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SEPTEMBER 2010

THE CONTRIBUTION OF SAB TO THE SOUTH AFRICAN ECONOMY

A STUDY CONDUCTED BY ECONEX AND QUANTEC RESEARCH FOR THE SOUTH AFRICAN BREWERIES LTD.

WORKING FOR SOUTH AFRICA

Key Highlights

The South African Breweries (SAB)

• SAB’seconomy-widecontributiontoSouthAfrica’sgrossdomesticproductamountedto

R66.2billionin2009or3.1% of the country’s GDP.

• Duringthe2009/2010fiscalyear,theNationalTreasuryreceivedR10.2 billion in tax

revenuedirectlyfromSABintheformofcorporatetaxes;itsemployeesviapersonal

incometax;andconsumersofbeveragesproducedbySABthrough,amongstothers,VAT

andexciseduties.Thisaccountedfor1.7%oftheSouthAfricangovernment’stotaltax

haulfortheyear.

• SABhasaworkforceof9390andsalesrevenueofR32billion.Whentheeconomic

multipliereffectsofSAB’soperationsarealsotakenintoconsideration,SABanditsvalue

chainsustainedmorethan355,000 jobs throughout South Africaandaddedan

estimatedR28billiontostatecoffersintermsofdirectandindirecttaxesduring2009.

• Inadditiontothetangibleeconomicbenefitsarisingfromthedeepemploymentlinkages

andeconomicoutputstimulatedbySAB,thecompanyalsoinvestsR60 million per

annum in responsible alcohol use campaigns and CSI activities. Italsoimplemented

aground-breakingbroad-basedblackeconomicempowermenttransaction,called

Zenzele, worth over R7 billionin2009.

The beer and liquor industry

• AnestimatedR94.2 billion (or 4.4%) of the country’s gross domestic product

(GDP)canbetracedbacktotheliquorindustry’smanufacturingoperationsandcapital

expenditure.

• Thedirectimpactoftheliquorindustryanditsfirstroundsuppliersontax revenue

is estimated at R19.5 billionin 2009,withahefty57%derivedfromtaxesonthe

productionandsaleofmaltbeer.

• Theliquorindustryemployedanestimated21,300 workersduring2009,andsupported

anadditional 66 000 jobsatfirstroundsuppliers.Approximately88%oftheemployees

intheliquorindustryanditsdirectsuppliersarefrompreviouslydisadvantaged

backgrounds,andtheagriculture,forestryandfishingsectorderivesthelargestdirect

benefit(intermsofemploymentopportunities)fromtheliquorindustry’soperations.

AstudyconductedbyEconexandQuantecResearchforTheSouthAfricanBreweriesLtd.

1

Executive summary 3

1 Introduction 7

2 The South African Breweries – South Africa’s premier beer producer 8

2.1 Heritage,operationsandkeyfinancialstatistics 8

2.2 EmploymentcreationatSAB 9

2.3 SAB’scontributiontogovernmenttaxrevenue 11

2.4 SAB–aresponsiblecorporatecitizen 12

3 The economic impact of The South African Breweries 14

3.1 Contributiontointermediateoutput 14

3.2 Capitalrequirement 16

3.3 Impactonemploymentcreation 17

3.4 Contributiontolabourincome 18

3.5 Contributiontogovernmenttaxrevenue 18

3.6 Impactonthegrossdomesticproduct 19

4 Broad overview of the South African liquor industry 21

4.1 Marketsegmentationandindustrysales 21

4.2 Internationaltradeperformance 24

4.3 Industrystructureandkeyplayersintheliquorindustry 26

4.4 Bolsteringgovernmenttaxrevenue 30

4.5 Employmentcreationandothereconomicimpactsoftheliquorindustry 32

4.6TherippleeffectsoftheliquorindustryinSouthAfrica 32

5 Concluding remarks 34

Appendix 1:Methodology 38

Appendix 2:TheimpactofSABontheSouthAfricaneconomy–2009 40

Appendix 3:TheimpactofSAB’sbeerinterestsontheSouthAfricaneconomy–2009 43

Appendix 4:TheimpactofSAB’ssoftdrinksinterestsontheSouthAfricaneconomy–2009 46

Appendix 5:TheimpactoftheliquorindustryontheSouthAfricaneconomy–2009 49

Appendix 6:TheimpactofthemaltbeerindustryontheSouthAfricaneconomy–2009 52

Appendix 7:Commodities/activitiesofthe2009SAMforSouthAfrica(QuantecResearch) 55

Table of contents

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Table of figures

Figure1: SAB’seconomy-widecontributiontogovernmenttaxrevenuetoppedR28billionin2009 6

Figure2: DivisionaldistributionofSAB’ssalesrevenue,2009/10 9

Figure3: SAB’semploymentdistributionbyskillslevelandrace,2009 10

Figure4: DistributionofSAB’staxesaccordingtotypeoftax 11

Figure5: Outputbyindustry–firstroundeffectsofSAB’soperationstotalledR21.8billionin2009 14

Figure6: Outputbyindustry–economy-wideeffectsofSAB’soperationsvaluedatR228billion 16

Figure7: Direct,indirectandinducedeffectsofSAB’soperationsonintermediateoutput 16

Figure8: ThevalueofcapitalstocksustainedthroughouttheeconomyasaresultofSAB’s

operationstoppedR121billionin2009 16

Figure9: Employmentbyindustry–firstroundeffectsofSAB’soperationstotalling37,095 17

Figure10: Employmentbyindustry–economy-wideimpactofSAB’soperationsestimatedat355,755 17

Figure11: Direct,indirectandinducedeffectsofSAB’soperationsonemployment 17

Figure12: Employmentbyskillandrace–economy-wideimpactofSAB’soperations 18

Figure13: Direct,indirectandinducedeffectsofSAB’soperationsonlabourincomeestimated

atR27.7billion 18

Figure14: Direct,indirectandinducedeffectsofSAB’soperationsongovernmenttaxrevenue

amounttoR18.1billion 18

Figure15: Direct,indirectandinducedeffectsofSAB’soperationsonGDPatfactorcost 19

Figure16: Marketsharebyliquorsegment 22

Figure17: Shareoftotalliquorsales(andSAB’sliquorsales)innominalGDPandconsumer

spendinginSouthAfrica,2009 22

Figure18: Growthinliquorsalesvsgrowthindisposableincome,2001-2009 23

Figure19: Keywineexportmarketsin2009(HS2204) 25

Figure20: Marketsharesofthekeyplayersintheliquorindustry,June2009toMay2010

(excludingsorghumbeer) 26

Figure21: Excisedutiesonliquoraccountedfor47%oftheR21billioninspecificexcisetax

collectedbygovernmentduring2009/2010 30

List of tables

Table1: ThecontributionofSAB,themaltbeerindustryandthetotalliquorindustrytothe

SouthAfricaneconomy 4

Table2: KeyperformanceindicatorsforSAB,April2009toMarch2010 9

Table3: SAB’sdirectemploymentandlabourremuneration 10

Table4: Skillscategoriesbyrace(2009) 11

Table5: ComparisonbetweenSAB’staxcontributionandtotalgovernmenttaxrevenue

(2009/2010taxyear) 11

Table6: TheimpactofSABontheSouthAfricaneconomy–2009 15

Table7: SAB’smultipliersandefficiencyratios 19

Table8: Industrysalesbyliquorcategory,2009 23

Table9: Liquorimportandexportperformance,2005-2009(Randmillion) 24

Table10:KeyplayersintheSouthAfricanliquorindustry 27

Table11:Rankingoftop30liquorbrandsbysalesvolumes 28

Table12:Specificexciseduties:2009/10vs2010/11 31

Table13:Exciseduties–Randperlitreofabsolutealcohol 31

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The contribution of SAB to the South African economy

• Withaworkforceof9,390,salesrevenueof R32billionandtaxcontributionsinexcessof R10.2billion(inclusiveofVATandexciseduties)in2009,SABistheleadingproduceranddistributorofalcoholicandnon-alcoholicbeveragesandoneofthelargestmanufacturingfirmsinSouthAfrica.However,thisinitialinjectionofeconomicactivitybySABisonlythetipoftheiceberg–whentheeconomicmultipliereffectsofSAB’soperationsarealsotakenintoconsideration,SABanditsvaluechainsustainedproductiontothevalueofR228billion,supportedmorethan355,000 jobs throughout South Africa and generated R27.6billioninlabourincomeduring2009. Inaddition,theeconomy-wideimpactofSAB’soperationssustainedcapitalstocktothevalueofR121billionduring2009,or2.4%ofSouthAfrica’stotalcapitalstock.

• ForeachjobofferedbySABanditsdirectsuppliers,6.7additionaljobsaresustainedintherestoftheSouthAfricaneconomy,ofwhichapproximately86% are for individuals from previously disadvantaged backgrounds.ThemajorityofjobopportunitiesgeneratedbySAB’svaluechainarelowskilledpositions(37%)orintheinformalsector(22%).SAB’snoteworthycontributiontoemploymentoflowskilledworkersshouldbeviewedpositivelygiventhehighunemploymentrateamonglowskilledworkersinSouthAfrica.

• Duringthe2009/2010fiscalyear,theNationalTreasuryreceivedR10.2 billion in tax revenue directlyfromSAB(corporatetaxes),itsemployees(personalincometax)andconsumersofbeveragesproducedbySAB(i.e.VATandexciseduties),accountingfor1.7%oftheSouthAfricangovernment’stotaltaxhaulfortheyear.TheamountoftaxrevenuegeneratedbySABinasingleyearisalmostequaltothetotalamount(R10.6billion)thatgovernmenthasspentsince

1992inelectrifying4.9millionhouseholds,5,000schoolsandallhealthclinicsinSouthAfrica.

• Thelargestproportion(53%)ofthetaxesderivedfromtheproductionandsaleofSAB’sproductscamefromspecificexcisetax.SAB’salcoholicbeveragesalesgeneratedexcisetaxtothetuneofR5.4billionduring2009/10,comprisingmorethanaquarterofallexcisetaxcollectedinSouthAfrica.

• WhenthegovernmentincomegeneratedbytheindirectandinducedimpactsofSAB’soperationsthroughouttheeconomyarealsoconsidered,thetaxrevenueaddedbySABanditsupstreamanddownstreampartnersincreasestoastaggeringR28billion(seeFigure1),or4.5%ofthegovernment’stotaltaxhaulduring2009.SAB’s

Executive summary

Thepurposeofthisstudywastoassessthedirect,aswellasthemultipliereffects,oftheTheSouthAfricanBreweriesonproduction,employment,labourremuneration,capitalstock,taxrevenueandthegrossdomesticproductinSouthAfrica.GiventheimportanceofthemaltbeerindustrytotheSouthAfricaneconomy,thisstudyalsoexplorestheoveralleconomicimpactofthissegmentoftheliquormarket,aswellasthecontributionofthetotalliquorindustrytoSouthAfrica.

•ExcisedutiesonliquortoppedR10billionduringthe2009/2010fiscalyear,representing47%ofallexcisetaxcollectedinSouthAfrica

•Themaltbeerindustryaccountsforanimpressive57%oftheliquorindustry’scontributiontoexciseduties

•Nearlyhalfofallthetaxrevenuegeneratedbytheliquorindustryin2009canbetracedbacktoSAB

Figure1:SAB’seconomy-widecontributiontogovernmenttaxrevenuetoppedR28billionin2009

30

25

20

15

10

5

0Economy-

wideInducedimpact

Indirect Firstround

suppliers

SAB

“Direct” impact

Ran

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illio

n

28.1 11.6

4.0

2.2

10.2

4

beerdivisionaccountedforanastounding48.5%ofthetaxrevenuegeneratedbythetotalliquorindustryin2009.

• SAB’seconomy-widecontributiontoSouthAfrica’sgrossdomesticproductamountedtoR66.2billionin2009,or3.1% of the country’s GDP.BasedonSAB’ssalesrevenueofR32.7billionin2009,

thecompany’sGDPmultiplierisestimatedat2.02,indicatingthatforeveryR1.00insalesrevenuegeneratedbySAB,R2.02isaddedtothecountry’sGDP.SAB’sbeerdivisionaccountsfor66%ofthecompany’stotalGDPinjection,and46%oftheeconomy-widecontributionofthetotalliquorindustry.

• InadditiontothetangibleeconomicbenefitsarisingfromthedeepemploymentlinkagesandeconomicoutputstimulatedbySAB,thecompanyalsoinvestsmorethanR60 million per annum in responsible alcohol use campaigns and CSI activities,andtabledaground-breakingBroadBasedBlackEconomicEmpowermenttransaction,SABZenzele, worth over R7 billion in 2009.Withastrongfocusonskillsdevelopment,entrepreneurshipandjobcreationthroughthestimulationofsmallandmediumsizedenterprises,SAB’sinitiativesaresupportiveof

Table 1: The contribution of SAB, the malt beer industry and the total liquor industry to the South African economy

SAB(Beer and Soft Drinks

Divisions)Total Malt Beer Industry Total Liquor Industry

Direct impact

Economy-wide impact

Direct impact

Economy-wide impact

Direct impact

Economy-wide impact

Intermediate output (at user prices)

Randbillion 76.5 228.4 60.3 169.8 115.5 332.7

Employment (number, including the informal sector)

Number 46,485 355,755 35,408 245,407 87,312 547,917

ShareoftotalemploymentinSA

0.4% 2.9% 0.3% 2.0% 0.7% 4.5%

Government tax revenue

Randbillion 12.4 28.1 11.2 22.8 19.5 41.8

ShareoftotalemploymentinSA

2.0% 4.5% 1.8% 3.7% 3.1% 6.7%

Value added (GDP) at factor cost

Randbillion 15.8 66.2 12.0 48.4 22.5 94.2

ShareofTotalGDPinSASA

0.7% 3.1% 0.6% 2.3% 1.0% 4.4%

Multipliers

Employmentmultiplier

7.7 6.9 6.3

GDPmultiplier 2.0 1.9 2.1

Source: Quantec Research

Includingallthemultipliereffects,SAB:•SustainedproductiontothevalueofR228billionthroughouttheeconomy

•Supportedmorethan355000jobs•GeneratedR28.1billioningovernmentincome(4.5%oftotaltaxrevenue)

•AddedR66.2billion(or3.1%)tothecountry’sgrossdomesticproductin2009

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thegovernment’sASGISAprogramme,aimedathigherandbroadersharedeconomicgrowth.

The ripple effects of the liquor industry in the South African economy

• ThevalueofproductionsupportedbytheliquorindustrythroughouttheSouthAfricaneconomyamountedtoanastonishingR332.7 billion during 2009,sustainingR173billionworthofcapitalstockinSouthAfrica(or3.5%ofthecountry’stotalcapitalstock).Themaltbeersegmentofthemarketmakesthelargestcontributiontointermediateoutputoftheliquorindustry,accountingfor51%ofthetotalindustry’seconomy-wideimpactonproduction;whileroughly45%ofthetotalvalueofproductionstimulatedbytheliquorindustrycanbetracedbacktotheeconomicimpactofSAB’sbeerdivision.

