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Consol’s on-again, off- again R1.5bn investment may be off again, if the alcohol ban bites

Business Insider SA
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Glass packaging company Consol may again review its R1.5 billion plans to build a furnace due to South Africa's latest booze ban.

  • Glass packaging company Consol may again review its R1.5 billion plans to build a furnace due to South Africa's latest booze ban. 
  • This comes after the government's decision to instate a total liquor sales prohibition of 14 days as South Africa struggles with a third wave of Covid-19 infections. 
  • The furnace would be the first built in the country since 2010. 
  • Future demand from alcoholic beverage makers and recovery in the economy will also influence the company's decision, it says. 
  • For more stories, go to www.BusinessInsider.co.za

South Africa's largest glassmaker Consol said it would reinstate its R1.5 billion plans to build a bottle plant after it paused it last August – but now, the company may shelve those plans again, depending on the impacts of the latest alcohol prohibitions.

The expansion of its glass production facility in Gauteng would've seen Consol construct the first furnace to be built in the country since 2010. 

"With regard to Consol's R1.5 billion capex project in Nigel, which was halted due to the impact of the previous alcohol bans, our investment decision will once again have to take cognisance of the extent of the latest alcohol ban and its impact on anticipated future demand,"  Mike Arnold, Chief Executive Officer of Consol Glass told Business Insider South Africa. 

In an address to the nation on Sunday, President Cyril Ramaphosa announced a 14-day total ban on liquor sales in a bid to limit trauma cases related to alcohol consumption amid a surge in Covid-19 cases, driven by the highly transmissible Delta variant first detected in India. 

The latest ban is the fourth since the start of the lockdown in March last year. 

The last three bans, which lasted a cumulative 4 months, cost the alcohol industry over R36 billion according to data by FTI Consulting's Economic Research Unit.

The alcohol industry contributes R173 billion, or 3.4% to the country’s GDP while the glass industry contributes over R11 billion. 

Arnold said the company's decision would also have to be influenced by the overall recovery of South Africa’s economy.

Last year, the glass industry, said it lost R8 million daily to keep its furnaces on during the alcohol bans. The industry is forced to keep the furnaces on or it risks damaging them permanently. 

Arnold said Consol's production levels will be dictated by demand from customers over the next two weeks.

"However, should the level 4 lockdown and associated alcohol ban extend beyond two weeks, this will again have financial ramifications for the glass packaging industry," he said. 

Earlier in the month, the company, which generates most of its income from its alcohol brewer customers, said it was reviewing its investment, citing a return of demand for glass bottles in December and sales back at pre-pandemic levels.

The decision also mirrored that of South African Breweries and one of Consol's biggest customers and their plans to invest R2 billion for its South African operations. The company previously cancelled R5 billion in planned investments due to the impacts of the alcohol bans.

With the country gripped by a third wave of infections, Arnold said while the company supports the temporary measures put in place to limit social interactions and ensure hospitals have enough capacity, total alcohol bans are not necessary.

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