SAB: No more booze bans
Brewer may lift R5bn investment freeze if given policy assurance
● South African Breweries (SAB), which has cancelled investment worth about R5bn in the country due to the impact of bans on alcohol sales, has said it would be willing to review its decision if the government provides long-term policy certainty and commits to no further bans in any future lockdowns.
The group, which is owned by AB InBev, is still pursuing legal action in the Western Cape High Court against the government in a bid to get a ruling on the unconstitutionality of such bans.
Asked in an interview if SAB would reconsider its decision on the cancellation of investments, Richard Rivett-Carnac, vicepresident of finance, legal & corporate affairs: rest of Africa, for the AB InBev Africa zone, said: “I think the short answer to that question is yes.”
He said if SAB received a “firm, binding commitment” from the government not to reintroduce the ban on the sale of alcohol, as well as more certainty about the long-term alcohol regulatory framework in SA, it would look again at the investments that are on ice.
He said the company understood that restrictions on people’s movements and on gatherings may be required, but it wanted an undertaking that an outright alcohol ban would not be reimposed.
Rivett-Carnac said the policy certainty referred to, among other things, laws regulating the industry and any changes to the way the sector operates.
He said the original commitment AB InBev made to invest R1bn over five years in SA as part of the merger with the then SABMiller in October 2016 remained intact and would be completed by the year-end.
“At the time of the merger, in 2016, we agreed to invest, as part of our public interest commitments, R1bn over the course of the next five years. We are now in the fifth year of that commitment.
“There were discussions last year while we were in lockdown with government about potentially cancelling some of that investment or postponing it. But where we are today, and if we continue to trade as we are at the moment, that commitment will be fulfilled by the end of the year.”
He said the R2.5bn investment that SAB cancelled in 2020, and a further R2.5bn it halted in January for 2021, were not part of the original commitment.
“The second set of investments is a business requirement that either is or isn’t needed. Given the lockdowns last year and bans, and that we weren’t trading, we made the decision not to invest further money to improve breweries or buy new production lines.”
He said this was “entirely linked to the lockdowns and the trading environment for us as a business, and also around policy and operating certainty in order to make those long-term material investments”.
“As you know, there are potential risks of further lockdowns if there are further waves of infections from Covid. Until we have certainty from government around further lockdowns and policy certainty, we don’t feel we are in a position to make those kinds of investment decisions.”
AB InBev released first-quarter results this week that showed a solid global performance with revenue rising 17.2%. Normalised profit attributable to shareholders was $1.013bn (about R14.26bn) in the first quarter of financial year 2021, compared with $845m in the first quarter of financial 2020.
SAB’s results are not published separately from its parent. But Rivett-Carnac reiterated previous disclosures about the effect of the lockdown restrictions and alcohol bans on the South African business.
“Last year the impact was devastating and we didn’t trade for months and months, so you can imagine a business of our size with our fixed-cost base, with zero revenue coming in, the impact was very material on our business last year. And this year we disclosed that volumes declined again after we were again locked down in January. The impact each time there is a ban is very severe.”
Zoleka Lisa, vice-president of corporate affairs at SAB, said: “In order to drive investor confidence, we really need to have certainty around policy infrastructure because investment is for the long term. If we are going to invest a further R5bn in expanding plants or building breweries, we need to know we can work in the country and have engagement with the government.”
As far as SAB’s court case launched early in January is concerned, Rivett-Carnac said the group was “waiting for judges to be nominated for the case and for a date from the judge president in the Western Cape”.
“We think it’s important that we have the case heard. There are many reasons but the main reason is there is no commitment from government not to ban alcohol again. If there are future waves, we would obviously like them not to do that because we disagree with the reasoning behind it.”
The department of co-operative governance & traditional affairs, responsible for overseeing lockdown regulations, and the department of health, which has led SA’s response to the pandemic, did not immediately respond to requests for comment.