SA’s booze ban is costing glassmakers R8 million a day, but they can’t turn off the furnaces
- Despite the alcohol ban killing demand for bottles, SA’s glass producers are forced to keep their furnaces running or risk permanent damage.
- This is costing them millions every day.
- Meanwhile, an oversupply of glass bottles is building, as companies run out of storage.
- For more stories, go to www.BusinessInsider.co.za.
Even as breweries cull orders for glass bottles because of the alcohol sales ban, South Africa’s glassmakers are forced to keep their furnaces running or risk permanent damage.
As a result, they are losing millions of rands every day – and are quickly running out of storage as glass stocks are building.
South Africa reinstated a total ban on alcohol sales in December in a bid to alleviate pressure on hospitals - burdened with trauma cases related to alcohol consumption - amid a rising number of Covid-19 cases.
Paul Curnow, deputy CEO of SA’s biggest glass packaging group Consol, says the industry spends R8 million a day to keep its furnaces on and to keep production running.
He says that furnaces must be kept running, as the molten glass solidifies in a matter of a couple of hours after being switched off, which will cause permanent damage to the furnace.
The alternative is to drain the glass, but that’s a lengthy and costly process and to drain 11 of the industry’s furnaces would cost billions.
“If you had to replace 11 of them, you would need R3 billion to rebuild the industry and we can’t allow that to happen,” Curnow said. Consol has had to halt a R1.5 billion project that would’ve seen it construct the first furnace to be built in the country since 2010. It has also redirected R800 million to the upkeep of its current furnaces.
The ban has also created a logistical nightmare, with Consol producing 3,000 tons and 7,200 pallets of glass per day. Its typical warehouse, which is the size of a soccer pitch, fills to capacity in about 3 days, Curnow said.
“Our problem is that when our customers [breweries] panic and they switch off their lines, we have nowhere for this glass to go.”
Chairman of glass producer Isanti Glass, Shakes Matiwaza, said an oversupply of glass and shortage of storage almost killed the industry during the first ban.
“We kept on running and what it meant is that we had to go out and get additional warehouses to store our glass. That means that our working capital gets tied up in storage and warehousing facilities that you’re acquiring. That’s unsustainable because you run out of money in no time (as) there’s no revenue coming in,” he said.
The glass packaging industry has cumulatively lost R1.5 billion during the first two alcohol bans, he says.
Last week, South African Breweries and one of Consol’s biggest customers cancelled an additional R2.5 billion rand of investment planned for 2021 following an initial R2.5 billion that the brewer cancelled in August.
Erik Smuts, CEO of Nampak, which also supplies the alcohol industry with mostly metal packaging, said while the ban has had a marginal impact on its business, sales for conical packaging have taken a hit.
The company supplies tamper-proof gable top cartons made from paper to sorghum beer producers.
“The alcohol ban has not affected us materially. We are still supplying the brewers (ABInbev etc.), but the sales of conical cartons into the traditional beer sector have taken a plunge, as their products are not for stock, but for almost immediate consumption in shebeens,” he said.
Receive a daily news update on your cellphone. Or get the best of our site emailed to you.
Go to the Business Insider front page for more stories.