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20 August 2020

Heineken and AB-InBev freeze investments in South Africa

South Africa | AB-InBev-owned SAB will no longer be investing ZAR 2.5 billion (USD 140 million) in its annual capital and infrastructure upgrade programme this year. Next year’s ZAR 2.5 billion capital expenditure is also under review.

The investments included upgrades to operating facilities and systems, as well as the installation of new equipment at selected sites.

With all breweries currently shuttered, Heineken confirmed on 4 August 2020 that it has stopped work on a ZAR 6 billion (USD 340 million) brewery near Durban, a project it announced last year. However, it will complete the expansion of its Sedibeng brewery near Johannesburg. With a market share of 18 percent, Heineken is a challenger to SAB.

This is not counting craft brewers, many of which are expected to go out of business altogether.

Per the website moneyweb.co.za, the freeze on investments is a consequence of the covid-19 lockdown-induced ban on alcohol sales. The first ban lasted from March until June and was renewed in July. The current ban is to run until the end of August.

Huge job losses

So far, the prohibition has cost AB-InBev about 30 percent of its annual domestic production, it was reported.

SAB estimates that the ban on alcohol production and sales will soon lead to about 120,000 job losses and a considerable drop in tax revenue. Between April and June alone, the government lost ZAR 5.5 billion (USD 310 million) in alcohol taxes.

During the last week of July, SAB and other alcohol industry leaders requested the government to review the South African Medical Research Council’s report that influenced its decision to ban alcohol sales again. The government had argued that the curb on alcohol sales during the lockdown had significantly decreased admissions to hospitals, where resources are needed to deal with covid-19 patients.

The alcohol industry said: “The incomplete nature of the data used in the modelling makes it difficult to accurately determine the extent of the link between trauma admissions and alcohol abuse.”