Manufacturer Consol Glass has indefinitely suspended construction of a new R1.5-billion glass manufacturing plant in Nigel, Gauteng, owing to the reduction in demand for glass products.
The company attributed this reduced demand to the Covid-19 pandemic and government’s actions to slow its spread, including the ban on the sale of alcohol and restrictions on all on-premise consumption in the restaurant and hospitality industry.
The legal alcoholic beverages industry accounts for about 85% of sales in the glass packaging industry. On-premise consumption comprises about 55% of alcohol consumption volumes, and will be prohibited until level 2 of the lockdown.
The combined effect of Covid-19, the current alcohol ban, ongoing restrictions on on-premise consumption, and lost compound growth will see the South African glass industry decline by an estimated 15% over the next 12 months, Consol says.
The R1.5 billion project – on which construction had started – would have added 130 000 t of glass production to Consol’s capacity and would have repatriated imports of glass for Coca-Cola, Heineken and AB InBev.
The project was to create 120 direct jobs and about 2 600 additional employment opportunities across the value chain, from waste pickers to truck drivers, machine operators, glass machine operators, fitters, electricians and additional senior managers.
The expansion would have doubled the capacity of Consol’s existing Nigel factory, and would have required additional locally sourced raw materials including silica, lime, feldspar and cullet (recycled glass) and was expected to support new investments in the mining industry, says Consol.
Owing to this suspension, mould-manufacturing company, Ross Moulds, based in Wadeville, will also halt its capacity expansion programme, which would have seen the company expand its workforce by 25%.
Moreover, R800-million approved to rebuild and maintain Consol’s current furnace capacity and footprint in the country has also been put on hold pending clarity on market demand.
Consol says it is lobbying for government to provide certainty around the duration of the second alcohol ban to enable the industry to put in place appropriate mitigation measures.
South African Breweries (SAB) has also decided not to invest R2.5-billion in capital expenditure (capex) initially planned for this year and is reviewing a further R2.5-billion in capex planned for the following financial year.