• Beer,wineandspiritsmanufacturersinSouthAfricaemployedanestimated21,300workersduring2009,andsupportedanadditional66,000jobsatfirstroundsuppliers.Approximately 88% of the employees in the liquor industry and its direct suppliers are from previously disadvantaged backgrounds,andtheagriculture,forestryandfishingsectorderivesthelargestdirectbenefit(intermsofemploymentopportunities)fromtheliquorindustry’soperations.However,thedirectemploymentimpact(i.e.byliquormanufacturersandtheirfirstroundsuppliers)onlyrepresentsafraction(16%)ofthetotaleconomy-wideimpactoftheliquorindustry–foreachjobofferedbytheliquorindustryanditsfirstroundsuppliers,5.3additionaljobsaresupportedintherestoftheeconomy.Inall,548,000 employment opportunities (or 4.5% of total employment in South Africa)canbedirectlyorindirectlytracedbacktotheproductionandsaleofliquor(ofwhichanestimated37%areintheretail,wholesale,cateringandaccommodationsectors).

SAB’soperationshaveparticularlyhighspin-offeffectsonemployment:•ForeachjobofferedbySABanditsdirectsuppliers,6.7additionaljobsaresustainedintherestoftheeconomy

•Themajorityofthepositionsareforlowskilledworkers

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• Thedirectimpactoftheliquorindustryanditsfirstroundsuppliersontax revenue is estimated at R19.5 billion in 2009,withahefty57%derivedfromtaxesontheproductionandsaleofmaltbeer.However,thetaxrevenuesarisingfromtheindirectandinducedimpactsthroughtheeconomyraisedthegovernment’staketoanestimatedR41.8billionin2009,or6.7%oftotalgovernmenttaxrevenue.SAB’sbeerdivisionaccountedfornearlyhalfofallthetaxrevenuegeneratedbytheliquorindustryduring2009.

• Thelion’sshare(59%)ofthetaxrevenuegeneratedbytheliquorindustrystemsfrom

indirecttaxessuchasexcisedutiesandVAT,followedbycorporatetax(24%).Accordingtoofficialexcisetaxstatistics,excisedutiesderivedfromtheliquorindustrytoppedR10billionduringthe2009/2010fiscalyear,representing47%ofallexcisetaxcollectedinSouthAfrica.Themaltbeerindustryaccountedfor57%(oranimpressiveR5.7billion)oftheliquorindustry’scontributiontoexcisedutiesduringthe2010fiscalyear.Consideringthatmalt beer sales account for roughly 51% of total liquor sales in alcohol by volume (ABV) terms,theexciseburdenonthemaltbeerindustryislargebycomparison.

• AnestimatedR94.2 billion (or 4.4%) of the country’s GDPcanbetracedbacktotheliquorindustry’smanufacturingoperationsandcapitalexpenditure.Theliquorindustry’sGDPmultiplierisestimatedat2.08,indicatingthatforeveryR1.00insalesrevenuegeneratedbytheliquorindustry,R2.08isaddedtothecountry’sGDP.Themaltbeerindustryisthelargestcontributortovalueaddedintheliquorindustry,accountingforanestimated51.4%(orR48.4billion)oftheliquorindustry’stotalGDPcontributionin2009.

• Inall,thefindingsfromthisanalysisreflecttheeconomicimportanceoftheliquorindustryinSouthAfrica.Theliquorindustry–andtheSouthAfricanBreweriesinparticular–isanindispensablesourceofgovernmenttaxrevenue,andhashighspin-offeffectsonproduction,employmentcreationandvalueaddedintheSouthAfricaneconomy.Inaddition,boththeGDP/capitalratioandthelabour/capitalratiooftheliquorindustrysuggestthattheliquorindustryismoreefficientinutilisingaunitofinvestmentcomparedtotheoverallSouthAfricaneconomy.

Includingallthemultipliereffects,theSouthAfricanliquorindustry:•SustainedproductiontothevalueofR333billion

•Supported548000jobs•GeneratedR41.8billioningovernmentincome(6.7%oftotaltaxrevenue)

•AddedR94.2billion(or4.4%)tothecountry’sgrossdomesticproductin2009

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However,thedirecteconomicimpactoftheliquorindustryconstitutesonlyasmallfractionofitstotalcontributiontotheSouthAfricaneconomy.Intheprocessofmanufacturing,packaging,marketinganddeliveringalcoholicbeverages,theliquorindustrystimulateseconomicactivitythroughouttheentirebeveragevaluechain,encompassingawiderangeofproducersandsuppliers(upstreamlinkages)andretailers,distributorsandthehospitalityindustry(downstreamlinkages).Theseupstreamanddownstreamactivitiesinthealcoholicbeveragevaluechaingenerateadditionalincomeandtaxrevenue,whichinturnisspentintheeconomy,inducingfurthereconomicbenefits.Thepurposeofthisstudyistogiveacredibleassessmentandmeasurementofthedirectcontributionoftheliquorindustry,andSABinparticular,totheSouthAfricaneconomy,aswellasitsindirectandinducedimpacts–alsoreferredtoasthemultipliereffect–onvalueadded(i.e.thegrossdomesticproduct),intermediateoutput(orproduction),employment,labourremuneration,capitalstockandtaxrevenueinSouthAfrica.

Thedomesticliquorindustrycanbroadlybeclassifiedintothemanufacturing(ordirectimportation)ofbeer,wine,spiritsandflavouredalcoholicbeverages.Themaltbeersegmentisbyfarthelargestsub-categoryoftheliquorindustry,withmaltbeersalesaccountingforapproximately51%oftotalliquorsalesvolumes(inalcoholbyvolumeterms).GiventheimportanceofthemaltbeerindustrytotheSouthAfricaneconomy,thisstudyalsoexplorestheoveralleconomicimpactofthissegmentofthemarket,aswellasthecontributionofSouthAfrica’spremierbeerproducer,SAB,totheSouthAfricaneconomy.Withfiveoutofthecountry’stopsixmostpopularbeerbrandsinitsstable–namelyCarlingBlackLabel,HansaPilsner,CastleLager,CastleLiteandCastleMilkStout–SABisSouthAfrica’sundisputedbrewmaster.ApartfromSAB’salcoholicbeverageinterests,thisstudyalsoconsidersthecontributionofABI–SAB’ssoftdrinksdivision–totheSouthAfricaneconomy.

ThestudywascommissionedbySABandconductedbyEconex(Pty)Ltd,withtheaidofQuantecResearch.SABprovidedthedataandotherinformationonthedirecteconomicimpactofSAB,

aswellasestimatesofliquorsalesvolumesandvaluebycategory,andtheseweresupplementedbyindependentresearchundertakenbyEconex. TheSocialAccountingMatrix(SAM)forSouthAfrica,developedandpublishedbyQuantec,wasmodifiedandemployedbyQuantectoestimatetherippleeffectsoftheliquorindustry,themaltbeerindustryandSAB’soperationsthroughouttheSouthAfricaneconomy.

Theeconomicimpactassessmentwasbasedonthelatestavailableannualdata–2009wasusedasthebaseyearforthemultipliercalculations.Giventheambitiousscopeofthisresearchproject,whichcoversbothcompanylevelaspectsandmultipliereffectsthroughouttheentirealcoholicbeveragevaluechain,withlimitedavailabilityofofficialdata,theresearchdoesnotpurporttobecomprehensive.Furthermore,inexploringthefootprintofSABinSouthAfrica,thefocusisontheoperationsofSABLtdinSouthAfrica,notthoseofitsmultinationalparentcompanySABMiller.

Chapter2describesSAB’soperations,employmentprofileanddirectcontributiontogovernmenttaxrevenueinmoredetail,whiletherippleeffectsofSAB’soperations,includingtheoveralleconomicimpactsofbothitsbeerandsoftdrinksdivisions,arepresentedanddiscussedinChapter3.Chapter4providesabroadoverviewoftheliquorindustry,considering,amongothers,itsstructure,keyrole-playersandindustrysales.Chapter5concludes.Appendix1detailsthemethodologyemployedtoquantifytheeconomicimpactoftheliquorindustryandSAB’soperationsinSouthAfrica.

1. Introduction

TheSouthAfricanliquorindustryhasdevelopedintoamajorforceintheSouthAfricaneconomy,providingemploymentandincometothousandsofhouseholdsandmakingasubstantialcontributiontoexportearningsandgovernmenttaxrevenue.

ThepurposeofthisstudyistogiveacredibleassessmentandmeasurementofthedirectcontributionofSABtotheSouthAfricaneconomy,aswellasitsindirectandinducedimpactsonvalueaddedintermediateoutput(orproduction),employment,labourremuneration,capitalstockandtaxrevenueinSouthAfrica

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2. The South African Breweries Limited – South Africa’s premier beer producer

2.1 Heritage, operations and key financial statistics

Foundedin1895,TheSouthAfricanBreweriesLimited(SAB)hasbeenSouthAfrica’spremierliquormanufacturerformorethanacentury.Withfiveoutofthecountry’stopsixmostpopularbeerbrandsinitsstable–namelyCarlingBlackLabel,HansaPilsner,CastleLager,CastleLiteandCastleMilkStout–SABisSouthAfrica’sundisputedbrewmaster.SABoperatessevenbreweries,withanannualbrewingcapacityof3.1billionlitres,and40depotsinSouthAfrica.Itboastsabrandportfoliooftenbeersandfiveflavouredalcoholicbeverages.UponitsacquisitionoftheUS-basedMillerBrewingCompanyin2002,SABbecametheSouthAfricansubsidiaryofSABMillerplc(SABMiller),theworld’ssecondlargestbrewerbyvolumeandoneofthelargestcompanieslistedontheJohannesburgStockExchange(accordingtomarketcapitalisation).1 Today,SABMilleremploysmorethan70,000peopleacrosssixcontinents,manufacturesinexcessof200brandsandsells213millionhectolitresofbeerperyearin75countriesaroundtheglobe.

SAB’ssoftdrinksdivision,AmalgamatedBeverageIndustries(ABI),isoneofthelargestproducersanddistributorsofCoca-Colabrands(e.g.Coca-Cola,Tab,FantaandSprite)inthesouthernhemisphere.Withfiveultra-modernproductionplantsinSouthAfrica,ABIaccountsforapproximately60%ofCoca-Cola’ssalesinSouthAfrica.2ABIalsohasanagreementwithAppletiserSouthAfrica(Pty)Ltd–awhollyownedsubsidiaryofSABMiller–todistributeandselltheirproductsinSouthAfrica.ABIoperatesprimarilyacrosstheuppercentralregionofSouthAfrica–fromtheKwaZulu-NataleastcoastthroughGautengandwestofRustenburgintheNorthWest–andmanufacturesanddistributes28brandsand 20packsizesofcarbonatedsoftdrinks,energydrinks,bottledwaterandfruitjuices.

Apartfromitsbeerandsoftdrinksdivisions,SABalsohasitsownhopsproductioncompany–TheSouthAfricanBreweriesHopFarms(Pty)Ltd(SABHF);thebarleymaltingcompanySABMaltings;3a60%shareofthemetalcrownmanufacturerColeusPackaging;anda30%stakeinDistell,oneofSouthAfrica’sleadingwineandspiritsproducers.

Duringtheirlastfinancialyear,SABproduced 2.46billionlitresofbeer,1.64billionlitresofnon-alcoholicbeverages(soldthroughABI)and90millionlitresofflavouredalcoholicbeverages,generatingsalesrevenueofR32.99billion.4Figure2showsthedivisionaldistributionofSAB’ssalesrevenue–

1SABMillerisalsolistedontheLondonStockExchange.2ABIwasestablishedin1976andhashadafranchiseagreementwiththeCoca-ColaCompanytomanufactureanddistributeCoca-Colabrandsforthelastthreedecades.3SABholdsalltheordinarysharesinSABMaltings,whileCaledonRiviersonderendKo-operasieBeperkownsallthepreferenceshares.4AlthoughSABhasa30%stakeinDistell,Distellfigureswerenottakenintoconsiderationwhencalculatingthesales,employment,taxoranyotherSABfiguresreportedinthisstudy.

SAB at a glance

7 Breweries

40 Depots

6 Bottlingplants(ABI)

14 Independentdistributors

2 Maltingplants

1 Hopproductionplant

R7bnValueofSAB’sBBBEE“DealoftheYear”,SAB Zenzele

R60m+SAB’sannualinvestmentinCSIandresponsiblealcoholusecampaigns

R2.9bnAmountinvestedbySABinitsowner-driverprojectsinceinception

287 Independentowner-drivers

74% %ofbeerdeliveredbyowner-drivers

22,936SouthAfricansprovidedwithbusinessskillsthroughKickStartprogramme

280,000 TonsofbarleyprocuredbySABannually

160,000 TonsofmaizeprocuredbySABannually

Duringthe2009/2010fiscalyear,SAB:• Produced2.46billionlitresofbeer,1.64billionlitresofnon-alcoholicbeveragesand90millionlitresofFABs

• GeneratedsalesrevenueofR33billion,accountingfor56.3%ofthetotalvalueofproductionbythebeveragemanufacturingindustryinSouthAfrica

• InvestedR2.6billioninthesalariesandwagesofits9,390employees

• AddedR10.2billiontostatecoffersintermsoftaxrevenue,comprising1.7%ofgovernment’stotaltaxhaulfortheyear

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SAB’sbeerdivisionaccountedforcloseon70%ofthecompany’ssalesrevenueduringitslastfinancialyear.AccordingtoStatisticsSouthAfrica,beveragemanufacturingsalestotalledR58.56billionduringthe12monthsbetweenApril2009andMarch2010period,givingSABashareof56.3%inSouthAfrica’stotalbeveragemanufacturingsector. MeasuredoverSAB’s2009/10financialyear,SAB’sdirectcontributiontothetotalmanufacturingsectorwasestimatedat2.8%.5Throughcontinuedinvestmentsinpeopleandbrands,thesalesofSAB’sbeerdivisionprovedresilientinthefaceoftheglobalrecessionandincreasedcompetitioninthedomesticliquormarket.Incontrast,SouthAfrica’sbroadermanufacturingsectorwashardhitbytherecession,contractingby11.9%overthesameperiod.

AnumberofkeyperformanceindicatorsforSABarepresentedinTable2.WithanattributableprofitofR2.9billion,thebeerdivisioncontributed67%toSAB’stotalprofitsinthe2009/10financialyear.Furthermore,thebeerdivision’sprofitwasupby2.4%comparedtothepreviousfinancialyear,despitedifficulttradingconditions,andSABdeclaredordinarydividendstoequityshareholderstothevalueof R3.99billion.SABaddedatotalofR10.21billiontostatecoffersinits2009/10financialyear,ofwhichR1.7billionwasintheformofcorporatetaxes, R2.3billioninvalueaddedtax(VAT)andR5.4billioninexciseduties.CapitalexpenditureamountedtoR1.6billion,whilecorporatesocialinvestmentequatedtoR21.1millionin2009/10.

