An entire industry shattered
No booze. That was the directive from government following the strict Covid-19 coronavirus lockdown imposed on South Africa in March.
It was meant to free up the emergency rooms of hospitals that were frantically gearing up for an expected tsunami of Covid-19 cases. According to the government, this has worked.
Hospitals all over the country have experienced dramatic drops in trauma cases and the numbers of alcohol-related admissions have decreased. But it has had a downside. The revenue service has reported losing hundreds of millions of rands from the ban on alcohol.
And both the alcohol and the glass industries, whose fortunes are intertwined, are taking major strain.
THE GLASS SECTOR
According to Mike Arnold, CEO of Consol Glass, “about 82% of sales of the glass container industry are to the alcoholic beverages sector”.
He told City Press: “The glass container industry contributes R11.83 billion in total to the national economy, which equates to 0.3% of South Africa’s gross domestic product. The glass container industry and related sectors employ about 26 300 people economy-wide (direct, indirect and induced).”
Arnold added that the effect of the lockdown and reduced sales for the glass packaging industry because of the extended ban on alcohol will be felt throughout the glass value chain.
“Under level 4, the glass container industry is able to return to 100% production under certain conditions,” he said.
“In reality, however, the majority of output from the industry is sold to the alcohol industry, which remains in lockdown under level 4 and will be highly restricted under level 3. Therefore, both level 4 and level 3 give the glass container industry little relief in terms of increasing output and/or sales to generate cash.”
Shakes Matiwaza, managing director of Isanti Glass, said: “Even under lockdown, our operating costs are very high as we have to keep the furnaces operating at a minimum of 50%. You can’t just switch a glass furnace on and off, so fixed costs such as energy and labour remain in place.
READ: Pressure mounts on government to lift ban on the sale of alcohol and tobacco
“The industry is spending more than R8 million a day just maintaining its assets, but with no sales, except for about 15% output that goes to the food industry. As a result, the financial reserves of the glass manufacturers are almost depleted. If we’re to recover, the ban on alcohol sales needs to be lifted as a matter of urgency.”
MONEY DOWN THE DRAIN
According to director of regulatory and public policy at South African Breweries (SAB), Hellen Ndlovu, “SAB produces 10 million litres of beer a day, 50 million a week and 250 million litres a month”.
“So far 1.7 million litres of beer have been disposed of (by 14 May 2020),”she told City Press.
“This is done at a rate of between 200,000 and 300,000 litres of beer a day over the past week. The longer SAB is not allowed to trade, the higher the number of beer to be dumped.”
Ndlovu said she was concerned by the impact the ban on alcohol was having on the economy, more so since “SAB’s value chain is wide-reaching”.
“Our entire supply chain has been affected by the alcohol ban,” she said.
BEER IN NUMBERS
250 million - The litres produced a month.
1.7 million - The litres that have been dumped
“Our supply chain incorporates a total of 3,739 suppliers of which 1 345 are small and medium businesses, supporting in excess of 140 000 jobs. In addition, our business sources agricultural inputs from more than 1 277 farmers of which 757 are emerging farmers. The longer we are unable to operate, the bigger the ripple effect.”
She added: “Revenue Service commissioner Edward Kieswetter alluded to the significant losses made to SARS as a result of this total ban on alcohol, which we estimate the immediate loss to the government in excise tax would be R500 million, as the state does not collect excise for unpacked beer.”
“This would literally be pouring that tax revenue down the drain, at a time when government – and the citizens of South Africa – have an urgent need for those funds.”
“To put the revenue loss in perspective: A loss of R285 billion in revenues would be larger than the R229.7 billion budget allocated for SA's health sector for 2020.”
Isanti Glass managing director Shakes Matiwaza said waste pickers like Samuel Makgetha and Daniel Mosia would be hard hit by the alcohol restrictions imposed during the nationwide lockdown.
He told City Press: “The lockdown has had a severe impact on the informal recycling industry as up to 90% of revenue has been lost by these guys up to this point, according to the FTI Consulting research. In turn, the economic well-being of the communities sustained by these collectors is at risk.”
“The alcohol industry contributes approximately 82 – 85 % to the glass industry revenues. It is the backbone of the glass container industry business. Without alcohol, the glass container industry in South Africa is not viable,” he said.
But the knock-on effects of the booze ban have affected those who live on the fringes of society the most.
South Africa’s thousands of recyclers are feeling the effects more than anyone else.
“I go through people’s bins as a way of making money to survive,” says Samuel Makgetha, who has been recycling as a source of income since 2007.
“The lockdown has definitely had a huge and negative effect not just on the items I now find in bins, but also on how much I find.”
Some have given up. Tokelo Kampong has stopped going to work.
“I know I won’t find a lot of what I want to collect. Items have reduced drastically since the lockdown. Even at the scrapyard, where I sell what I’ve collected, the amount they give me per kilogram has gone down. I’m guessing they, too, have felt the effects of the lockdown.”
As another recycler, Daniel Mosia, said: “No alcohol doesn’t just mean no alcohol – it also means no empty bottles, which in turn means less money for some of us. So alcohol can’t be all bad.”