry discussion on Tuesday. “There is a conversation [with the government] and we are discussing alternatives so there will be no need for legal action.
The liquor industry, which contributes 3% to SA’s GDP and supports 1-million jobs, was dealt a serious blow and left fuming in July when the government announced an immediate ban on alcohol sales to take the pressure off hospitals in its Covid-19 lockdown strategy. The companies dispute that alcohol-related trauma led to bed shortages.
Scientists advising the government have also spoken against the ban, which is costing the government an estimated R11bn a month in tax revenue at a time when its finances are stretched due to the pandemic. SA received a R70bn loan from the IMF last week to help it address coronavirus challenges.
“If we have a conversation we will always find a solution ... very few countries applied restrictions on alcohol trade [to deal with the health crisis]. We have to learn from other countries and base our decision on data and facts. Without collaboration there will be no solution,” said Moreira.
The industry proposed measures such as providing more resources to build field hospitals, improved law enforcement, education, and tackling the illicit market.
Consol Glass CEO Mike Arnold said in a statement that the decision to halt a project that the company had expected to create 120 direct jobs and about 2,600 along the value chain, was “clearly a tremendous disappointment” and would hurt the country’s industrial capacity. The legal liquor industry was by far the biggest customer and accounted for about 85% of sales in the glass-packaging industry.
Lucky Ntimane, convener of the National Liquor Traders Council, which represents the interests of taverns, said at the industry event on Tuesday that about half of taverns could not resume operations even if the ban was lifted. There were 34,500 taverns, mostly in the townships, contributing R40bn-R60bn a year to the economy.
Sean Robinson of the SA Liquor Traders Association said many traders were likely to go out of business because their trading licences were linked to valid leases, and some would be forced to write off expired stock.
SAB said on Monday that it was stalling R2.5bn in planned infrastructure upgrades this financial year, while planned investment of a similar amount for the next year had been placed under review. On Tuesday, Pick n Pay, which warned that first-half profits could halve, said trading restrictions on liquor and tobacco weighed on its performance.
At the weekend, scientists advising the government and health minister Zweli Mkhize on the Covid-19 response, suggested lifting the ban on liquor sales as it had achieved its objective. SA Medical Research Council president and CEO Dr Glenda Gray urged the government to be “nimble”.
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