2.2 Employment creation at SAB

SABcurrentlyemploys9,390people,with 5,602(or60%)ofallSABemployeesworkinginSAB’sbeerdivision.AccordingtotheMarch2010QuarterlyEmploymentStatistics(QES)reportfromStatisticsSouthAfrica,thebroadermanufacturingsectoremployed1.2millionpeopleduringthefourthquarterof2009–SABthereforeaccountedfor0.8%oftheworkersinthemanufacturingsector.(Themanufacturingsectorisoneofthelargestsectors

5StatisticsSouthAfricaestimatedthattotalmanufacturingsalesamountedtoR1.2billionduringtheApril2009toMarch2010period(Source:Manufacturing-ProductionandSales,P30441.2,StatisticsSouthAfrica).

Figure2:DivisionaldistributionofSAB’ssalesrevenue,2009/10

Source: SAB

BeerdivisionR22.7billion(69%)

Other(egSABHF,SABMaltingsandColeus)R246million(1%)

SoftdrinksdivisionR10.1billion(30%)

Table 2: Key performance indicators for SAB, April 2009 to March 2010

(Rand millions) Beer division Soft drinks division SAB Ltd

Salesrevenue 22,653 10,087 32,986

EBITA* 4,337 1,535 5,906

Taxation(corporatetaxonly) 1,247 431 1,686

Other: Excise duties 5,394 - 5,394

Value added tax (VAT) 1,852 446 2,298

Attributableprofit(aftercorporatetax) 2,908 1,145 4,345

Ordinarydividendonequityshares 2,699 1,127 3,994

Capitalexpenditure 1,076 566 1,642

Corporatesocialinvestment 15.3 4.3 21.1

*Earnings before interest, tax and amortisation; Source: SAB

10

inSouthAfrica,accountingfor1in7ofalljobsinformalnon-agriculturalindustries.)

InlightofthetryingeconomictimesanddramaticjoblossesseenthroughouttheSouthAfricaneconomysincetheonsetoftherecession,SABistobelaudedfornotsuccumbingtothepressuretocutcostsbyretrenchingworkers.AccordingtotheQES,totalemploymentintheformalnon-agriculturalsectordeclinedby4.1%betweenDecember2008andDecember2009,while7.1%ofthejobsinthemanufacturingsectorweredestroyedoverthesameperiod.Insharpcontrast,SABincreaseditslabourforceby2.7%,creatingemploymentopportunitiesforanother250workersduring2009.6

EvenmoreimpressiveistheremunerationthatSABoffersitsworkers.Whereastheaveragemonthlywage,includingbonusesandovertime,inthemanufacturingsectorcameinatR9,178during2009(andR10,237forallformalsectorworkersinSouthAfrica),theaverageSABemployeeearnedR23,307permonthduring2009(seeTable3).Thisisequaltoroughlytwoandahalftimestheaveragewageinthemanufacturingsector.Apossibleexplanationforthistrendisthat52%ofthepeopleworkingatSABareclassifiedaseitherskilled7orhighlyskilled8individuals–skillsgroupsthatnaturallyearnhighersalaries(seeFigure3).However,itshouldbenotedthateventhe“relativelylower”remuneratedsemi-andunskilledworkersatSABearnanaveragemonthlyincome(R11,981)thatissignificantlyhighercomparedtotheaverageSouthAfricanworker,includingallskillsgroups.In2009,theaverage

workeremployedintheformalnon-agriculturalsectorsofSouthAfricaearnedR10,237permonth–15%lessthaneventhesemi-andunskilledemployeesatSAB–whiletheaverageworkerinthemanufacturingindustryearned23%lessthantheaveragesemi-andunskilledemployeeatSAB.Inall,SAB’sworkforcecanthereforebesaidtobewell-remuneratedintheSouthAfricancontext.

Figure3showsthedistributionofSAB’slabourforcebyskillslevelandrace.MorethanthreequartersofSAB’semployeesarefrompreviouslydisadvantagedracegroups,and58%ofitsworkersareblack.Evenatthehighlyskilledlevel,workersfrompreviouslydisadvantagedbackgroundsaccountforalmosthalfofSAB’semployees(seeTable4).

6ThenumberofpermanentemployeesandtraineepositionsatSABincreasedfrom9,139inDecember2008to9,390inDecember2009.7Skilledemployeesincludetechnicalandacademicallyqualifiedworkers,juniormanagement,supervisors,foremenandsuperintendents.8Highlyskilledincludestopmanagement,seniormanagementandprofessionallyqualifiedandexperiencedspecialistsandmid-management.

Black58%

White24%

Asian/Indian10%

Coloured8%

Semi-and

unskilled48%

Skilled32%

Highlyskilled20%

Figure3:SAB’semploymentdistributionbyskillslevelandrace,2009Figure 1 Figure 2a

Figure 2b Figure 3

Figure 4 Figure 5

Figure 7 Figure 8

Figure 1 Figure 2a

Figure 2b Figure 3

Figure 4 Figure 5

Figure 7 Figure 8

Table 3: SAB’s direct employment and labour remuneration

2009

Numberofemployees 9,390

Labourremuneration(Rmillion) 2,626

Averageannualwage(R) 279,691

Averagemonthlywage(R) 23,307

Averagemonthlywageintotalmanufacturingsector*(R)

9,178

SAB’saveragewageas%ofaveragemanufacturingsectorwage

254%

Source: Statistics South Africa, Quarterly Employment Survey, March 2009 to December 2009 (4 quarter average of monthly earnings including bonuses and overtime)

Source: SAB

11

2.3 SAB’s contribution to government tax revenue

Eachyear,theSouthAfricanBreweriesmakesasignificantcontributiontogovernmenttaxrevenue,notonlyintermsofcompanytax,butalsoasaproducerofgoodsthatcarryexcisedutiesandvalueaddedtax(VAT),andasaproviderofemployment(i.e.generatingpersonalincometax).Inthe2009/2010fiscalyear,SABanditsemployeescontributedR10.22billiontostatecoffers,or1.7%oftheSouthAfricangovernment’stotaltaxhaulfortheyear(seeTable5).Thelion’sshare(53%)ofthetaxesderivedfromtheproductionandsaleofSAB’sproductscamefromspecificexcisetax(seeFigure4).ThesaleofalcoholicbeveragesbySAB’sbeerdivisiongeneratedexcisetaxtothetuneofR5.4billionduring2009/10,representingjustoveraquarterofallexcisetaxcollectedinSouthAfrica.

SABcontributedR1.8billiontostaterevenuein theformofcorporatetaxesin2009/10,accountingfor1.2%ofallcorporatetaxescollectedin SouthAfrica,whilethecompany’semployeespaid

R670millioninpersonalincometaxes.Althoughitisultimatelytheconsumerthathastofootthebill,itisalsoinstructivetoconsidertheVATincomethatgovernmentreceivesfromthesaleofbeer,flavouredalcoholicbeveragesandsoftdrinksproducedbySAB.Approximately1.6%(orR2.3billion)oftheVATrevenuegovernmentreceivedin2009/10wasacquireddirectlyfromthesaleofSAB’sproducts.

Table 4: Skills categories by race (2009)

Black ColouredAsian/ Indian

White TotalPDI % of total

Black % of total

Highlyskilled 421 142 331 980 1,874 47.7% 22.5%

Skilled 1,514 339 253 894 3,000 70.2% 50.5%

Semi-andunskilled 3,560 255 346 355 4,516 92.1% 78.8%

Total 5,495 736 930 2,229 9,390 76.3% 58.5%

Source: SAB

Table 5: Comparison between SAB’s tax contribution and total government tax revenue (2009/2010 tax year)

Rand million SABGovernment tax revenue

SAB % of government tax revenue

Specificexcisetax 5,394 21,000 25.69%

CompanytaxandSTC 1,779 146,500 1.21%

VAT 2,298 146,500 1.57%

SITE/PAYE 670 203,500 0.33%

Other 78 72,925 0.11%

Total taxes and levies 10,219 590,425 1.73%

Source: SAB Tax department and National Treasury, Budget Review 2010, p 73 (Revised 2009/2010 government tax estimates)

Figure4:DistributionofSAB’staxesaccordingtotypeoftax

Source: SAB

Figure 1 Figure 2a

Figure 2b Figure 3

Figure 4 Figure 5

Figure 7 Figure 8

Specificexcisetax53%CompanytaxandSTC17%VAT22%SITE/PAYE7%Other1%

12

VATaccountsfor22%ofallthetaxespaidbySAB.Apartfromtheabovementionedtaxes,thecompanycontributedanotherR78milliontotheNationalTreasuryintheformofmunicipal,RSCandskills/traininglevies.

Inall,taxesontheproductionandsaleofSAB’sproductsamountedtoR10.21billionintheyearendedMarch2010–effectivelymorethanenoughtofinanceboththegovernment’splannedComubiahousingdevelopment(19,313mixed-incomehousesplannedfor2016/2017atacostofR5.1billion)andtheN2Gatewayproject(22,000low-incomehomestobefinishedby2013atacostofR2.3billion).9 Fromanotherperspective,theR10.2billioncollectedfromSABin2009/10wouldalsohavebeensufficienttofinancetheconstructionofSoccerCityStadium–thebiggestall-seatedstadiumeverbuiltforanyFIFAWorldCupfootballevent–theGreenPointStadiuminCapeTown,Durban’sMosesMabhidaStadiumandthePeterMokabaStadiuminNelspruit.Alternatively,SAB’staxcontributionalsocomesclosetothetotalamount(R10.6billion)thatgovernmenthasspentsince1992onelectrifying4.9millionhouseholds, 5,000schoolsandallhealthclinicsinSouthAfrica.10 InlightofthefactthattheNationalTreasuryderivessuchasubstantialamountofincomefromallthedifferenttaxesleviedontheproductionandsaleofasinglecompany’sproducts,SABcanbedescribedas

akeyassetandimportantsourceofstaterevenueinSouthAfrica.

2.4 SAB – a responsible corporate citizen

InadditiontothetangibleeconomicbenefitsarisingfromSAB’sbeerandsoftdrinksoperations,SABalsoinvestslargeamountsinawiderangeofcorporatesocialinvestmentactivities,ground-breakingblackeconomicempowermentinitiativesandresponsiblealcoholusecampaigns.SABhaslongplayedaroleasoneofSouthAfrica’smostsociallyprogressiveandinnovativeenterprises.Thecompanylooksbeyondtraditionalbusinessapproachesandsearchesforpioneeringsolutionstonewchallenges,and

ThetaxesontheproductionandsaleofSAB’sproductstotalledR10.2billionintheyearendedMarch2010,enoughtofund:•Boththegovernment’sComubiaandN2Gatewayhousingprojects;or

•SoccerCity,GreenPointstadium,MosesMabhidastadiumandthePeterMokabastadium;or

•Theelectrificationof4.9millionhomes,5,000schoolsandallhealthclinicsinSouthAfrica

9Source:NationalTreasury,BudgetReview,page67.10Source:NationalTreasury,BudgetReview,page128.

Previous SAB KickStart winners

13

considersafocusoncorporatesocialinvestmentandsustainabledevelopmentintegraltohardcorebusinesspractice,ratherthana‘nicetohave’.

TheSABbeerdivisionspendsinexcessof R40millionannuallyoninitiativeswhichaimtotackletheabuseofalcoholandencourageresponsibledrinking.ThisfigureincreasestomorethanR90millionannuallyifthevalueofcampaignsisconsidered–i.e.thediscountsgivenbymediahousesandothersupplierstoexpandmediaandadvertisingcoverage.AsignificantportionofthisamountisspentonhighimpactinitiativesaimedatreducingdrinkinganddrivingthroughthehighlyeffectiveReality Check campaignandalcoholevidencecentres.FurthersignificantinvestmentshavebeenmadeincombatingFAS(FoetalAlcoholSyndrome),addressingunderagedrinking,ensuringresponsibletradingandsupportingindependentindustrybodies. Inaddition,SABspendsinexcessofR21millionannuallyonenterprisedevelopment(ED)andcorporatesocialinvestment(CSI)initiatives.AkeyinitiativeistheSABKickStartprogramme,whichcelebratesits15thanniversaryin2010.SinceitslaunchinMay1995,theprogrammehasbenefitted22,936youngentrepreneursthroughatotalinvestmentofR51millioningrantfundingbySAB.Fromthistotalnumberofbeneficiaries,3,200smallbusinesseshavebeenestablished.

OtherCSIandEDinitiativesinclude:• Owner-driverandTaungBarleyFarmersinitiatives,whichsupporttheformationofnewbusinessesandwhich,inturnfeedintoSAB’ssupplychain

• Thesupportanddevelopmentofsportin SouthAfrica• ThefundingoftheSABregionalsoccerleagueandtheCaddiesTrust,whichgiveschildrenofgolfcaddiesopportunitiestoapplyforfinancialassistanceforfurtheringstudies

• AcollaborationwithBobsForGoodworth R1million,whichseesspeciallyreflectiveshoesdeliveredtodisadvantagedschoolchildren

• AcollaborationwiththeWorldWildlifeFund(WWF)ontheirWaterNeutralProject

• ThesupportoftheWomeninBusinessinitiativewhichsupportswomenentrepreneursinthetourismsector

• TheETEYAAwards,whichensuresthatthesmaller,black-ownedtourismbusinessesareadequatelyequippedtogainentryintothetourismindustry

SABalsosponsors,amongothers,thenationalrugby,cricketandfootballteams.

InJune2009SABannouncedabroadbasedblackeconomicempowerment(BBBEE)transaction–calledSABZenzele–worthoverR7billion.ThedealaimstobenefitthemajorstakeholdergroupswhoplayameaningfulroleinSAB’slong-termbusinesssuccess,includingSABemployees,black-ownedbeerandsoftdrinkretailersandthewiderpublicthroughtheformationoftheSABFoundation.ThistransactionwasawardedtheDealoftheYearAwardintheDealMakersmagazineawards.

Withastrongfocusonskillsdevelopment,entrepreneurshipandjobcreationthroughthestimulationofsmallbusinesses,SAB’sinitiativesalsofurtherthegoalsofgovernment’sAcceleratedandSharedGrowthInitiativeforSouthAfrica(ASGISA).Itshouldbenoted,however,thattheproduction,employment,andtaxrevenuefigurespresentedaboveonlyportraytheinitialdirectimpactofSAB; intheprocessofmanufacturing,packaging,marketinganddeliveringalcoholicandnon-alcoholicbeverages,SABstimulateseconomicactivitythroughouttheentirebeveragevaluechainandthebroaderSouthAfricaneconomy.Theseupstreamanddownstreamactivitiesinthebeveragevaluechaincreateadditionalincomeandtaxrevenue,whichinturnisspentintheeconomy,inducingfurthereconomicbenefits.TheindirectandinducedimpactsthatarisefromSAB’sactivities,aswellasthetotaleconomy-wideimpactofSAB’soperations,areconsideredinChapter3ofthisreport.

