South Africa introduces new alcohol ban as COVID-19 cases escalate

The South African government has introduced a new alcohol ban as COVID-19 cases continue to rise. Scientists have warned that the new variant of COVID-19 sweeping across the country might be more resistant to current vaccines. The new alcohol ban is designed to free up capacity in hospitals but will hit alcohol companies hard.

South Africa moved to virus alert level 3 from level 1 from midnight on Monday 28th December until January 15th. It has detected a second and more infectious strain of the virus known as 501.V2 and reported a record 14,796 new infections on Christmas Day.

The Beer Association of South Africa has estimated that two previous alcohol bans in 2020 caused 7,400 job losses and lost beer sales of R14.2bn (US$946m). Market leader South African Breweries has noted that it lost 25% of its revenue in the year to date due to the alcohol ban. The company estimated it had lost 12 full trading weeks. Both it and Heineken have postponed major investments in South Africa.

Alcohol manufacturers are not the only companies feeling the pinch. South Africa has a curfew in place and during this pandemic has restricted the foodservice industry and limited consumer travel. This has hit restaurants, bars twice over: alcohol sales can account for as much as 60% of restaurant revenues, and travel limitations have restricted custom.

Grand Parade Investments (GPI), the master franchise holder for Burger King in South Africa is still trying to sell the franchise. Reports suggest that the COVID-19 HAS devalued it by R100m (US$6.8m). It has yet to find a buyer after a year long search.

Another area hit hard has been manufacturers of impulse products, such as chocolate countlines, sugar confectionery, snacks and gum. The dramatic change in working and travelling patterns has meant that consumption patterns have been radically altered too. In Google’s latest report on mobility, usage public transport was down 43% against the year prior, and visits to the workplace was down by 63%. By contrast, visits to residential properties were up 25%.

As in Europe and the US, the issue in South Africa is that the borders remain open and lockdowns have failed to prevent the COVID-19 virus re-emerging again. In the case of South Africa, Africa’s most-industrialized economy, some economists forecast that GDP may only regain pre-COVID-19 levels by 2025 and the economy remains intensely vulnerable to a resurgence of the pandemic. This is not the case in most sub Saharan African markets, where although the pandemic has affected the supply chain, it has largely reverted to business as usual.