South African Breweries rekindles hope for SA market, plans to invest US$147m in plant upgrades

SOUTH AFRICA – South African Breweries (SAB), subsidiary of AB InBev, has now walked back on its investment plans in the South African economy, announcing it has allocated R2 billion (US$147m) for its home operations.

This comes months after the maker of Castle Lager beer was forced to pull the plug on billions of Rands in planned operational investments in the country.

At the height of the COVID-19 pandemic in August 2020, the brewer withdrew a R2.5bn (US$164m) capital and infrastructure upgrade expenditure for the year, and later on in January 2021, cancelled investments amounting also to R2.5bn (US$164m) for 2021.

The capital injections were geared towards upgrade of operating facilities, product innovation, operating systems, as well as the installation of new equipment at selected plants.

The leading alcohol manufacturer highlighted that the decision to cancel the investments, was prompted by the challenging operating environment, regulatory uncertainty and surprise bans on alcohol sales in the country.

“The move to implement reasonable measures, as we continue to navigate the pandemic, is a welcomed signal that we can expect to see more consultation in the future and that blanket bans will be a thing of the past.”

Richard Rivett-Carnac – AB InBev’s vice president of finance, legal and corporate affairs for the rest of Africa

However, SAB has reviewed its operations over the last few months and decided to reinstate its investment programme by injecting R2 billion on a number of projects to be completed in the 2022 financial year.

The funding will be used for a number of upgrades to operating facilities, installation of new equipment at selected plants, product innovations and other necessary operating systems, Reuters reported.

However, it cautioned that the move was a show of good faith and that government should consult with the business sector ahead of any future bans.

“The move to implement reasonable measures, as we continue to navigate the pandemic, is a welcomed signal that we can expect to see more consultation in the future and that blanket bans will be a thing of the past,” said Richard Rivett-Carnac, AB InBev’s vice president of finance, legal and corporate affairs for the rest of Africa.

“Further collaboration will provide the required confidence boost needed in order to attract further investment to the country,” he said.

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The recent move by the SAB, gives the South African economy hope that players like Heineken will also re-embark on the construction of its R6 billion (US$344.9m) brewery in KwaZulu-Natal which was put on hold last year.

Despite the COVID-19 pandemic still ravaging on, SAB has taken the bull by its horn as the company recently launched its new B-BBEE scheme SAB Zenzele Kabili after maturation of its SAB Zenzele scheme.

SAB Zenzele which had a maturation value of R9.7 billion (US$716m) was scheduled to unwind in March 2020, with SAB Zenzele Kabili envisioned to launch shortly thereafter.

However, Covid-19 driven restrictions prevented the necessary shareholder scheme meeting from taking place, at which time beneficiaries would have voted regarding pay-outs and reinvestment options.

Owning R5.4 billion (US$399m) worth of shares in AB InBev, the world’s largest beer maker, the replacement scheme, SAB Zenzele Kabili has now been listed on the B-BBEE Segment of the Johannesburg Stock Exchange (JSE).

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