SAB’s big-ticket expansion in KZN comes as welcome news after a torrid time for the brewer, reports Matthew Hattingh.
The booze business in KwaZulu-Natal these past few years has been about as appealing as one of those quarts you find near the braai come clean-up time on Saturday morning. You know the sort: two-thirds drained, with a cigarette butt floating somewhere near the bottom.
First, Covid with its sales bans and later restrictions on restaurant and tavern trading times kicked profits into touch. Next, in July last year, looters gave liquor retailers and distributors a multi-million rand kicking. Then, in April this year, more misery flowed as flooding mauled infrastructure.
South African Breweries, the industry’s biggest player and maker of popular beer brands Carling Black Label and Castle, and flavoured alcohol beverages like Brutal Fruit, has had a tough time of it.
SAB said the floods “severely damaged” its Prospecton brewery, in low-lying South Durban, and it was still tallying up the cost. It confirmed too that the July looting at its operations across the province left a trail of theft and destruction totalling about R80-million.
So, the recent announcement that the brewer intended spending R650-million expanding its operations at Prospecton comes as cheering news indeed. The expansion plan (made public before the floods) included an upgraded brewhouse and raw material silos and a new flavoured alcohol beverage blending plant.
Work at the brewery – originally established in 1973 – would take two years to complete and was expected to increase output to 7,5-million hectolitres a year. To put things in perspective, that’s the equivalent of 300 Olympic-size swimming pools of liquor. Prospecton accounts for one-fifth of SAB’s South African production by volume.
The company said the expansion would create direct full-time employment for 56 people. It would also mean training drives to improve the skills of workers on new processes. This was in addition to the more than 300 full-time workers the company already employed in KZN and the 57 beer truck owner-drivers operating with a collective crew of 151 employees.
With around 4 860 retailers and 400 suppliers across KZN, the brewer believed the investment held “enormous potential” for the business as well as for the province.
“We anticipate this expansion to further increase demand for raw materials, labour, utilities and equipment within the brewery, thus stimulating economic activity in our country, and in the province,” said Peter Thembane, SAB’s regional corporate affairs manager.
It would provide R3,1-billion in additional tax revenue and generate 24 000 jobs through the full value chain, SAB said. “Additionally, the investment would generate R4,4-billion in additional gross domestic product for the KwaZulu-Natal economy.”
On top of this, R270-million had been committed to upgrading the company’s Ibhayi Brewery in Port Elizabeth (renamed Gqeberha last year).
“These investments will give us the capacity to not only contribute to the economy but to be able to contribute to tax, excise and procurement spend. From province to province, we are committed to playing a pivotal role in working with government and social partners to continue helping South Africa grow,” said Thembane.
The Prospecton and Ibhayi investments, totalling R920-million, were announced at the fourth SA Investment Conference in March, when SAB chief executive Richard Rivett-Carnac spoke about the economic impact of the Covid-19 lockdowns.
He said it was SAB’s intention to assist with economic recovery. “The budget delivered by the Minister of Finance in February ensured that economic recovery was prioritised by keeping the beer excise adjustment closer to inflation. This has provided us with the financial space to grow the beer category responsibly and aid our government in our collective mission towards economic recovery and growth,” he said.
This new investment pledge followed SAB’s commitment to invest R2-billion into capital expenditure projects during its 2021 financial year.
As one of the country’s largest businesses – wholly owned by the JSE-listed global alcohol giant Anheuser-Busch InBev SA/NV – Rivett-Carnac said SAB played a significant role in igniting economic growth and recovery.
“Our position as an economic-driving, multinational corporation in South Africa means we are keen to play a role in working with our government and social partners to help South Africa recover and grow.”