South Africa’s alcohol ban sees Consol Glass halt US$87.1m plant construction project

SOUTH AFRICA – South African glass packaging manufacturer, Consol Glass has indefinitely suspended construction of a new R1.5bn (US$87.1m) glass manufacturing plant in Ekurhuleni, Gauteng, due to the reduction in demand for glass products driven by the Covid-19 pandemic and government’s ban on the sale of alcohol.

The alcoholic beverages industry in South Africa accounts for about 85% of sales in the glass packaging industry, which Consol expects to fall by about 15% over the next year, reports Business Live.

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“The ongoing ban of alcohol sales and restrictions of on-premise consumption results in massive future demand issues and lost confidence in these markets recovering,” Consol CEO Mike Arnold said.

The R1.5 billion (US$87.1m) project which had commenced construction would have added 130,000 tons of glass production to Consol Glass’s capacity and would have repatriated imports of glass for Coca-Cola, Heineken and ABInbev.

It was expected to create 120 direct jobs, and approximately 2,600 additional employment opportunities across the value chain, from waste pickers to truck drivers, computer numerical control machine operators, glass machine operators, fitters, electricians and additional senior managers.

The expansion would have required additional locally sourced raw materials including silica, lime, feldspar and cullet (recycled glass) and was expected to support new investments in the mining industry.

This announcement also means that Africa’s largest mould-manufacturing company, Ross Moulds, based in Wadeville, will halt its capacity expansion programme, which would have seen the company expand its highly skilled workforce by 25%, Consol said.

In addition, R800 million (US$46.5m) approved to rebuild and maintain Consol’s current furnace capacity and footprint in SA is on hold pending clarity on market demand.

“It is clearly a tremendous disappointment and a considerable loss to SA industrial capacity. It was a difficult decision to make, but unavoidable given the significant impact of the pandemic and the second ban on alcohol sales in SA,” said Arnold.

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“Had there been no alcohol ban, as in most other countries around the world who have dealt with the impact of the pandemic, our models indicate that demand would have reduced only slightly,” said Mike Arnold, CEO of Consol Glass.

The first alcohol ban resulted in losses of R1.5 billion (US$87.1m) to the glass packaging industry, and if the second ban continues without clarity on its duration, it will place at risk 25,000 direct jobs and hundreds of thousands of indirect jobs in the industry’s supply chain, the group said.

The cancellation of the Nigel project comes on the back of the recent announcement by Heineken that it has cancelled the construction of a R6 billion brewery near Dube TradePort in KwaZulu-Natal.

South African Breweries (SAB), subsidiary of AB InBev has also pulled the plug on billions of Rands in planned operational investments in South Africa.

The brewery has cancelled R2.5 billion (US$145.3m) in investments for 2020 and are reviewing another R2.5 billion (US$145.3m) for 2021.

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