SAB has revealed in court papers that the government has been informed that the conditions in the merger agreement between AB InBev and SABMiller have been suspended effective from the day the new alcohol ban was imposed at the end of December.
The conditions raised by SAB impact two key issues in SA — jobs in a country in which unemployment is at record highs, and investment, which is necessary to grow SA’s already ailing economy.
Specifically, the two conditions are the requirement that an aggregate headcount of 5,967 workers be maintained in SA; and that R1bn in local investment in the country be made in instalments of R200m over a period of five years from the merger agreement.
SAB, now a unit of AB InBev, has taken the state to court to have the regulations banning the sale of alcohol declared unlawful and of no force or effect as they are unconstitutional.
A third ban was introduced late in December in a bid to curb the spread of Covid-19. Alcohol sales were banned for months during the earlier part of SA’s lockdown, but restrictions were lifted as infection numbers eased.
SA is, however, in the midst of a pandemic surge and the ban was re-introduced in a bid to alleviate pressure on SA hospitals.
As part of SAB’s case, it has set out the consequences of the ban, which include warning the state of the risks to compliance with the conditions required for the merger agreement between the two alcohol giants, which was concluded late in 2016.
In the application filed in the Western Cape High Court on Wednesday, Richard Rivett-Carnac, a director of SAB, said in the founding affidavit that the company had written a letter to the Competition Commission dated December 4, which followed a process started in May 2020, saying there was a risk of non-compliance with the two conditions provided for in the $106bn (R1.635-trillion) merger between AB InBev and SA’s biggest brewer.
He said SAB submitted a proposal that these conditions be amended by way of an application to the Competition Tribunal, but there was no response to the letter. He said the risk to compliance with the two conditions, is caused directly by the ban.
To that effect, he said SAB informed government authorities in a letter dated January 4 that “its obligations have been suspended with effect from the date of the impugned regulations”.
Rivett-Carnac painted the dire economic consequences of the ban to the fiscus, which includes that it has cost the state approximately R4.5bn in tax revenue so far. He said job losses as a result of the two previous bans could amount to as many as 165,000, while SAB estimates that, on an annualised basis, R55bn was lost to SA’s GDP at market prices, about 1.2% of GDP.
He said another issue was that the ban threatened “SA’s most important trade treaty” — the economic partnership agreement with the EU. He said this is because SA is not importing alcohol form the EU now as a result of the ban.
Rivett-Carnac said the government did not consider the risk to trade deals in coming to its decision to ban alcohol. He also referred to the loss in investment the ban has led to. SAB was among a spate of companies in 2020 that either delayed or cancelled billions of rand in investment, citing uncertainty caused by the government’s ban on the sale of alcohol — a blow for President Cyril Ramaphosa, who made attracting foreign investment a central pillar of his economic strategy.
The AB InBev unit said in August that it was withdrawing R2.5bn of planned infrastructure upgrades for the 2020 financial year, while a planned investment of a similar amount for 2021 has been placed under review.
At the time, glass manufacturer Consol said it was suspending the construction of a R1.5bn production plant. Heineken, Europe’s largest beer company, stopped work on a R6bn brewery.
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