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SAB cancels R5bn capex

SAB cancels R5bn investment in South Africa due to alcohol ban

The South African Breweries (SAB) says it has cancelled R2.5-billion of scheduled investments that were earmarked as part of its annual capital and infrastructure upgrade programme.

These funds were previously scheduled as part of its capital allocation programme for this financial year, while an additional R2.5 billion planned expenditure for the next financial year remains under review, the brewer said.

Brands in the group’s portfolio include Black Label, Castle Lager, Brutal Fruit, and Hansa.

“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 SAB’s vice president of finance, Andrew Murray.

“This decision is a result of the first, and current, suspension of alcohol sales which has led to significant operating uncertainty for ourselves, our partners, as well as colleagues in the industry, including participants in the entire value chain, and which impacts over one million livelihoods across the country.”

The investments that were being considered included upgrades to operating facilities and systems, as well as the installation of new equipment at selected plants.

SAB warned that its decision will also have an impact on the external supply chain companies that had been selected for these upgrades.

It is forecast that the jobs lost across the entire industry as a result of the alcohol ban will soon reach 120,000 people and the excise tax lost from the first ban is sitting at over R12-billion.

The jobs and financial losses magnify considerably when considering the severe impact the suspension is having on communities, as well as the downstream supply chain, including, farmers and other raw material suppliers, tavern owners, packaging and logistics companies, among many others that have had to immediately stop operations, and are facing dire consequences.

The many thousands of people that have now joined the significant number of South Africans already unemployed is of great concern, SAB said.

These vulnerable South Africans are not in a position to afford healthcare, services or products, and are therefore being placed at great risk in terms of being infected by Covid-19.

“As SAB we are focused on our priority of ensuring the well-being and safety of our employees and all members of our communities, and this commitment will remain intact for as long as possible.

“We will continue our attempts at engaging with the South African government to obtain some form of clarity on when we can resume operations,” said Murray.

Regardless of the decision to cancel capital expenditure, SAB said it will continue to implement measures that are having a meaningful impact on the health crisis and in support of South Africa’s much needed economic recovery.