/ 23 July 2020

The glass is half empty

Tavern Owners Association Photo Delwyn Verasamy
Glass ceiling: The ban on the sale of liquor is not only affecting tavern owners (above). Glass manufacturers sell about 85% of their products to the alcohol beverages industry. (Delwyn Verasamy/M&G)

The glass industry understands the health reasons for the alcohol ban, but views it as catastrophic for business. 

On July 12, President Cyril Ramaphosa announced the second ban on the sale of liquor to free up medical staff, beds and equipment for Covid-19 patients by reducing the number of admissions for alcohol-related trauma cases.

The industry says the decision to halt sales will see the alcohol industry losing billions of rands, which will result in job losses and hamper an already ailing economy. 

“The glass packaging industry as a whole stands to lose about R3-billion, which regrettably will take the industry to the cliff’s edge. This places more than 2 500 jobs at risk,” says Mike Arnold, chief executive of Consol Glass. 

The alcoholic beverages industry accounts for about 85% of sales in the glass packaging industry.

Arnold says the first lockdown and alcohol ban resulted in losses totalling R1.35-billion — R850-million in lost sales and R500-million in lost production. The company says it will lose more during the second ban.

The duration of the prohibition is a matter on the minds of everyone in the liquor business chain. Confusion was created on Wednesday when an incorrect message appeared on the government’s Twitter page — that the alcohol ban would last for the duration of the lockdown. A few hours later the tweet was corrected to read that the ban on the sale of alcohol ban is part of the level 3 regulations.

The prohibition does not affect alcohol companies only — other related businesses are also negatively affecting. 

The glass packaging industry contributes R11.8-billion to South Africa’s gross domestic product and provides more than 26 000 direct and indirect jobs, the income from which supports more than 50 000 people, says Arnold. 

Should the glass production industry close because many customers are no longer ordering supplies as a result of the ban, the South African economy would lose about R20-billion. The country would have to import glass packaging and other related products.

Arnold says the export of products such as wine, food and nonalcoholic beverages that use locally produced glass packaging contributes more than R11-billion to the South African economy, which will be lost if there is no local glass packaging industry.

Another contribution by the sector is the recycling of glass.

“The industry spends more than R500-million each year on waste glass collections from waste collectors, which accounts for some 7 000 people’s livelihoods”, Arnold says. 

 Shakes Matawaza, the owner of iSanti Glass, previously known as Nampak Glass, says the longer the ban is in place, the more severe the consequences will be, adding that it will take a long time for the sector to recover. 

Matawaza acquired 60% shares of iSanti Glass in April this year. He says the furnaces used to make glass products, cannot be switched off — “they run for 10 years”. 

The furnaces use a lot of power and have fixed energy costs. 

“It becomes difficult to run the business when your fixed costs are very high and the sales are not there,” Matawaza says. 

The business “depleted its financial resources” as a consequence of the first ban, and had to ask for assistance from the funders to start operating again. Matawaza says things were going well until the second alcohol ban was announced out of the blue. 

His worry is that if the prohibition goes on for much long, he will have to relook at the business, and that might result in cutting jobs. 

Arnold says the ban on alcohol says is a huge blow for the country’s economy, which was in a recession before the pandemic.

Instead of shutting down the entire alcohol industry, he said the restrictions under the lockdowns “should balance their impact on effectively mitigating health risks and saving lives with preserving the stability of the South Africa economy and people’s long term livelihoods”. 

Tshegofatso Mathe is an Adamela Trust business reporter at the M&G