14


ThebusinessoperationsofalargecompanylikeSABareatthecentreofacomplexvaluechainwithbothupstreamanddownstreamlinkagesintotheeconomy.WhereasChapter2consideredSAB’sownemploymentprofile,salesrevenueandcontributiontotaxrevenue,theaimofthischapteristotracetherippleeffectsofSAB’soperationsthroughouttheSouthAfricaneconomy.Thedirect,indirectandinducedimpactsofSAB’soperationsonintermediateoutput(i.e.thevalueofproduction),capitalstock,employment,labourremuneration,governmenttaxrevenueandvalueadded(GDP)areanalysed.TheSocialAccountingMatrix(SAM)forSouthAfricadevelopedandpublishedbyQuantecResearchwasmodifiedtomaptheeconomicfootprintofSABthroughoutthedomesticeconomy.TheSAMutilisestheinitialinjectionofoperationalspendingbySAB(e.g.salesrevenue,employment,capitalexpenditureandcontributiontotaxrevenue-asdiscussedinthepreviouschapter),alongwithaseriesofinter-industrytechnicalcoefficientsandmultipliersreflectingthelinkagesbetweenSABandtherestoftheeconomy,toestimatethetotalimpactofSABondifferentsectorsintheeconomy.

TheSAMdifferentiatesbetween:• Theinitialinjection–SAB’sownemploymentnumbers,capitalexpenditureandtaxcontributions

• Firstroundeffects–theimpactofSABonitsdirectsuppliers(e.g.production,employmentandtaxrevenuestimulatedatfirstroundsuppliers)

• Thedirectimpact–thesumtotalofSAB’sinitialinjection(e.g.thetotalproduction/turnoverofSAB,theintermediategoodsbought,thesalariesandwagespaidandtheprofitsgeneratedbySAB)andtheimpactonitsfirstroundsuppliers

• Theindirectimpact–theimpactthatoccurswhensupplierstoSABpurchasegoodsandservicesfromtheirsuppliers,whointurnremuneratetheiremployeesandpaytaxes

• Theinducedimpact–theimpactthatoccurswhenthesupplyingsectorsandtheiremployeesandhouseholdsre-spendintheeconomy,generatingfurthereconomicactivity

• Thetotaleconomy-wideimpact–thesumtotalofthedirect,indirectandinducedimpacts

TheSAMmodellingresultsaresummarisedinTable6,whiledetailedoutputfromtheSAMforSAB’sbeerandsoftdrinksdivisions,aswellasthecompanyasawhole,arepresentedinAppendices2to4.

3.1 Contribution to intermediate output

Inordertoproducebeer,softdrinksandflavouredalcoholicbeverages,SABdependsonvarioussectorsoftheeconomytosupplythenecessaryproductioninputs,rangingfromwater,sugar,barley,hopsandmalttotincans,glassbottlesandbottlecrowns,as

3. The economic impact of The South African Breweries

SABisSouthAfrica’sleadingbeerandsoftdrinksproducerandoneofthelargestmanufacturingcompaniesinthecountry.

Figure5:Outputbyindustry–firstroundeffectsofSAB’soperationstotalledR21.8billionin2009

Figure 1 Figure 2a

Figure 2b Figure 3

Figure 4 Figure 5

Figure 7 Figure 8Foodandbeverages26.5%Finance,insurance,realestateandbusinessservices15.5%Transportequipment3.8%Metals,machineryandequipment8.6%Othernon-metalmineralproducts3%Othersectors16.8%Petroleumproducts,chemicals,rubberandplastics8.5%Wood,paper,publishingandprinting6.5%Agriculture,forestyandfishing10.7%

During2009,SAB’sbeerandsoftdrinksoperations:•Stimulatedproduction(orintermediateoutput)tothevalueofR228billioninthedomesticeconomy

•Sustainedinexcessof355,000jobsinSA,yieldingclosetoR28billioninlabourincome

•GeneratedR28billioningovernmenttaxrevenue

•ContributedR66billiontoSA’sgrossdomesticproduct

15

Table 6: The impact of SAB on the South African economy – 2009

Impact including gross domestic fixed investment (Rand billion)

First round impact

Direct impact: SAB + First

round suppliers

Indirect impact

Direct and indirect impact

Economy-wide

impact

Intermediate output (at user prices)

TotalSAB 21.8 76.5 40.2 116.7 228.4

SABsoftdrinksdivision 7.1 22.9 13.9 36.8 77.5

SABbeerdivision 14.7 53.6 26.4 79.9 150.9

SABbeeras%oftotalliquor 47.4% 46.4% 46.5% 46.4% 45.3%

Capital requirement

TotalSAB 11.8 25.6 18.6 44.2 121.3




Employment (number, including the informal sector)

TotalSAB 37,095 46,485 54,928 101,413 355,755

SABsoftdrinksdivision 10,016 13,804 19,380 33,184 126,448

SABbeerdivision 27,079 32,681 35,548 68,229 229,306


Labour income

TotalSAB 3.3 6.8 3.8 10.6 27.7




Government tax revenue

TotalSAB 2.1 12.4 4.05 16.5 28.07




Value added (GDP) at factor cost

TotalSAB 6.4 15.8 11.2 27.1 66.2




SAB’s share of:

TotalcapitalstockinSA 0.2% 0.5% 0.4% 0.9% 2.4%

TotalemploymentinSA 0.3% 0.4% 0.4% 0.8% 2.9%

Governmenttaxrevenue 0.3% 2.0% 0.7% 2.6% 4.5%

GDPatfactorcost 0.3% 0.7% 0.5% 1.3% 3.1%


16

Figure7:Direct,indirectandinducedeffectsofSAB’soperationsonintermediateoutput

Figure8:ThevalueofcapitalstocksustainedthroughouttheeconomyasaresultofSAB’soperationstoppedR121billionin2009

Buildingsandconstructionworks70%Machineryandotherequipment22%Transportequipment8%

Beerdivision Softdrinksdiviison

Figure 1 Figure 2a

Figure 2b Figure 3

Figure 4 Figure 5

Figure 7 Figure 8

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wellasfuelandpower.During2009,SABpurchasedgoodsandservices(includingcapitalequipment)fromitsdirectsupplierstothevalueofR21.8billion,ofwhichroughlytwo-thirdswereutilisedintheproductionofbeer.Figure5showsthatthesupplyingsectorsthatexperiencethegreatestdirectbenefitfromSAB’soperationsarethefoodandbeveragessector(particularlysugarandfruitjuices);finance,insuranceandotherbusinessservices(includingadvertising);agriculture,forestryandfishing (e.g.barley,hops,maltandmaizefarming);metals,machineryandequipment(includingaluminiumandtinproducts);andpetroleumproducts,chemicals,rubberandplastic.

ValuedatR228billionin2009,theeconomy-wideimpactofSABonintermediateoutput(orproduction)isconsiderable.Figure6showsthatthesectorsthatprofitthemostfromSAB’soperationsarefoodandbeveragemanufacturing;finance,insuranceandotherbusinessservices;wholesale,retail,cateringandaccommodation;petroleumproducts,chemicals,rubberandplastic;andtransport,storageandcommunication.SAB’sbeerdivisionaccountedfor66%(orR150.9billion)oftheeconomy-widevalueofproductionstimulatedbySAB’soperations(and45%ofthatofthetotalliquorindustry).

Theremaining34%oftheeconomy-wideimpactonintermediateoutputcanbeattributedtoABI’sproductionofsoftdrinks,energydrinks,bottledwaterandfruitjuices(seeFigure7).ThedirectimpactofSABaccountsforapproximatelyathirdofSAB’seconomy-wideimpactonproduction,whiletheindirectimpactcontributesafurther17.6%andtheinducedimpactconstitutestheremaining49%.

3.2 Capital requirement

Productivecapitalassets–includingtechnologicallyadvancedmachineryandequipment,trucksandbuildingstructures–togetherwithlabourandentrepreneurship,formthebasicproductivefactorsneededinmostmanufacturingprocesses.WhereasSAB’sowncapitalstockisvaluedatapproximatelyR13.8billion,SAB’sproductionprocessesalsostimulatesignificantfixedinvestmentintheeconomy.AfurtherR107.5billionincapitalisneededthroughouttheSouthAfricaneconomytosupporttheupstreamanddownstreamlinkagesofSAB’soperations.


Figure6:Outputbyindustry–economy-wideeffectsofSAB’soperationsvaluedatR228billion

Foodandbeverages32.7%Agriculture,forestyandfishing3.1%Transport,storageandcommunication5.7%Finance,insurance,realestateandbusinessservices12.9%Wholesale,retail,cateringandaccommodation11.9%Petroleumproducts,chemicals,rubberandplastics6.9%Othersectors18.5%Metals,machineryandequipment3.3%Transportequipment5.1%

Figure 1 Figure 2a

Figure 2b Figure 3

Figure 4 Figure 5

Figure 7 Figure 8

17

Inall,thetotalcapitalstockneededtosustainthepresentlevelofbeerandsoftdrinksproductionbySABtotalsR121billion,or2.4%ofSouthAfrica’stotalcapitalstock.Buildingsandconstructionworksaccountfor70%ofthetotalcapitalrequirement,whilemachineryandotherequipmentandtransportequipmentconstitute22%and8%respectively.

3.3 Impact on employment creation

Ashighlightedinthepreviouschapter,SABemployed9,390peopleduring2009,with5,602(or60%)workinginthebeerdivisionand3,788inthesoftdrinksdivision.ItisestimatedthatSAB’soperationssustainanother37,095employmentopportunitiesatfirstroundsuppliers,themajorityofwhichareintheagriculture,forestryandfishing(27%);finance,insurance,realestateandbusinessservices(26%)andwholesale,retail,cateringandaccommodation(13%)sectors(seeFigure9).

Figure10illustratesthatsome355,000jobsaresustainedthroughouttheeconomyasaresultofalltheactivitiesrelatedtotheproductionandsaleofSAB’sproducts,withthewholesale,retail,cateringandaccommodationsectorbeingthemainbeneficiary.SAB’semploymentimpactrepresents2.9%oftotalemploymentinSouthAfrica,whileemploymentstimulatedbySAB’sbeerdivisionaccountsforanestimated41.9%oftheeconomy-wideemploymentimpactofthetotalliquorindustry.

Directemployment(atSABanditsfirstroundsuppliers)onlyrepresentsasmallfraction(13.5%)ofthetotaleconomy-wideimpact–foreachjobofferedbySABanditsfirstroundsuppliers,6.7additionaljobsaresupportedupstreamanddownstreamfromSAB(seeFigure11).


Figure9:Employmentbyindustry–FirstroundeffectsofSAB’soperationstotalling37,095

Figure 1 Figure 2a

Figure 2b Figure 3

Figure 4 Figure 5

Figure 7 Figure 8

Agriculture,forestyandfishing27%Metals,machineryandequipment6.2%Othersectors14.8%Foodandbeverages6.2%Finance,insurance,realestateandbusinessservices25.9%Wood,paper,publishingandprinting2.2%Wholesale,retail,cateringandaccommodation13%Construction(contractors)2.8%Petroleumproducts,chemicals,rubberandplastic2.1%

Figure10:Employmentbyindustry–economy-wideimpactofSAB’soperationsestimatedat355,755

Figure 9 Figure 11a

Figure 11b Figure 15a



Wholesale,retail,cateringandaccommodation36.3%Metals,machineryandequipment1.9%Othersectors22.6%Transport,storageandcommunication3.7%Finance,insurance,realestateandbusinessservices18.1%Foodandbeverages4.6%Agriculture,forestyandfishing9%Construction(contractors)3.8%

Figure11:Direct,indirectandinducedeffectsof SAB’soperationsonemployment

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Intermsofemployment:•ForeachemploymentopportunitycreatedbySABanditsfirstroundsuppliers,6.7additionaljobsaresupportedupstreamanddownstreamfromSAB

•Thevastmajority(71%)ofthejobssustainedbySAB’soperationsarefilledbyblackemployees

18

Figure13:Direct,indirectandinducedeffectsofSAB’soperationsonlabourincome

estimatedatR27.7billion

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Lookingattheskillscompositionoftheeconomy-wideimpactofSAB’soperationsonemployment,onlyasmallportion(9%)ofthepositionsarefilledbyhighlyskilledemployees.ThemajorityofjobopportunitiessustainedbySAB’svaluechainarelowskilledpositions(37%)orintheinformalsector(22%).SAB’snoteworthycontributiontoemploymentoflowskilledworkersshouldbeviewedpositivelygiventhehighunemploymentrateamonglowskilledworkersinSouthAfrica.Furthermore,thevastmajority(71%)ofthe355,000jobssustainedbySAB’soperationsarefilledbyblackemployees(seeFigure12).

3.4 Contribution to labour income

SABanditsfirstroundsupplierscontributedanestimatedR6.7billiontowardslabourremunerationduring2009.However,theresultsfromtheSAMmultiplieranalysisshowthat,whentheindirectandinducedimpactsofSAB’svaluechainarealsotakenintoconsideration,theeconomy-wideimpactonhouseholdincomesincreasestoR27.7billion(seeFigure13).SAB’sbeerdivisionaccountsfor65%(orR17.9billion)oftheeconomy-wideimpactofthecompanyonlabourremuneration.

Incontrasttotheskillsbreakdownofemployment,thelabourincomefiguresfavourthehigherskilled(i.e.higherremunerated)occupations–approximately70%ofthelabourincomegeneratedcanbeascribedtothemediumandhighlyskilledgroupsintheformalsector.

3.5 Contribution to government tax revenue

During2009,theNationalTreasuryreceivedmorethanR10billionintaxrevenuesfromSAB,itsemployeesandconsumersofalcoholicandnon-alcoholicbeveragesproducedbySAB.Whentheindirectandinducedimpactsthroughtheeconomyarealsoconsidered,thetotaltaxrevenuegeneratedbySABanditsupstreamanddownstreampartnersincreasestoastaggeringR28billion(seeFigure14),or4.5%ofthegovernment’stotaltaxhaulduring2009.Indirecttaxes(e.g.excisedutiesandVAT)paidbyconsumersarethemostimportantrevenuesource,atR15.8billion(or56%ofSAB’seconomy-widetaxcontribution),followedbycorporatetaxesatR7.3billion(26%).

Figure12:Employmentbyskillandrace–economy-wideimpactofSAB’soperationsFigure 9 Figure 11a




Mediumskill32%Lowskill37%Informalsector22%Highskill9%

Figure 9 Figure 11a




Black71%Coloured11%Asian4%White14%


19

LookingatSAB’stwodifferentdivisions,thetaxcontributionsplitisroughly70:30infavourofSAB’sbeerdivision(seeFigure14),mainlyduetotheimpactofexcisedutiesonbeer.Furthermore,consideringthesplitbetweenthedirect,indirectandinducedimpacts,thecontributionofSABanditsfirstroundsuppliers–i.e.thedirectimpact–comprisesthelargestproportion(44%)ofthetotaltaxcontribution,indicativeoftheheavytaxburdenbornebySAB,itsfirstroundsuppliersandconsumersofitsproducts.

