South African Breweries (SAB) has cancelled R2.5-billion of scheduled investments that were earmarked as part of its yearly 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 in planned expenditure for the next financial year remains under review.
SAB finance VP Andrew Murray explained on August 3 that the cancelation of the planned expenditure for this year is a direct consequence of having lost 12 trading weeks, which equates to some 30% of the SAB’s yearly production.
This decision is a result of the first, and current, suspension of alcohol sales, which has led to significant operating uncertainty for the company, its 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, says 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. This decision will also have an impact on the external supply chain companies that had been selected to undertake the 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, Murray lamented.
“The many thousands of people that have now joined the significant number of South Africans already unemployed is of great concern. 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,” he said.
Murray added that SAB was focused on its priority of ensuring the wellbeing and safety of its employees and all members of its communities. He confirmed that this commitment would 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.”
Regardless of the decision to cancel capital expenditure, SAB 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, Murray concluded.