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South African Glass packagers face R1.5Bn hit from Alcohol Ban

South Africa’s glass packaging industry could lose a further R1,5 billion (US$98 million) in sales if the latest ban on alcohol sales continues for long, the chief executive of glass bottle maker Consol said yesterday.

South Africa has recently banned alcohol sales for the third time as part of efforts to free up space for Covid-19 patients in hospitals burdened with alcohol-related injuries.

The first two bans together resulted in losses of more than R1,5 billion to the glass packaging industry, Consol chief executive officer Mike Arnold said in an emailed response to questions.

Arnold also warned of likely job losses at Consol and most parts of its supply chain, adding any major extended loss of demand, at short notice, was “catastrophic.”

The company, which supplies wine, spirits and beer bottles, is spending 8 million rand a day to keep production and furnaces running even as orders run dry, Arnold said, adding its debt was also piling up.

Consol is not yet suspending or cancelling investments, as this will depend on the duration of the ban.

It has, however, reallocated 800 million rand meant to rebuild and maintain its current furnace capacity and footprint at home towards maintaining operations during the lockdown.

The reallocation will result in Consol not being able to fund the repair of furnaces reaching end of asset life, even if glass demand recovers, Arnold said.

Last August, Consol indefinitely suspended construction of a new R1,5 billion glass manufacturing plant due to reduced demand.

South African Breweries, part of Anheuser-Busch InBev and a Consol customer, last Friday cancelled 2,5 billion rand of investment earmarked for 2021.

This, and likely similar moves by other customers, “are likely to have a medium-term knock-on effect on sales volumes, capital expenditure and the general financial stability of the business and our supply chain,” said Arnold.

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