3.6 Impact on the gross domestic product

EstimatedatR66.2billionduring2009,thetotaleconomiccontributionfromtheproductionandsaleofSAB’sproductstotheSouthAfricaneconomyisconsiderable.Approximately3.1%ofSouthAfrica’sGDPcanbetracedbacktothedirect,indirectandinducedimpactsofSAB,withSAB’sbeerdivisionaccountingfortwo-thirdsofthecompany’stotalcontributiontovalueadded(GDPatfactorcosts).SAB’sGDPmultiplierisestimatedtobe2.02,indicatingthatforeveryR1.00insalesrevenuegeneratedbySAB(i.e.turnoveratcompanylevel),R2.02isaddedtothecountry’sgrossdomesticproduct.TheGDPmultiplierofSAB’ssoftdrinksdivisionisestimatedtobeslightlyhigher(2.26)thanthatofSAB’sbeerdivision(1.92).Figure15showsthatthedirectandindirectimpactscompriseapproximately41%ofSAB’seconomy-wideimpact,

withinducedeffectsaccountingfortheremaining59%ofthevalueadded.

Table7showstheGDPandemploymentmultipliersforSABandtheliquorindustry,aswellastwoindicatorsoftheefficiencywithwhichSABandtheindustryemploysscarceproductiveresources,namelytheGDP/capitalratioandthelabour/capitalratio.

Table 7: SAB’s multipliers and efficiency ratios

Total SAB

Total liquor

industry

Total RSA

Employmentmultiplierintermsofdirectjobs(includinginformalsector)

7.7 6.3

GDPmultiplier 2.0 2.1

GDP/Capitalratio 0.6 0.5 0.4

Labour/Capitalratio 2.9 3.2 2.5

Source: Econex calculations based on SAM modelling resultsfrom Quantec Research

SAB’slabour/capitalratio,measuringthenumberofadditionalemploymentopportunitiesthatcanbecreatedfromtheinvestmentofR1millionincapitalbySABanditsfirstroundsuppliers,isestimatedat2.9.Whilethisisslightlylowercomparedtotheoverallliquorindustry(3.2),itcomparesfavourably

Figure15:Direct,indirectandinducedeffects ofSAB’soperationsonGDPatfactorcost

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Figure14:Direct,indirectandinducedeffects ofSAB’soperationsongovernmenttaxrevenue

amounttoR18.1billion


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withthatoftheoverallSAeconomy(2.5).SAB’sGDP/capitalratioof0.6isinlinewiththatofthetotalliquorindustry(0.5),indicatingthatforeveryR1millionincapitalinvestedbySABanditsfirstroundsuppliers,anadditionalR0.6millioninGDPisgenerated.BothSAB’sGDP/capitalratioanditslabour/capitalratiosuggestthatSABanditsfirstroundsuppliersareslightlymoreefficientinutilisingaunitofinvestmentcomparedtotheoverallSouthAfricaneconomy.

Inall,theresultsfromtheanalysisshowthatSABnotonlymakesasubstantialdirectcontributiontostatecoffersintermsoftaxrevenue,butSAB’soperationshavehighspin-offeffectsonproduction,employmentcreationandvalueaddedintheSouthAfricaneconomy.

GiventhehighunemploymentrateamonglowskilledworkersinSouthAfrica,SAB’scontributiontolowskilledandinformalsectoremploymentisparticularlyvaluable.

21

Intheprocessofmanufacturing,packaging,marketinganddeliveringalcoholicbeverages,theliquorindustrystimulateseconomicactivitythroughouttheentirebeveragevaluechain,encompassingawiderangeofproducersandsuppliers(upstreamlinkages)andretailers,distributorsandthehospitalityindustry(downstreamlinkages).TheprimaryfocusofthissectionofthereportistoprovideanoverviewoftheliquormanufacturingindustryinSouthAfrica,ratherthanontheupstreamordownstreamlinkagesoftheindustry.Inwhatfollows,themarketsegmentationandrecentindustrysales,theinternationaltradeperformanceofthedifferentliquortypes,andthestructureofandkeyplayersintheliquorindustryareconsideredbriefly.

4.1 Market segmentation and industry sales

Thedomesticliquorindustrycanbroadlybeclassifiedintothemanufacturing(ordirectimportation)ofbeer,wine,spiritsandflavouredalcoholicbeverages,withbeersalesaccountingforjustover50%ofthevalueoftotalliquorsalesin2009.Thebeercategorycanbefurthersub-dividedintomaltandsorghumbeer(ortraditionalAfricanbeer),whilewinecanbedelineatedintonatural,fortifiedandsparklingwine.Spirits,inturn,canbesegmentedintowhitespirits(e.g.vodkaandgin),brownspirits(e.g.brandyandrum)andwhisky,whilespiritcoolersandcider-likedrinksarethemaincategorieswithintheflavouredalcoholicbeveragessegment.

4. Broad overview of the South African liquor industry

TheSouthAfricanliquorindustryhasdevelopedintoamajorforceintheSouthAfricaneconomy,providingemploymentandincometothousandsofhouseholdsandmakingasubstantialcontributiontogovernmenttaxrevenueandexportearningsinSouthAfrica.

Key statistics for the South African liquor industry - 2009

4.053bn Litresofalcoholicbeveragessoldin2009

R62.5bnValueoftotalliquorsalesatoff-premiseprices

51% Contributionofmaltbeertototalliquorsales

CarlingBlackLabel

SouthAfrica’stopsellingliquorbrand

SABSouthAfrica’spremierliquormanufacturerandhometo6outofthetop10liquorbrandsconsumedinSouthAfrica(byvolume)

R10bnExcisedutiespaidbytheliquorindustryduringthe2010fiscalyear

47%Liquorindustry’sshareintotalexcisetaxcollectedinSouthAfrica

57%Theshareofmaltbeerintheliquorindustry’stotalexcisecontribution

R16bnCorporatetax,personalincometax,VATandexcisedutiespaidbytheliquorindustry,itsemployeesandconsumersin2009

21,300Estimatednumberofemployeesintheliquorindustry

R7.1bn Valueofliquorexportsin2009

253% Growthinliquorexportssince2000

United Kingdom

TopSouthAfricanliquorexportdestination

22

Figure16showsthatsalesofmalt(or“clear”)beeraccountedforroughly51%oftotalliquorsales(alcoholbyvolume)in2009,aswellas51%ofthesalesrevenuegeneratedbytheliquorindustry.11 Inalcoholbyvolume(ABV)terms,spirits(withanABVshareof18%)andwine(16%)arethesecondandthirdlargestliquorsegments,followedbysorghumbeer(8%).However,itshouldbenotedthattheseestimatesonlycoversalesofcommerciallyproducedsorghumbeer,whilemorethantwo-thirdsofsorghumbeerishome-brewed(andhence

unrecorded).Flavouredalcoholicbeverages(FABs)contributedroughly6.6%toliquorsalesinABVtermsin2009,butcomprisedaconsiderablylargershare(11%)insalesrevenueterms. Withthevalueofsalesatoff-premisepricesestimatedatR62.5billionin2009,totalliquorsales(includingcommerciallyproducedsorghumbeer)accountedfor15.9%ofconsumerspendingonfood,beveragesandtobaccoin2009,and4.2%oftotalconsumerspending(seeFigure17).12

Figure17:Shareoftotalliquorsales(andSAB’sliquorsales)in nominalGDPandconsumerspendinginSouthAfrica,2009

Source: Econex calculations, based on official statistics from the SARB Quarterly Bulletin and liquor industry data supplied by SAB

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11IndustrysalesdatawassuppliedbySABandcomprisesoff-premisefigures(i.e.liquorsalesbybars,restaurantsandotherdrinkingestablishmentsareexcludedsoastoavoiddoublecounting).SABincorporateddatasourcedfromACNielsen,theSouthAfricanLiquorBrandOwnersAssociation(SALBA)andtheSouthAfricanWineIndustryInformationandSystems(SAWIS),aswellasexcisefiguresforsorghumbeerfromtheDepartmentofTradeandIndustry,intheirestimatesofliquorsalesinSouthAfrica.12Theratioswerecalculatedusingthevalueofsalesatoff-premise(e.g.liquorstore)prices.However,giventhathotels,restaurantsandbars(i.e.on-premiseconsumptionoutlets)typicallyhavehighermark-upsonliquorpricescomparedtoliquorstores,theactualcontributionofliquortototalconsumerspendingandGDPinSouthAfricamayinfactbehigherthanreflectedbytheratiosinFigure17.

Figure16:Marketsharebyliquorsegment

Alcoholbyvolumeshares Valueshares

Figure 9 Figure 11a




Figure 9 Figure 11a




Spirits18%Wine16%FABs7%Sorghumbeer8%MaltBeer51%

Spirits20%Wine14%FABs11%Sorghumbeer4%MaltBeer51%

Source: SAB, based on data supplied by AC Nielsen, SAWIS, SALBA and the Department of Trade and Industry

23

Table 8: Industry sales by liquor category, 2009

Sorghum beer

Malt beer

Spirits WineFlavoured alcoholic

beverages

Total liquor

Total liquor excluding

sorghum beer

Bulkvolume-Thousandsofhectolitres

5,319 27,204 1,041 3,472 3,491 40,528 35,209

Alcoholstrength 4.2% 5% 43%Natural:12%Fortified:17%

5%

ShareoftotalbyABV 8.4% 51.2% 17.6% 16.3% 6.6% 100%

Value–Randbillion 2.5 31.9 12.7 8.4 7.0 62.5 60.0

Shareintotal 4.0% 51.0% 20.3% 13.4% 11.2% 100%


WeighedagainstSouthAfrica’sGDP,theshareoftotalliquorsalesmeasured2.6%in2009.SAB,SouthAfrica’slargestliquorproducer,heldapproximately48%ofthetotalliquormarket(invalueterms)in2009.Roughly8%ofconsumerspendingonfood,beveragesandtobacco(or2%oftotalconsumerspending)in2009wasdirectedatalcoholicbeveragesproducedbySAB.

Figure18showsthegrowthinliquorsales,inbothvolumeandvalueterms,relativetothegrowthindisposableincomesince2001.Involumeterms,totalliquorsales(includingcommerciallyproducedsorghumbeer)increasedbyanaveragerateof1.9%overthelastnineyears,significantlyslowercomparedtotheaverageannualgrowthinrealdisposableincomeof3.7%.However,invalueterms,thegrowthinliquorsales(10.6%perannum)wasonparwiththegrowthinnominaldisposableincome(10.7%perannum).Inotherwords,despitesubduedvolumegrowth,thevalueshareofliquorinconsumers’walletsremainedmoreorlessunchangedsince2001.

Thiscanbeascribedtorelativelyhighliquorpriceincreasesoverthelastdecade,which,inturn,arepartlyrelatedtohighexcisetaxincreases.Thespiritsandnaturalwinecategoriessawparticularlyhighpriceincreases,withaverageannualpriceincreasesof9.8%and8.8%perannumrespectivelyoverthelastdecade,followedbyFABsat8.4%perannum.Maltbeerandcommerciallybrewedsorghumbeersawthelowestinflationrates,cominginat7.6%and7.0%respectivelysince2000,onlyslightlyhighercomparedtotheaverageCPIinflationrateof6.8%.

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Figure18:Growthinliquorsalesvsgrowth indisposableincome,2001-2009


Liquorsalesvalue Realdisposableincome

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24

Consideringtherelativeperformanceofthedifferentliquorcategoriesoverthelastdecade,FABstoppedthelog,withanaverageannualgrowthrateof17.7%insalesatoff-premisesalesbetween2001and2009.Thiswasfollowedbyspirits(12.9%),maltbeer(9.4%)andwine(9.2%),whilethevalueofcommerciallybrewedsorghumbeerincreasedbyonly7.9%perannumsince2001.Giventhattotalhouseholdconsumptionexpenditurepostedanaverageannualincreaseof10.9%since2001,thissuggeststhattherewasasignificantincreaseintheshareofFABsintotalconsumerspending.Theshareofspiritsintotalconsumerspendingalsoincreasedslightly,mainlyattheexpenseofwineandsorghumbeerconsumption.

WhiletheSouthAfricanliquorindustryhasperformedrelativelywellinrecentyears,otherretailsectorsarechallengingdomesticliquorsalesforashareoftheconsumer’swallet.Duringthelate1990sandearly2000s,theproliferationofnewspendingavenuessuchascellphones,laptopcomputers,satellitetelevision,digitalcameras,MP3players,casinosandtheNationalLotteryattractedanincreasingshareofthedisposableincomeofconsumers.Althoughthe

growthinliquorsalesimprovedsignificantlybetween2003andthefirsthalfof2008,therecessionposednewchallengestotheSouthAfricanliquorindustry.Inparticular,widespreadjoblosses13inthedomesticeconomy,toppingonemillionbetween2008Q4and2010Q1,areweighingonvolumegrowthandthepricingpoweroftheliquorindustry.Furthermore,theSouthAfricangovernmentisreinvestigatingexcisedutiesonliquor,andanyincreaseinexcisewilllikelyleadtofurtherdownwardpressureonvolumegrowthintheindustry.

4.2 International trade performance

SouthAfricaisanetexporterofliquor,largelyduetoextensivewineexports.Totalbeer,spirits,wineandotherfermentedbeverageexportsmeasured R7.1billionin2009,whileimportswereestimatedatonlyR3.36billionin2009(seeTable9).Totalliquorexportshaveshownimpressivegrowthoverthelastfouryears,withanincreaseof71%intheRandvaluebetween2005and2009.Incomparison,theRandvalueofexportsofallcommoditiesincreasedby58%since2005.ConsideringSouthAfrica’sexportperformancesince2000,theoutperformanceofthe

Table 9: Liquor import and export performance, 2005 - 2009 (Rand million)

Malt beer WineOther fermented

beverages (e.g. cider)

Spirits Total

HSClassification

H2203 H2204 H2206 H2208 Aggregate

Exports Imports Exports Imports Exports Imports Exports Imports Exports Imports

2005 51.6 35.4 3,806.8 81.3 20.3 1.3 255.4 1,141.2 4,134.1 1,259.1

2006 70.1 58.4 3,563.5 110.4 28.1 2.7 287.2 1,501.0 3,948.9 1,672.5

2007 68.8 637.5 4,731.9 130.5 32.1 0.9 398.7 1,823.3 5,231.6 2,592.2

2008 188.6 813.4 6,229.0 163.7 106.9 1.1 550.1 2,113.7 7,074.5 3,092.0

2009 182.2 1,185.9 6,015.4 143.5 261.8 1.1 608.7 2,025.8 7,068.2 3,356.3

%change,2005-09

253.1% 3,253% 58.0% 76.6% 1,191% -17.3% 138.3% 77.5% 71.0% 166.6%

Shareofexportsin2009

2.6% 85.1% 3.7% 8.6%

Shareofimports in 2009

35.3% 4.3% 0.0% 60.4%

Source: Department of Trade and Industry – Trade Statistics

13AccordingtoStatisticsSouthAfrica’sQuarterlyLabourForceSurvey(June2010),232,000jobsweredestroyedduringthefirsthalfof2010,pushingthetotalnumberjoblossesupto1.1millionbetween2008Q4and2010Q2.

