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Tag: SAB

550 Workers Suspended at SAB due to Prohibition

South African Breweries (SAB) has suspended 550 temporary contract workers as the ripple effect of South Africa’s third alcohol ban is being felt throughout its beer value chain.  The SAB is also reaching  its maximum storage capacity at its nine brewing facilities.  In a statement on Monday the brewery said that it will continue to reduce production levels, as it navigates the unintended consequences of the prohibition.

The continued lack of trade and reduced storage capacity has led to a slowing down of production which, along with the uncertainty of the duration of the alcohol ban, has resulted in the decision to suspend 550 temporary contract workers.  Workers in the supply and logistics workforce will be most affected by the suspensions.

“The third alcohol ban has resulted in a reduced demand for the temporary workers skills, this is no fault of their own but rather a result of the current operating environment,” said Zoleka Lisa, vice president of Corporate Affairs at SAB.

“We realise the impact this decision will have on the 550 families who will sadly have to go without because of the reduction of production levels due to the suspension of sales.”

 

With Heineken already retrenching parts of its South African workforce, Lisa said that the company is doing everything in its power to avoid a similar outcome despite having to navigate an uncertain regulatory and policy environment.

“We are reviewing all measures available to us, but with minimal communication and engagement from government on timelines for the ban, this has made business planning, and the consequential impact, extremely difficult.

“Together with the broader industry we will continue in our attempts to engage government, ultimately to arrive at collaborative resolutions for a better sustainable future, which balances lives and livelihoods alike,” said Lisa.

“We have already cut overall staff salaries by 10%. We have already cancelled R5 billion in investments. We have reduced as much discretionary spend as possible, in order to deal with the uncertainty of subsequent bans and changes in regulations.”

With costs mounting, SAB called on the government to engage with the industry in an attempt to ‘achieve greater responsibility in decision making’.

“This has to be a truly collaborative effort on all fronts so that we can all work together as partners in our fight against the pandemic.

“SAB remains committed to supporting the nation’s fight and we are determined to play our part in ensuring that we continue to contribute positively to our country’s economic recovery and stability. But we strongly believe that a more balanced approach would be better in the long run,” Lisa said.

Counting the costs 

The Beer Association of South Africa (BASA) published data in December, which showed that previous alcohol bans and restrictions on the trade of alcohol saw an estimated 7,400 jobs lost, R14.2 billion in lost sales revenue, and more than R7.4 billion lost in taxes and excise duties in the beer industry alone.

The craft brewery sector was most affected, with over 30% of breweries shutting their doors and those that managed to stay open being forced to retrench staff.  SAB also announced that it has cancelled a planned R2.5 billion capital investment in South Africa. Competitor Heineken also announced that it would retrench around 7% of its local workforce due to the ban.

“The Covid-19 pandemic has had a material impact on many businesses and markets around the world,” Heineken said.

“It has been particularly devastating for the alcohol industry in South Africa, which has not been able to trade for almost 14 weeks in 2020 and is currently experiencing another ban on the sale of alcohol in 2021.

“The pandemic has also accelerated existing trends, requiring us to quickly adjust to ensure we can continue to support our customers and consumers given the increasing pace of change.”

Legal challenge

The cancellation of their investment comes after SAB  announced its plans to challenge the constitutionality of South Africa’s latest alcohol ban in court.

“After much consideration, SAB has decided to approach the courts to challenge the constitutionality of the decision taken and process followed by the National Coronavirus Command Council (NCCC) to re-ban the sale of alcohol,” it said.

“This legal action is the last resort available to SAB in order to protect our employees, suppliers, customers, consumers and all the livelihoods we support.”

“The damage to the South African economy and impact on the alcohol value chain arising from ban on the sale of alcohol is, in SAB’s view, disproportional and unlawful.”

News: SAB halts R5bn investments due to the ban on alcohol.

South African Breweries (SAB) announced on Monday that it had “halted” R5bn in investments in the country over the next two years because of the ban on alcohol sales, TimesLive reported.

SAB said it had cancelled R2.5bn in investments for 2020 and another R2.5bn was being reviewed for 2021.

The funds, according to the company, were previously scheduled as part of its capital allocation programme for this financial year, while an additional R2.5bn planned expenditure for the next financial year was now under review.

 “The cancellation of this planned expenditure is a direct consequence of having lost, as of August 3 2020, 12 full trading weeks, which effectively equates to some 30% of annual production,” said SAB’s finance vice-president, Andrew Murray.

“This decision is a result of the first, and the 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 affects over one million livelihoods across the country,” he said.

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

It said its decision would have an effect 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 tax lost from the first ban is sitting at over R12bn,” said SAB. 

“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.”

Murray added: “As SAB, we are focused on our priority of ensuring the wellbeing 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.”

SAB said regardless of the decision to cancel capital expenditure, it would continue to implement measures that had a meaningful impact on the health crisis and in support of the country’s much-needed economic recovery.

Photo Credit:Unsplash

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