By Ntando Thukwana for Business Insider SA
Even as breweries cull orders for glass bottles because of the alcohol sales ban, South Africa’s glassmakers are forced to keep their furnaces running or risk permanent damage.
As a result, they are losing millions of rands every day – and are quickly running out of storage as glass stocks are building.
South Africa reinstated a total ban on alcohol sales in December in a bid to alleviate pressure on hospitals – burdened with trauma cases related to alcohol consumption – amid a rising number of Covid-19 cases.
Paul Curnow, deputy CEO of SA’s biggest glass packaging group Consol, says the industry spends R8 million a day to keep its furnaces on and to keep production running.
He says that furnaces must be kept running, as the molten glass solidifies in a matter of a couple of hours after being switched off, which will cause permanent damage to the furnace.
The alternative is to drain the glass, but that’s a lengthy and costly process and to drain 11 of the industry’s furnaces would cost billions.
“If you had to replace 11 of them, you would need R3 billion to rebuild the industry and we can’t allow that to happen,” Curnow said. Consol has had to halt a R1.5 billion project that would’ve seen it construct the first furnace to be built in the country since 2010. It has also redirected R800 million to the upkeep of its current furnaces.
The ban has also created a logistical nightmare, with Consol producing 3,000 tons and 7,200 pallets of glass per day. Its typical warehouse, which is the size of a soccer pitch, fills to capacity in about 3 days, Curnow said.
“Our problem is that when our customers [breweries] panic and they switch off their lines, we have nowhere for this glass to go.”
Chairman of glass producer Isanti Glass, Shakes Matiwaza, said an oversupply of glass and shortage of storage almost killed the industry during the first ban.
“We kept on running and what it meant is that we had to go out and get additional warehouses to store our glass. That means that our working capital gets tied up in storage and warehousing facilities that you’re acquiring. That’s unsustainable because you run out of money in no time (as) there’s no revenue coming in,” he said.
The glass packaging industry has cumulatively lost R1.5 billion during the first two alcohol bans, he says.
Last week, South African Breweries and one of Consol’s biggest customers cancelled an additional R2.5 billion rand of investment planned for 2021 following an initial R2.5 billion that the brewer cancelled in August.
Erik Smuts, CEO of Nampak, which also supplies the alcohol industry with mostly metal packaging, said while the ban has had a marginal impact on its business, sales for conical packaging have taken a hit.
The company supplies tamper-proof gable top cartons made from paper to sorghum beer producers.
“The alcohol ban has not affected us materially. We are still supplying the brewers (ABInbev etc.), but the sales of conical cartons into the traditional beer sector have taken a plunge, as their products are not for stock, but for almost immediate consumption in shebeens,” he said.
In addition to the inevitable jobs and livelihoods lost due to the Government’s ban on alcohol, South Africa has also lost R13.3-billion in investments.
- SAB has put R5-billion worth of capital investment projects on ice
- South Africa’s largest brewery is cancelling R2.5-billion in investment for 2020
- An additional R2.5-billion in investment is being reviewed for 2021, due to the ban
- Distell has said that the industry had already lost 118 000 jobs, and projections showed that a nine-week ban now would cost another 84 000 livelihoods
- The tax loss from the first six-week ban on alcohol sales came to R15.4-billion
- If the current ban remains in place for nine weeks, another R13-billion would be lost
- Glassmaker Consol has suspended construction of a R1.5-billion glass manufacturing plant that it was due to build in Erkhuleni, Gauteng
- In additon, Consol has halted R800-million worth of furnace upgrades
- Consol maintains that the alcoholic beverages industry accounts for about 85% of glass sales, and that the South African glass industry will see a 15% decline over the next 12 months
- The new manufacturing plant would have added 130 000 tons of glass production to Consol Glass’s capacity
- It was anticipated to create 120 direct job and approximately 2 600 additional employment opportunities across the value chain
- Heineken, the world’s second-largest beer brewer, has shelved R6-billion in planned investment
- A new brewery was to be built on the KwaZulu-Natal north coast
- It was expected to create more than 400 permanent jobs
If you are the admin on a Facebook or WhatsApp group, you can be held vicariously liable for illegal cigarette and alcohol sales on that platform.
This is the warning from Megan Harrington-Johnson, managing partner at HJW Attorneys, who was speaking to Jacaranda FM.
The ban on alcohol and cigarette sales has drawn sharp criticism from many people who argue that it is doing more harm than good.
Apart from the lack of support from many citizens, it is also costing the country a lot of money in lost tax revenue.
SARS Commissioner Edward Kieswetter said the losses in tax revenue from beer and alcohol in April were around R1.5 billion.
Another consequence of the ban is the rapid rise of black-market sales of liquor and tobacco products.
The Witness reported that the ban on cigarette and alcohol sales has created a thriving underground market.
It is, however, not only criminals engaging in this illegal activity. Those supporting it, The Witness said, include normally law-abiding citizens and many professional people.
“Some tuck-shop and pub owners, and their connections, have formed WhatsApp groups advertising what they have in stock,” it said.
Warning from Harrington-Johnson
Harrington-Johnson warned people that, independent of their feeling towards the ban, it is currently law and people who break this law face harsh penalties.
She said it is worrying that people on social media are advertising alcohol and cigarettes for sale, which is illegal.
“It is currently illegal to trade in, transport, or sell alcohol or cigarettes,” she said.
If you are putting these adverts on your Facebook feed or WhatsApp group, you are contravening the lockdown regulations.
“If you are an admin of a Facebook group or a creator of a WhatsApp chat and you allow this content on your platform, you can be held vicariously liable,” she said.
She said all it takes is a screenshot sent to your local police station and you can be in very big trouble.
“Please be very careful. Educate yourself and make informed decisions,” she said.