25

liquorindustryisevenmorestriking–whereasthevalueofallSouthAfricanexportsincreasedby143%between2000and2009,thevalueofliquorexportssurgedby253%.Furthermore,liquorexportsappeartohaveweatheredtherecessionquitewell,postingonlyamarginaldeclineof0.1%invaluetermsin2009,comparedtoacontractionof20.5%inthevalueoftotalexportsfromSouthAfrica.

Wineexportsaccountedfor85%oftotalexportsin2009,followedbyspirits(8.6%),otherfermentedbeverages(3.7%)andbeer(2.6%).Beerexportsaretypicallysmallincomparisonwithwine,asbeerisgenerallybrewedbydomesticbrewerieswithinacountry.Europe(andtheUnitedKingdominparticular)isSouthAfrica’slargestwineexportmarket,accountingforthree-quartersofallSouthAfricanwineexports(seeFigure19).

Liquorimportsalsoshowedstronggrowthoverthelastfouryears,withacumulativeincreaseof166.6%since2005,relativetototalimportgrowthof52.8%between2005and2009.Spirits(withashareof60.4%in2009)andmaltbeer(35.3%)importsaccountforthebulkofliquorimportsinSouthAfrica.Thedynamicsofthespiritsmarketaresuchthatglobalbrandsareeitherimporteddirectly,orproducedunderinternationallicenceinSouthAfrica.Lookingatabreakdownofspiritsimportsbycountry,thebulkofspiritsimportsweresourcedfromtheUKandIreland(76.4%),hometotheworld’sleadingspirits(notablywhisky)producersandmarketers. Onthespiritsexportside,SouthAfricaisregardedasoneofthepremierbrandyproducersworldwide,while

SouthAfricacanalsoboastwithother“home-grown”spiritsbrandssuchasAmarulaCreamLiqueurandCapetoRiocanespiritininternationalmarkets.

Table9showsthatbeerimportssurgedoverthelastfouryears(albeitfromalowbase).WhileSABstartedtoimportthePeroniNastroAzzurro(fromItaly)andGrolschbrands(fromtheNetherlands),thedramaticincreaseinbeerimportsbetween2006and2009canlargelybeascribedtoimportsoftheAmstelbrandfromtheNetherlands.WhereasAmstel,oneofthefastestgrowingpremiumbeerbrands,waspreviouslybrewedbySABinSouthAfricaunderlicencefromHeineken,Heinekenmovedthebrandtobrandhouse–ajointventurebetweenNamibianBreweries,HeinekenandDiageo–in2007,asHeinekenwasnowcompetingwithSABMilleronaninternationallevel.Giventhatbrandhousehadnolocalbrewingcapacityatthetime,AmstelwasimportedfromtheNetherlands,leadingtoasurgeinSouthAfricanbeerimportsbetween2007and2009.However,on25March2010,HeinekenandDiageoopenedanewbrewerysouthofJohannesburg(theSedibengBrewery),withaninitialcapacityof3millionhectolitres.ThebrewerywasestimatedR3.5billion,and,inanticipationofgrowingdemandforpremiumbrands,thebreweryisbeingexpandedtoincreaseitscapacityto4millionhectolitresinSeptember2010.TheSedibengbrewerywillbrewandbottlearangeofpremiumbeersforthelocalmarket,includingAmstel,HeinekenandWindhoekLager,implyingthatSouthAfricanbeerimportsshoulddeclinesignificantlyduringthesecondhalfof2010.

Figure19:Keywineexportmarketsin2009(HS2204)

Figure 9 Figure 11a




Figure 9 Figure 11a




Europe76.7%Oceania1.3%Africa6.6%Americas10.4%Asia4.7%

UnitedKingdom26.9%Sweden12%Germany11.5%Netherlands9%Denmark5.3%UnitedStates5.1%Canada4.8%Rest25.4%

Source: Department of Trade and Industry – Trade Statistics

26

4.3 Industry structure and key players in the liquor industry

Thedomesticliquorindustryischaracterisedbyhighlevelsofconcentration,implyingthatafewliquormanufacturers(ordistributors)servethevastmajorityofthemarket.Concentrationlevelsareparticularlyhighinthemaltbeer,commerciallyproducedsorghumbeerandspiritssegmentsinSouthAfrica,whereSAB(maltbeer),UnitedNationalBreweries(sorghumbeer),Distell(spiritsandFABs)andBrandhouse(maltbeer,spiritsandFABs)eachholdasubstantialshareoftherespectivesegmentsoftheliquormarketinwhichtheyoperate.AlthoughcompanieslikeDistell,theKWVandDGBalsocontrolanumberofbrandsinthewineindustry,alargenumberofsmaller“independent”producersalsoactivelycompeteinthewineindustry,implyingsignificantlylowerlevelsofconcentrationrelativetothebeerandspiritssegments.Infact,accordingtoSAWIS,therewere3,839primarywineproducers(i.e.growersofgrapes),supplying585winecellarsandwineco-operativeswithgrapesin2008.14

Table10showsabreakdownofthelargestliquormanufacturersanddistributorsinSouthAfrica,aswellasasampleofthebrandsineachcompany’sstable.Withavolumeshareofroughly88%inthemaltbeermarket–andapproximately51%ofthetotalliquormarketmeasuredinalcoholbyvolumeterms–SABisSouthAfrica’sundisputedbrewmaster.

SAB,theSouthAfricansubsidiaryofSABMiller,operatessevenbreweriesinSouthAfricaandboastsabrandportfoliooftenbeersandfiveflavouredalcoholicbeverages.SABMillerisnowtheworld’ssecondlargestbrewerbyvolume.Table10showsthatsixoutofthetoptenliquorbrandsconsumedinSouthAfrica(byvolume)inthe12monthsfromJune2009toMay2010camefromtheSABstable(namelyCarlingBlackLabel,HansaPilsner,CastleLager,CastleLite,CastleMilkStoutandRedds).

Brandhouse,theHeineken-Diageo-NamibianBreweriesjointventure,isSAB’smaincompetitorinthemaltbeermarket,andthethirdlargestliquorcompanyinSouthAfricabyvalueofsales(seeFigure20forACNielsen’smarketshareestimates).WithbrandssuchasAmstel,Heineken,Windhoek,GuinnessandKilkenny,brandhousehasabiastowardsthepremiumendofthebeermarket.Brandhousealsohousesanimpressiveportfolioofspiritsbrands,includingsomeoftheworld’sleadinginternationalbrands,suchasJohnnieWalker,J&B,andBell’swhisky,Smirnoffvodka,CaptainMorganandSpicedGoldrum,JoseCuervotequila,ArchersschnappsandBaileyscreamliqueur.HomegrownbrandsincludeGilbey’sgin,CapeVelvetcreamliqueurandBertramsVObrandy.Brandhousealsoproducesanddistributesvariousflavouredalcoholicbeveragebrands,includingArchersAqua,SmirnoffSpin,StrongbowandFoundry.

14Source:SAWIS,9December2009.“Macro-economicimpactofthewineindustryontheSouthAfricanEconomyalsowithreferencetotheimpactsontheWesternCape.”ReportcompiledbyConningarthEconomists,page20.

Figure20:Marketsharesofthekeyplayersintheliquorindustry,June2009toMay2010(excludingsorghumbeer)

Source: AC Nielsen

Figure 19b Figure 20

Figure 21 Figure 22

Figure 24 Figure 25

Figure 26 Figure 30

SAB44.7%DGB1.6%Distell19.3%PernodRicard2.1%

Brandhouse18.3%EdwardSnell2.6%Other11.5%

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Table 10: Key players in the South African liquor industry

Name of company Liquor segment Selected example of brands

SABMaltbeer

CarlingBlackLabel,Castle,CastleLite,DreherPremiumLager,Grolsch,Hansa,MillerGenuineDraft,PeroniNastroAzzurro,PilsnerUrquell

Flavouredalcoholicbeverages

BlakesandDoyle,BrutalFruit,Redd’s,Sarita,Skelter'sStraight

Distell

Wine

Alaska,Allesverloren,Alto,AutumnHarvestCrackling,Brandyale,Capenheimer,CellarCask,ChateauLibertas,Drostdy-Hof,DurbanvilleHills,FlatRoofManor,FleurduCap,Graça,Grünberger,Hill&Dale,Jacobsdal,J.C.LeRoux,LeBonheur,Lomond,Monis,Nederburg,Neethlingshof,Obikwa,PaarlPerlé,PlaisirdeMerle,Pongrácz,Sedgwick'sOldBrownSherry,Stellenzicht,Tassenberg,Theuniskraal,Tukulu,TwoOceans,Uitkyk,Zonnebloem,Zorba,4thStreet,5thAvenue

Spirits

Amarula,Angel’sShare,Bacardi,Bain's,Bisquit,BlackBottle,Bunnahabhain,Collison'sWhiteGold,Commando,CountPushkin,FlightoftheFishEagle,Gordon's,Harrier,Klipdrift,Knights,Mainstay,Mellow-Wood,Nachtmusik,Nederburg,OudeMeester,Richelieu,Romanoff,ScottishLeader,SevenSeas,ThreeShips,Uitkyk,VanRyn's,Viceroy


Bernini,Burchell,Esprit,Hunter's,KlipdriftandCola,Savanna,Vawter

Brandhouse

Maltbeer Amstel,Kilkenny,Guinness,Heineken,TafelLager,Windhoek

Spirits

Archers,Bayleys,Bell’s,Bertrams,Black&White,Bushmills,JohnnieWalker,CaolIla,Cragganmore,CapeVelvet,CaptainMorgan,Ciroc,Dimple,DonJulio,Gilbey’s,GlenElgin,J&B,JoseCuervo,Lagavulin,Lupini,Montego,Oban,Slate,Smirnoff,SpicedGold,Squadron,Swing,Talisker,Tanqueray,WhiteHorse


Archers,BertramsandGingerAle,CaptainMorganandCola,Foundry,J&BandSoda,Smirnoff,Strongbow

UnitedNationalBreweries

SorghumbeerChibuku,IjubaBlue,iJubaSpecial,JoburgBeer,LeopardSpecial,Tlokwe

DGB

WineBellingham,Boschendal,Culemborg,DouglasGreen,FranschhoekCellar,GrahamBeck,Legacy,OudeKaap,St.Augustine,St.Pettie,TheBeachouse,TheDelivery,TallHorse

SpiritsAntonella,BlackDouglas,ButlersLiqueurs,DouglasGreenRubyPort,Fetzer,FlexBender,NordicIce,Potency,RedHeart,Tango,Teacher’s,Zappa

PernodRicard

Wine LongMountain,Mumm

SpiritsAbsolutVodka,Ballantine’s,Beefeater,ChivasRegal,HavanaClub,Jameson,Kahlua,Malibu,Martell,Pernod,Olmeca,Ricard,Seagram’s,TheGlenlivet

EdwardSnell &Co.

Wine Craighall

Spirits

Barclays,Campari,CapeHope,CapetoRio,Cinzano,ClanMacGregor,FirstWatch,Glenfiddich,GlenGrant,GrandMarnier,Grant’s,Hendrick’s,Hooper’s,JackDaniel’s,JackTarr,OudeMolen,Skyy,Stretton’s,StrohRum,RussianBear,TheBalvenie,TwoKeys,Wellington

KWVWine

CaféCulture,CathedralCellar,GoldenKaan,KWVWines,Laborie,PearlyBay,Roodeberg

Spirits Imoya,KWVBrandy,WildAfricaSource: Company websites

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WhileSABandbrandhousearebyfarthelargestplayersinthemaltbeermarket,anumberofsmallerbreweriesalsoexistinSouthAfrica,operatingmainlyatthepremiumendofthemarket.AmongtheseareBavariaBrau,ownedbyitsDutchnamesakeBavaria–thesecondlargestbreweryintheNetherlands–andtheKnysnabasedMitchellsBrewery.

United National Breweries (UNB)istheleadingmanufacturerofsorghumbeer(orUmqombothi)inSouthAfrica,withiJuba,LeopardSpecialandChibukubeingthemostpopularbrandsintheUNBstable.ThisIndian-ownedcompanyproducesanddistributessorghumbeerfromsevenbreweriesaroundthecountry,andalsoownsitsownmaltplant.Sorghumbeeristypicallyregardedasanutritionaldrink,andismainlyconsumedinruralandsemi-urbanareasbypoorerhouseholds.WhileUNBholdsthevastmajorityofthecommerciallyproducedsorghumbeermarket,itisestimatedthatmorethantwo-thirdsofsorghumbeerishome-brewed.

OthercompanieswithapresenceinthesorghumbeermarketincludeAwethu Breweries and Tiger Brands.AwethuBreweriesbrewssorghumbeerandmageu(fermentedporridge)fromitstwobreweriesinWelkomandCarltonville,andalsomillsmaize,wheatandflourforuseinitsownproduction

processes.KingFoods,asmalldivisionofTigerBrands,producesanddistributespowderedsorghumbeerandmaltforhomepreparation,aswellassorghum-basedbreakfastcereals.

TheDistell Group Ltd(Distell)isoneofSouthAfrica’spremierproducersandmarketersofspirits,wineandflavouredalcoholicbeverages.15Withamarketshareofaround19%forthe12monthsendingMay2010,DistellisthesecondlargestliquorcompanyinSouthAfricabyvalueofsales.16 Distell’sdomesticdistributionnetworkconsistsof20depotssituatedacrossSouthAfrica,aswellasinternationalofficesinWindhoek,Accra,Nairobi,London,NewYork,SãoPauloandSingapore.Distellownsaportfoliooftrademarksintheliquorindustry,includingspiritssuchasAmarulaliqueur,Gordon’sgin,Bacardirum,MainstaycaneandKlipdrift,OudeMeester,andVanRyn’sbrandy;popularwinelabelssuchasTassenberg,ChateauLibertas,DurbanvilleHills,NederburgandFleurduCap;aswellasFABssuchasHunter’s,Savanna,Vawter,EspritandBernini.

OthercompetitorsinthespiritssegmentoftheliquormarketincludeEdward Snell & Co Ltd, Douglas Green Bellingham (DGB), and Pernod Ricard. EdwardSnell&CoLtdpridesitselfinbeingSouthAfrica’slargestfamily-ownedspiritsbusiness,with

15SABholdsa30%stakeinDistell16Source:ACNielsensalesstatistics

Table 11: Ranking of top 30 liquor brands by sales volumes

Ranking Brand Ranking Brand

1 CarlingBlackLabel 16 RedSquare

2 HansaPilsner 17 HansaMarzenGold

3 CastleLager 18 WindhoekLight

4 CastleLite 19 Peroni

5 Amstel 20 Sarita

6 CastleMilkStout 21 Foundry

7 Heineken 22 Klipdrift

8 Hunter’s 23 HoopersHooch

9 Redd’s 24 Archers

10 Savanna 25 Grolsch

11 WindhoekLager 26 Strongbow

12 Smirnoff 27 J&B

13 WindhoekDraught 28 Esprit

14 BrutalFruit 29 Vawter

15 Miller 30 BerniniSource: AC Nielsen National Off-Premise Sales Volumes (June 2009 – May 2010)

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productionfacilitiesinCapeTownandJohannesburgandsevendistributioncentresthroughoutSouthernAfrica.EdwardSnellownsanumberofprominentinternationalandSouthAfricanspiritsbrands,includingJackDaniel’swhisky,CapetoRiocane,RussianBearvodkaandWellingtonbrandy,aswellastheCraighallwinelabel.WhereasbrandhouseandDistellarepredominantlyactiveinthepremiumandproprietarysegmentsofthespiritsmarkets,EdwardSnellmainlysuppliesthelowerpricedmarketsegment.

