BRUCE WHITFIELD: Why SAB and Heineken are hopping mad
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The announcement by the country’s two biggest brewers that they will cancel R11bn in capital expenditure should come as no surprise to the government which, despite mounting evidence of the economically destructive impact of the liquor ban, continues to outlaw the sale of alcohol.
The government is showing no sign of sensible compromise as it battles Covid-19. Its wholesale ban is based on the premise that it frees up much needed critical care facilities in public hospitals, which had an increase in admissions when government permitted the sale of alcohol after the five-week hard lockdown.
Foreign investors have long been wary of capital investment in SA. In January, for example, in a small room above the main plenary hall in Davos, a handful of foreign investors with interests in the country gathered to sound out the SA delegation, led by finance minister Tito Mboweni.
Among them was the finance director of Heineken, who added her voice to growing worries about the stability of the country’s energy supply. “Your power cuts really hurt us,” said Laurence Debroux. It was a message echoed by the few investors concerned about the future value of their capital. The feedback the firm received must have soothed its board’s concerns as it had further okayed expansion in the country.
Now, however, Heineken has pulled the plug on a new R6bn brewery at Inyaninga near the Dube TradePort. It would have been the multinational’s first big expansion since it built its first facility at Sedibeng a decade ago.
It’s not alone in withholding investment.
AB InBev has also cancelled R5bn in SA capital expenditure over the next two years.
The decisions will have long-term ramifications for not only their expansion, but will serve as a warning to other potential investors about the impact of government decision-making on their ability to get a return on risk capital.
The decision by the rival brewers, who between them make nine out of every 10 beers consumed in SA, comes as a direct result of the renewal of the alcohol ban, which has been in force for most of the lockdown, which began in March.
In addition, Heineken, the company which makes its flagship brand as well as Amstel beer and Strongbow cider, has also cut executive salaries at least until December amid continued uncertainty as to how long the ban on the sale of alcohol will last.
Without the prospect ...
The government is showing no sign of sensible compromise as it battles Covid-19. Its wholesale ban is based on the premise that it frees up much needed critical care facilities in public hospitals, which had an increase in admissions when government permitted the sale of alcohol after the five-week hard lockdown.
Foreign investors have long been wary of capital investment in SA. In January, for example, in a small room above the main plenary hall in Davos, a handful of foreign investors with interests in the country gathered to sound out the SA delegation, led by finance minister Tito Mboweni.
Among them was the finance director of Heineken, who added her voice to growing worries about the stability of the country’s energy supply. “Your power cuts really hurt us,” said Laurence Debroux. It was a message echoed by the few investors concerned about the future value of their capital. The feedback the firm received must have soothed its board’s concerns as it had further okayed expansion in the country.
Now, however, Heineken has pulled the plug on a new R6bn brewery at Inyaninga near the Dube TradePort. It would have been the multinational’s first big expansion since it built its first facility at Sedibeng a decade ago.
It’s not alone in withholding investment.
AB InBev has also cancelled R5bn in SA capital expenditure over the next two years.
The decisions will have long-term ramifications for not only their expansion, but will serve as a warning to other potential investors about the impact of government decision-making on their ability to get a return on risk capital.
The decision by the rival brewers, who between them make nine out of every 10 beers consumed in SA, comes as a direct result of the renewal of the alcohol ban, which has been in force for most of the lockdown, which began in March.
In addition, Heineken, the company which makes its flagship brand as well as Amstel beer and Strongbow cider, has also cut executive salaries at least until December amid continued uncertainty as to how long the ban on the sale of alcohol will last.
Without the prospect ...