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Consol warns of adverse losses should the alcohol ban continue

CEO Mike Arnold considers allowing retail sales for home consumption a first step towards the unbanning.

NOMPU SIZIBA: Bottle producer Consol Glass has continued to run its manufacturing operations and service clients during the third alcohol ban. But they’re warning that if the bank continues beyond the middle of February it could have adverse implications for their operations and the wider alcohol sector.

Well, to discuss the matter further I’m joined on the line by Mike Arnold, the CEO of Consol. Thanks very much, Mike, for joining us. Now, some people may ask why you don’t just shut down your operations during these alcohol bans, since the markets that you serve are inactive during these periods.

MIKE ARNOLD: Thank you. Well, just to clarify, in the first and second alcohol ban there were limited sales taking place, because 85% of our business is in the alcohol industry. The third alcohol ban – there’s no impact in our business right now, because most customers are expecting the alcohol ban to be lifted sometime in February, about February 15. So it is allowed, in terms of the legislation, to produce and fill alcohol, and put it into storage, into warehouses. So there’s no impact immediately on the on the glass industry.

But, of course, if the alcohol ban continues, then there will be an impact as orders dry up almost immediately. Then we’ll have to make a decision on how we run the business. Of course, furnaces are a continuous process. They need to be kept hot. And so those furnaces need to continue to run, whether you are producing or not producing, from a safety perspective.

NOMPU SIZIBA: Right. So, if the alcohol ban does continue beyond mid-February, of course you are warning that it will be very adverse for the sector, as well as for yourselves. And, as you’ve just mentioned, you’ll have to start making very significant decisions. What  sort of impact has this had on jobs, given that obviously it’s downtime at the moment?

MIKE ARNOLD: It’s lockdown time right now, but in the first and second alcohol ban we reduced production. We introduced salary and wage sacrifices across the business. Basically we lost 85% of our sales over that 12-, 13-week period. So that was the harm that the industry has suffered.  As I said, we have to keep out furnaces running. Of course, if it gets to an extended period of time, then you would look at actually shutting down operations – and that would then of course impact employment.

NOMPU SIZIBA: As a result of the previous alcohol bans, a couple of companies have decided to withdraw or cancel investment, and they include South African Breweries and Heineken. What sort of impact does that have on you? I do see that you cancelled a potential investment as well.

MIKE ARNOLD: The investment we cancelled was the new factory down in the south of Johannesburg – and the Nigel area. Essentially that was to add about 120 000 tonnes of capacity or about 15% of the total market. We cancelled that because clearly Covid, together with the alcohol ban, had had an impact on market demand as far as our customers are concerned, obviously their investment plans.

I think Heineken was going to put up a new brewery in the year, possibly in the KwaZulu-Natal region. And that of course is a lost opportunity, not only for glass, but for the entire value chain.

NOMPU SIZIBA: What does Consol mean to the ecosystem of the alcohol-beverages industry? I mean, what sort of role do you play and, if you were to minimise your role or completely disappear, what would it mean?

MIKE ARNOLD: Well, we contribute about R11.8/12 billion to the economy. Essentially that amount of money is the amount of glass packaging that we sell into the market, which then gets filled with the various alcohol products. That includes food, which is about 15% of our total business. Clearly if that packaging were not available, we would have to import that packaging, and that would have a direct impact on foreign-exchange requirements.

NOMPU SIZIBA: Yes, indeed. Now, given that the government has cited the need to relieve hospital trauma units of unnecessary accidents that tend to be induced by alcohol abuse, what do you think could have been a better way for the government to handle this situation, such that it doesn’t impact on companies like yourselves –and sectors like the whole alcohol sector – in the way that it has?

MIKE ARNOLD: I think if we are referring specifically to alcohol ban three, I don’t speak on behalf of all stakeholders, but I think everyone can get their head around limiting socialisation through the outright banning of alcohol over the new year period. So, in the short term I don’t think we have we have much to argue about that. But certainly in the medium term, beyond the 15th of February, outright banning of alcohol we think is both unreasonable and disproportionate.

We think retail sales of alcohol for home consumption should be allowed. We have no evidence to suggest that home consumption of alcohol will significantly increase hospitalisation and therefore impact on the capacity of hospitals, as well as the Covid-19 treatment.

NOMPU SIZIBA: As part of the industry or any of the bodies that represent you, are you in constant engagement with government, and are you hopeful that, come mid-February, indeed there will be a lifting of the ban, or what?

MIKE ARNOLD: Well, we are reaching out to the media and the various platforms to try and influence that decision. We are involved with the Alcohol Industry Forum, together with Business 4 South Africa [BSA], and indirectly through some informal discussions at the Nedlac level. But in essence we have written to Cogta  as well as the ETI [Employment Tax Incentive] and the President’s Office, setting out our position – as we’ve now articulated on this call. And yes, we fully expect that retail sales for home consumption would be the first step towards unbanning of alcohol consumption.

NOMPU SIZIBA: That was Mike Arnold, the CEO of Consol.

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South Africa needs to sort out its issues with booze, we’re now in a state which reminds me of school, when the entire class stayed late cause some pupils spoke during class.
Immature policy

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