DGB’sproductionheadquartersarelocatedinWellingtonintheWesternCape(theBellinghamcellar),whileitssales,marketingandadministrativeheadofficeisinMidrand.Amongotheroperations,DGBalsoownstherenownedBoschendalwinefarmintheCapewinelands.ApartfromtheBoschendallabel,DGBalsomarketswinetrademarkssuchasBellingham,DouglasGreenandGrahamBeck.DGB’sspiritsportfolioincludesbrandssuchasNordicIcevodka,RedHeartrum,andZappasambuca.Pernod RicardSouthAfricaisasubsidiaryof

thesecondlargestinternationalwineandspiritscompanyintheworld,PernodRicard.PernodRicardsellsarichportfolioofspiritsbrandsinthedomesticmarket,includingChivasRegal,Ballantine’sandJamesonwhisky,Olmecatequila,Absolutvodka,Kahlualiqueur,MalibuandHavanaClubrumandMartellbrandy,aswellasMummchampagneandLongMountainwines.

LocatedmainlyintheWesternCapeandNorthernCapeprovinces,thewineindustryischaracterisedbylowerlevelsofconcentrationcomparedtothespiritsandbeerindustry,withmorethan500activewineproducersinthecountry.ApartfromDistellandDGB,KWVisoneofthelargestproducersinthewineindustry,withwell-knownwinelabelssuchasKWVWines,CathedralCellar,LaborieandRoodeberg.KWVwinesandbrandies(e.g.Imoya,WildAfricaandKWVBrandy)arepopularinexportmarkets.OthersmallerindependentwineproducersincludeMooiuitsig,Vergelegen,Warwick,Fairview,Meerlust,Simonsig,Delheim,NeilEllis,L’Ormarins,Morgenhof,MiddelvleiandZevenwacht,tonamebutafew.

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Figure21:Excisedutiesonliquoraccountedfor47%oftheR21billioninspecificexcisetaxcollected

bygovernmentduring2009/2010Figure 19b Figure 20

Figure 21 Figure 22

Figure 24 Figure 25

Figure 26 Figure 30

CigarettesR9.2billion(43.2%)PipetobaccoR482.2million(2.3%)PetroleumproductsR872.7million(4.1%)BLNSDuties/NeighboursR667.7million(3.1%)BeerR5.8billion(27%)SorghumR34.4million(0.2%)WineandAFBsR1.5billion(7%)SpiritsR2.8billion(13.1%)

Whiletheliquorcompanieslistedinthisreportdonotrepresentanexhaustiveaccountofalltheplayersintheindustry,itdoesincludethelargestmanufacturersanddistributorsinthemarket.AccordingtoACNielsen,thethreelargestproducersintheliquormarket–namelySAB,Distellandbrandhouse–hadacombinedmarketshareofroughly91%inbulkvolumetermsand82%invalueterms(measuredatoff-premiseprices)duringthe12monthsbetweenJune2009andMay2010.

4.4 Bolstering government tax revenue

Financialproceedsarisingfromdirectandindirecttaxesontheproductionandsaleofbeverages,particularlyalcoholicbeverages,areanimportantsourceofgovernmentrevenueinSouthAfrica.Theliquorindustrycontributestogovernmenttaxrevenueinvariousways,includingexciseduties,valueaddedtax(VAT),corporatetaxandpersonalincometax.Althoughonecanarguethatexciseduties,VATandincometaxesessentiallyfalluponliquorindustryemployeesandconsumersofalcoholicbeverages,andnotonmanufacturers,itisneverthelessinstructivetoconsiderthetotalamountofstaterevenuederivedfromtaxesontheproductionandsaleofliquor.Inthisregard,QuantecResearchestimatesthattheliquorindustryanditsemployeescontributedaroundR16billiontostatecoffersduring2009,or2.6%oftotalgovernmenttaxrevenueinSouthAfrica.17

Thesinglelargestproportionofthetaxpaidbytheliquorindustryduring2009wasderivedfromspecificexcisetax.AccordingtoexcisetaxstatisticsfromtheDepartmentofTradeandIndustry,excisedutiesderivedfromtheliquorindustry(excludingsorghum)amountedtoR10.01billionduringtheApril2009toMarch2010period,representingroughly60%oftheliquorindustry’stotaltaxburden,and47%ofallexcisetaxcollectedinSouthAfrica(seeFigure21).WithexcisedutiestotallingR5.7billionin2009/2010,themaltbeerindustryaccountedfor57%oftheliquorindustry’scontributiontoexciseduties,followedbyspirits(R2.8billion)andwineandalcoholicfruitbeverages(R1.5billion).

Accordingtothe2010BudgetReview,thegovernmentreceived78.90cinexcisetaxfromevery340mlcanofmaltbeersoldin2009/10.Inthe

Source: Department of Trade and Industry

17Thisestimateonlyincludesthecorporatetaxespaidbyliquormanufacturers,personalincometaxpaidbyemployeesintheliquorindustryandtheVAT,customsandexcisedutiespaidbyliquorconsumers.Itdoesnotincludethetaxcontributionsofthesupplierstotheliquorindustry,noranyoftheliquorindustry’srippleeffectsthroughouttheeconomy.

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Table 12: Specific excise duties: 2009/10 vs 2010/11

Product2009/10

Excise duty rate2010/11

Excise duty rate

Change in excise duties

Nominal Real

MaltbeerR46.41/litreofabsolutealcohol(78.90c/average340mlcan)

R50.2/litreofabsolutealcohol(85.34c/average340mlcan)

8.2% 2.50%

Traditionalbeer 7.82c/litre 7.82c/litre 0.0% -5.70%

TraditionalAfricanbeerpowder

34.70c/kg 34.70c/kg 0.0% -5.70%

Unfortifiedwine R1.98/litre R2.14/litre 8.1% 2.40%

Fortifiedwine R3.72/litre R4.03/litre 8.3% 2.60%

Sparklingwine R6.16/litre R6.67/litre 8.3% 2.60%

Cidersandalcoholicfruitbeverages

R2.33/litre(79.32c/average340mlcan)

R2.52/litre(85.68c/average340mlcan)

8.2% 2.50%

SpiritsR77.67/litreofabsolutealcohol(R25.05/average750mlbottle)

R84.57/litreofabsolutealcohol(R27.27/average750mlbottle)

8.9% 3.20%

Cigarettes R7.70c/20cigarettes R8.94/20cigarettes 16.1% 10.40%

Cigarettetobacco R9.15/50g R9.73/50g 6.3% 0.60%

Pipetobacco R2.5/25g R2.7/25g 8.0% 2.30%

Cigars R444.88/23g R47.66/23g 6.2% 0.50%

Source: National Treasury, Budget Review 2010, p80

current(2010/11)financialyear,theamountwasincreasedby8.2%innominaltermsto85.34c/ 340mlcan(seeTable12),or2.5%inrealterms.Apartfromtraditionalbeer(i.e.sorghum),forwhichexcisewasnotincreased,andspirits,forwhichexcisedutiesincreasedby3.2%inrealterms,alltheotherliquorcategoriessawrealincreasesinexcisedutiesofaround2.5%inthe2010/2011fiscalyear.

ConsideringexcisetaxaccordingtotheRandamountpaidperlitreofabsolutealcoholobtained(seeTable13),spiritscurrentlycarrythehighestexciseduties,atR84.57perlitreofabsolutealcohol(2010/2011fiscalyear).AtR50.40andR50.20respectively,alcoholicfruitbeveragesandmaltbeerranksecondandthirdhighestonthelist.AtonlyR17.83perlitreofabsolutealcohol,theexcisedutiesonunfortifiedwineis78.9%lowercomparedtotheABVexciserateonspirits,and64.5%belowthatofmaltbeer.

Thegovernment’scurrentexcisepolicyistomaintainatotaltaxburden(VATandexciseduties)of33%onmaltbeer,23%onwineand43%onspiritsinSouthAfrica.However,duringhisBudgetSpeech,

MinisterPravinGordhanannouncedthattheNationalTreasuryisreinvestigatingthesebenchmarks,whichweresetin2002,andsuggestedthattheymaybeincreasedinanattempttocurbalcoholabuse.

Table 13: Excise duties – Rand per litre of absolute alcohol

Product2009/10

Excise duty rate

2010/11 Excise duty

rate

Spirits R77.67 R84.57

Alcoholicfruitbeverages

R46.60 R50.40

Maltbeer R46.41 R50.20

Sparklingwine R37.33 R40.42

Fortifiedwine R21.88 R23.71

Unfortifiedwine R16.50 R17.83

Sorghumbeer R1.86 R1.86

Sorghumflour(R/kg)

R0.35 R0.35

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4.5 Employment creation and other economic impacts of the liquor industry

TheliquorindustryisanimportantsourceofhouseholdemploymentinSouthAfrica.Unfortunately,StatisticsSouthAfricadoesnotprovidedisaggregatedemploymentstatisticsforthebeveragesector–nottomentionfortheliquorindustry–implyingthattherearenoofficialstatisticsonthenumberofjobssustainedbytheliquorindustryinSouthAfrica.

However,thethreelargestplayersinthemarket–SAB’sbeerdivision(5,600employees),Distell(4,200)andbrandhouse(900plus)–employcloseon11,000workersintotal.Furthermore,arecentreportbyConningarthEconomistsestimatedthedirectlabourimpactofwinecellarsandwinemanufacturingataround16,000workers,withroughly15,000ofthosejobslocatedintheWesternCape.18,19Forthepurposesofthisanalysis,QuantecResearchestimatedthattheliquorindustry(excludingsorghumbeer)employedroughly21,300workersin2009,witharound15,100workinginthewineandspiritssegmentsofthemarket(reflectingthehigherlabourintensityofthewineindustry)andtheremaining6,200inthemaltbeerindustry.

4.6 The ripple effects of the liquor industry in South Africa WhiletheliquorindustryinitselfprovidesemploymentandincometothousandsofworkersandmakesasubstantialdirectcontributiontoexportearningsandgovernmenttaxrevenueinSouthAfrica,thisinitialinjectionofeconomicactivityisonlythetipoftheiceberg.TheresultsfromtheSAMmultiplieranalysissuggestthat,afteraccountingforalltheindirectandinducedeconomicbenefitsarisingfromtheliquorvaluechain,theliquorindustrystimulatedproductiontothevalueofR333billionduring2009,ofwhich51%canbetracedbacktothemaltbeerindustry.Inaddition,theliquorindustrysupportedroughly548,000jobs,or4.5%oftotalemploymentinSouthAfrica,yieldingmorethan R40billioninhouseholdincome.Themaltbeerindustrymakesaparticularlyimportantcontributiontotheeconomy-wideemploymentimpactoftheliquorindustry-roughly245,407jobs(or45%of

18Source:SAWIS,9December2009.“Macro-economicimpactofthewineindustryontheSouthAfricaneconomyalsowithreferencetotheimpactsontheWesternCape.”ReportcompiledbyConningarthEconomists,page52-53.19Conningarthestimatedthat,includingtheindirectandinducedimpacts,thewineindustrysupportsjustover275,000jobsinSouthAfrica.ThewineindustryhasahighlabourintensityduetothelabourintensiveproductionmethodsfollowedintheprimaryagriculturesectorinSouthAfrica.

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20Source:SAWIS,9December2009.“Macro-economicimpactofthewineindustryontheSouthAfricanEconomy(alsowithreferencetotheimpactsontheWesternCape,”ReportcompiledbyConningarthEconomists,page18-19.

thejobssupportedbythetotalliquorindustry)canbetracedbacktothemaltbeerindustry. TheresultsfromthemultiplieranalysisconfirmthattheliquorindustryisakeysourceofgovernmentrevenueinSouthAfrica.ThedirectimpactoftheliquorindustryontaxrevenueisestimatedatR19.5billionin2009,withamighty57%derivedfromtaxesontheproductionandsaleofmaltbeer.Thetaxrevenuesarisingfromtheindirectandinducedimpactsthroughtheeconomyraisedthegovernment’staketoanestimatedR41.8billionin2009,orahefty6.7%oftotalgovernmenttaxrevenue. EstimatedatR94billionin2009,or4.4%ofthecountry’sgrossdomesticproduct(GDP),theliquorindustrymakesasubstantialcontributiontotheSouthAfricaneconomy.TheGDPmultiplier-basedonnetsalesbyliquormanufacturers-is2.08,indicatingthatforeveryR1.00insalesrevenuegeneratedbytheliquorindustry(i.e.turnoveratcompanylevel)R2.08isaddedtothecountry’sGDP. Apartfromthemultipliereffectsquantifiedintheaboveanalysis,theliquorindustry–andtheCapewinerouteinparticular–alsoservesasadrawcardfortourisminSouthAfrica.Althoughdataonthenumberoftouriststhatvisitthewinelandsarelacking,ConningarthEconomistsmadearoughestimatethataroundR4.2billioninforeigntourismspendin2008maybeindirectlylinkedtovisitorstothewinelands,whilelocaltouristsinalllikelihoodspentanotherR800millioninthewinelands.20 Consideringitscontributionintermsoftourism,jobcreation,exportearningsandgovernmenttaxrevenue,itisclearthattheSouthAfricanliquorindustryhasdevelopedintoamajorforceintheSouthAfricaneconomy.

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5. Concluding remarks

SABistheleadingproduceranddistributorofmaltbeerandsoftdrinksandoneofthelargestmanufacturingfirmsinSouthAfrica.Duringits2009/2010financialyear,SABproducedmorethan2.5billionlitresofalcoholicbeverages,sold1.6billionlitresofnon-alcoholicbeveragesandemployedaworkforceof9,390people.

WithsalesrevenueofR33billionin2009,thebeveragesmanufacturedbySABaccountedfor56.3%ofthetotalvalueofproductionbythebeveragemanufacturingsectorinSouthAfrica.However,thisinitialinjectionofeconomicactivitybySABisonlythetipoftheiceberg.WhentheeconomicmultipliereffectsofSAB’soperationsarealsotakenintoconsideration,SABanditsvaluechainsustainedproductiontothevalueofR228billion,supportedmorethan355,000jobsthroughoutSouthAfricaandgeneratedR27.6billioninlabourincome.Inaddition,theeconomy-wideimpactofSAB’soperationssustainedcapitalstocktothevalueofR121billionduring2009,or2.4%ofSouthAfrica’stotalcapitalstock.

