South African drinks industry on brink of collapse

There are fears the drinks industry in South Africa will collapse following a third ban on alcohol in the country in the past 12 months.

The liquor industry is pleading with government to allow the sale of alcohol for off-site consumption in a bid to save more than 250,000 jobs, with about 30% of local breweries closing down permanently and fears many more will follow. The ban on the sale of alcohol was instituted to ease the pressure on the already overburdened health system battling the COVID-19 pandemic.

This week Heineken announced it will let go 70 of its 1000 employees as lockdown restrictions and alcohol bans bite. Last year the company cancelled a 6-billion rand investment to build a new brewery in South Africa.

Lucky Ntimane, Convenor of the National Liquor Traders Council, said President Cyril Ramaphosa should review the current regulations urgently.

“Since the lockdown began on 26 March 2020, the sector hasn’t received any financial assistance from the government. Government needs to take responsibility for the sector and support us in one way or another,” he said.

South African Breweries, part of ABusch InBev, has also cancelled a $US300million in investment in South Africa due to the bans.

“Given the material impact that this third ban on the sale of alcohol has on our business and the possibility of further bans, we have no choice but to halt these investments for the foreseeable future,” SAB’s Vice President of Finance, Richard Rivett-Carnac said in a statement.

The cancelled investments relate to upgrades to operating facilities, product innovation, operating systems as well as the installation of new equipment at selected plants, the brewer said.

“This decision will impact on the profitability of and number of jobs created by the companies that would have worked with SAB to execute the capital investment plans,” SAB added.

SAB is currently in court challenging the government’s decision to re-impose the ban.

Equal pain is being felt by South African vintners.

“The timing is unfortunate for those that rely heavily on direct sales to tourists and local holiday makers—it is usually a very busy time for direct sales from tasting rooms,” Anthony Hamilton Russell, of Hamilton Russell Vineyards in Hemel-en-Aarde, told Wine Spectator. “There are a lot [of wineries] that are still limping from the previous ban.”

Wine Spectator adds: “According to Vinpro and Wines of South Africa, two industry bodies that represent wineries domestically and internationally, the impact of a total of 14 weeks of bans on domestic sales so far, five weeks of restricted domestic sales, plus five weeks of bans on exports has been devastating to the wine industry. The groups estimate that the industry has already lost more than $US400 million since the first shutdown began. They also estimate that about 80 wineries and 350 grape growing operations will shut down and 21,000 people won’t have a job in the coming months, as a direct result of the alcohol bans.”

“The number of COVID cases has risen dramatically, and it makes total sense that the South African government would take severe measures to address it,” said Jim Clarke, US marketing manager for WoSA. “However, the industry has already suffered dramatically and has presented a number of alternative approaches that would help protect the industry and the 290,000 jobs it supports.”

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