SAB’sbeerandsoftdrinksoperationshaveparticularlyhighpositivespin-offeffectsonemploymentinSouthAfrica.ForeachjobofferedbySABanditsdirectsuppliers,6.7additionaljobsaresustainedintherestoftheSouthAfricaneconomy,ofwhichroughly86%areforindividualsfrompreviouslydisadvantagedbackgrounds.Furthermore,bothSAB’slabour/capitalratioanditsGDP/capitalratiocomparefavourablytotheratiosfortheoverallSouthAfricaneconomy,suggestingthatSABanditsfirstroundsuppliersareslightlymoreefficientinutilisingaunitofinvestmentcomparedtotherestoftheSouthAfricaneconomy.

Duringthe2009/2010fiscalyear,theNationalTreasuryreceivedR10.2billionintaxrevenuefromSAB(corporatetaxes),itsemployees(personalincometax)andconsumersofbeer,FABsandsoftdrinksproducedbySAB(i.e.VATandexciseduties).TheamountSABaddedtostatecoffersisalmostequaltothetotalamount(R10.6billion)thatgovernmenthasspentsince1992onelectrifying4.9millionhouseholds,5,000schoolsandallhealthclinicsinSouthAfrica.Fromanotherperspective,theR10.2billioncollecteddirectlyfromSABin2009/10waseffectivelysufficienttofinancetheconstructionofSoccerCityStadium-thebiggestall-seatedstadiumeverbuiltforanyFIFAWorldCupfootballevent–theGreenPointStadiuminCapeTown,Durban’sMosesMabhidaStadiumandthePeterMokabaStadiuminNelspruit.WhenthetaxincomegeneratedbytheindirectandinducedimpactsofSAB’soperationsthroughouttheeconomyarealsoconsidered,thegovernmentrevenueaddedbySABanditsupstreamanddownstreampartnersincreasestoastaggeringR28billion,or4.5%ofthegovernment’stotaltaxhaulduring2009.SAB’sbeerdivisionaccountedforanestimated48.5%ofthetaxrevenuegeneratedbythetotalliquorindustryin2009.

Theentireliquorvaluechainaccountsforroughly548,000jobs,R41.8billionintaxrevenueandR94.2billion(4.4%)ofthecountry’sGDP

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ValuedatR66.2billionduring2009,thetotaleconomiccontributionfromtheproductionandsaleofSAB’sproductstotheSouthAfricaneconomyissubstantial.Approximately3.1%ofSouthAfrica’sgrossdomesticproductcanbetracedbacktothedirect,indirectandinducedimpactsofSAB.BasedonSAB’ssalesrevenueofR32.7billionin2009,thecompany’sGDPmultiplierisestimatedat2.02,indicatingthatforeveryR1.00insalesrevenuegeneratedbySAB,R2.02isaddedtothecountry’sGDP.SAB’sbeerdivisionaccountsfor66%ofthecompany’stotalGDPinjection,and46%oftheeconomy-widecontributionofthetotalliquorindustry.

InadditiontothetangibleeconomicbenefitsarisingfromthedeepemploymentlinkagesandeconomicoutputstimulatedbySAB,thecompanyalsoinvestslargeamountsinawiderangeofcorporatesocialinvestmentactivities,pioneeringblackeconomicempowermentinitiativesandresponsiblealcoholusecampaigns.SAB’sbeerdivisionspendsinexcessofR40millionannuallyoninitiativeswhichaimtotacklealcoholabuseandencourageresponsibledrinking,whilethecompanydedicatesmorethanR21millionperannumtoitsenterprisedevelopmentandcorporatesocialinvestment(CSI)initiatives.

AkeyprojectistheSABKickStartprogramme,whichcelebratesits15thanniversaryin2010.SinceitsinceptioninMay1995,theprogrammehasempoweredmorethan22,900youngentrepreneurswithbusinessskillstraining,andhasenabledtheestablishmentof3,200fledglingbusinesses.Furthermore,theBroadBasedBlackEconomicEmpowerment(BBBEE)transactionannouncedbySABinJune2009,SABZenzele,isworthover R7billion,andwasawardedtheDealoftheYearAwardintheDealMakersmagazineAwards.

ThisanalysisalsoconsideredtheeconomicfootprintofthetotalliquorindustryinSouthAfrica.Theliquorindustrymakesanimportantcontributiontoemployment,taxrevenueandtheoverallgrossdomesticproductinSouthAfrica.Withliquorsales

volumes(excludingsorghumbeer)topping 3.5billionlitresin2009,theliquorindustryanditsdirectsuppliersprovidedemploymenttoanestimated87,000employeesandgeneratedtaxrevenueinexcessofR19.5billion.

However,thisdirecteconomicimpactoftheliquorindustryonlyconstitutesafractionoftheoveralleconomiccontributionmadebytheindustry.Afteraccountingforalltheindirectandinducedeconomic

Maltbeermakesthelargestcontributionofalltheliquorsegments,accountingformorethanhalfoftheliquorindustry’stotalGDPcontribution

Thetrade,agriculture,financeandotherbusinessservicessectorsarethelargestbeneficiariesintermsofjobcreationbytheliquorindustry

36

benefitsarisingfromtheliquorvaluechain,roughly548,000employmentopportunities,R41.8billionintaxrevenueandR94.2billion(or4.4%)ofthecountry’sgrossdomesticproductcanbetracedbacktotheliquorindustry’smanufacturingoperationsandcapitalexpenditure.Thevalueofproductionsupportedbytheliquorindustryamountedto R332.7billionduring2009,sustainingR173billionworthofcapitalstockinSouthAfrica.Theindustry’sGDPmultiplierisestimatedat2.08,indicatingthatforeveryR1.00insalesrevenuegeneratedbytheliquorindustry,R2.08isaddedtothecountry’sGDP.

Themaltbeerindustryisthelargestcontributortovalueaddedintheliquorindustry,accountingforanestimated51.4%(orR48.4billion)oftheliquorindustry’stotalGDPcontributionin2009.Roughly2.3%ofSouthAfrica’sGDPcanbetracedbacktothedirect,indirectandinducedimpactsofthemaltbeerindustry.Themaltbeerindustrymakesaparticularly

importantcontributiontotheeconomy-wideemploymentimpactoftheliquorindustry–roughly245,000workersowetheirjobsdirectlyorindirectlytotheproductionandconsumptionofmaltbeer.

TheSAMmodellingtechniquesemployedinthisstudyalsoallowfortheanalysisofemploymenteffectsacrossdifferentindustriesandskillslevels.Themajorityofthejobssustainedbythemaltbeerindustry(andtotalliquorindustry)areintheretail,wholesale,cateringandaccommodation;finance,insuranceandotherbusinessservices;agriculture,forestryandfishing;andfoodandbeveragemanufacturingsectors.Inaddition,60%ofthejobsthatcanbetracedbacktothemaltbeerindustryareintheformoflowskilledorinformalsectoremployment.Theabilityofthemaltbeerindustrytocreateemploymentopportunitiesforlowskilledworkersshouldbeviewedpositively,giventhehighunemploymentrateamonglowskilledworkersinSouthAfrica.

Themaltbeerindustryaccountsforanimpressive57%oftheliquorindustry’scontributiontoexciseduties

Themaltbeerindustrymakesanotablecontributiontoemploymentoflowskilledworkers

37

Whereasthedirectimpactsoftheliquorindustryonemployment,labourincomeandthegrossdomesticproductarerelativelysmall(typicallylessthan25%ofthetotalimpact)comparedtotheindirectandinducedimpacts,thisisnotthecasefortheindustry’scontributiontogovernmenttaxrevenue.Thedirectimpactoftheliquorindustryaccountsforalmost46%ofthetotaleconomy-widetaximpact,indicativeofthelargetaxburdenbornebythe liquorindustry.

Thelargestproportion(59%)ofthetaxrevenuegeneratedbytheliquorindustrystemsfromindirecttaxessuchasexcisedutiesandVAT.ExcisedutiesderivedfromtheliquorindustrytoppedR10billionduringthe2010fiscalyear,representing47%ofallexcisetaxcollectedinSouthAfrica.Themaltbeerindustryaccountedfor57%(orawhopping R5.8billion)oftheliquorindustry’scontributiontoexcisedutiesduringthe2010fiscalyear.Consideringthatmaltbeersalesaccountforabout51%oftotalliquorsalesinalcoholbyvolume(ABV)terms, theexciseburdenonthemaltbeerindustryislargebycomparison.

Inall,theresultsfromthisanalysisshowthattheliquorindustryisamajorforceintheSouthAfricaneconomy.Theliquorindustry–andSABinparticular–isanindispensablesourceofgovernmenttaxrevenue,andhashighspin-offeffectsonproduction,employmentcreationandvalueaddedintheSouthAfricaneconomy.SABalsotakescorporateresponsibilityseriously,withitsinnovativeapproachtoBBBEEandinvestmentsofmorethanR60millionperannuminresponsiblealcoholusecampaignsandCSIactivities.Withastrongfocusonskillsdevelopment,entrepreneurshipandjobcreationthroughthestimulationofsmallandmediumsizedenterprises,SAB’sinitiativesaresupportiveofthegovernment’sASGISAprogramme,aimedathigherandbroadersharedeconomicgrowth.

WithaninvestmentofmorethanR60millionperannuminresponsiblealcoholusecampaignsandCSIactivities–andthe“DealoftheYear”BBBEEtransaction–SABtakescorporateresponsibilityseriously

38

TheprojectcommencedwiththecollectionoffinancialandlabourinformationdatafromSAB,describingitsbeerandsoftdrinksoperationsseparately,aswellasdeskresearchbyEconexonthestructureanddirecteconomiccontributionofthebroaderliquorindustryinSouthAfrica.TheinformationprovidedbySABcomprisessalesrevenue,inputcosts,exportearnings,capitalstockandexpenditureanddetailedemploymentandlabourremunerationbyskill,genderandpopulationgroupforthe2009calendaryear(alternatively,SAB’slastfinancialyear-fromApril2009toMarch2010).SABalsoprovidedEconexwithestimatesoftotalliquorsalesvolumes(andthevalueofsales),aswellasthebreakdownforthemainliquorcategories,namelymaltbeer,sorghumbeer(commerciallybrewedonly),spirits,wineandflavouredalcoholicbeverages.TheseestimateswereusedtoapproximatethecontributionofthetotalliquorindustrytotheSouthAfricaneconomy,andtomaptheeconomicfootprintofthemaltbeerindustryinthecountry.

InlightofthefactthatthemajorityofsorghumbeerconsumedinSouthAfricaishome-brewed,renderingthesorghumbeersalesestimatesincomplete,itwasdecidedthatthefocusofthestudywouldbeontheliquorindustryexcludingthesorghumbeersegment.TheinformationsuppliedbySABwassupplementedwithofficialdata,suchasemploymentandmanufacturingsalesstatisticsfromStatisticsSouthAfricaandtradestatisticsfromtheDepartmentofTradeandIndustry,aswellaswithdeskresearchundertakenbyEconex(e.g.theoperationsofthekeyplayersintheliquorindustry).

Themacro-economicimpactassessmentconductedforthisstudywasbasedonadetailedinput-outputanalysisandcomprehensiveSocialAccountingMatrix(SAM)basedeconomicmodelforSouthAfrica,developedandmaintainedbyQuantecResearch.Input-outputanalysiscanbedescribedasanaccountingframeworkthatprovidesasnapshotoftheeconomyataspecificpointintime(i.e.thebaseyear-2009inthecaseofthisstudy),describingthecompositionandlevelofeconomicactivityandtheinteractionsanddependenciesbetweenindustriesandinstitutions.SAMmultipliermodelsarewell-suitedforthepurposeofthisstudy,andgenerally,formodellingtheintricatelinkagesofdifferentindustriesandmeasuringtheeconomy-wideeffectsofaspecificsector.Thesemodelsareoftenusedforeconomicimpactanalysis,wheretheeconomicimplicationsofapotentialaction(e.g.alargeinfrastructureinvestment)ornewpolicyorregulationcanbeevaluatedpriortotakingthataction.

TheSAMmodeldevelopedbyQuantecidentifies43activitiesorindustriesintheSouthAfricaneconomy.However,forthepurposeofthisanalysis,

Appendix 1: Methodology

ThisstudyaimedtoquantifytheeconomicimpactofSAB,includingbothitsdirectcontributiontotheSouthAfricaneconomyandtheeconomicmultipliereffectsworkingthroughacomplexchainofbusinessactivity.

Everysocialaccountingmatrixanalysisbeginswithaninjectionofnewmoneyintotheeconomy–thisrepresentstheso-calleddirecteffect.Thedirecteconomicimpactoftheliquorindustryistheresultofoperationalandcapitalexpendituresbythedifferentplayersintheliquorindustry.

39

QuantecextendedtheSAM,withtheaidoftheabovementionedSABdata,tosplitthebeverageindustryintotwobroadcategories,namelynon-alcoholicand(non-sorghum)alcoholicbeverages,afterwhichthealcoholicbeveragescategorywasthensub-dividedintothreeproductgroups,namely“SABmaltbeer”and“othermaltbeer”(thesumtotalofwhichforms“totalmaltbeer”)andtherestoftheliquorindustry(i.e.wine,spiritsandflavouredalcoholicbeverages).

Similarly,thenon-alcoholicbeverageindustrywassubdividedintotwosegments,namely“SABsoftdrinks”andtherestofthenon-alcoholicbeverageindustry.TheactivitiesandcommoditiesinthefullSAMaresummarisedinAppendix7.ThelabourcomponentoftheSAMwasextendedtoaccommodatelabourbyskill,populationgroupandgender.Capitalstockandexpenditureareavailableforthreeassetclasses,namelyconstructionwork,machineryandtransportequipment.

EverySAManalysisbeginswithaninjectionofnewmoneyintotheeconomy–thisrepresentstheso-calleddirecteffect.Thedirecteconomicimpactoftheliquorindustryistheresultofoperationalandcapitalexpendituresbythedifferentplayersintheliquorindustry.Ongoingspendingcreatesemploymentandincomeforindividualsworkingwithintheliquormanufacturingindustry,aswellasatitsdirectsuppliers.

TheSAMmodelthencalculatesindirectandinducedimpacts,derivingfromseveralsources.Forexample,ifSABpurchasessuppliesinSouthAfrica,thesuppliersreceiveincomewhichtheyinturnspend,leadingtofurtherroundsofincomeandexpenditurebyotherbusinessesandindividualsinSouthAfrica.Moreemploymentandincomeisgenerated.

Furthermore,SAB’ssuppliersalsohavetoinvesttomaintainandextendtheirproductioncapacity.Thisindirecteffectresultingfromthepurchasesofandinvestmentbysuppliers,alongwiththespecificimpactsondifferentindustries,canbemodelledthroughtheSAM.Moreover,theremunerationthatemployeesintheliquorindustryanditssupplychainreceivewillbespent,creatingyetanotherimpact–namelythe“inducedimpact”.ASAMcantracetheserippleeffectsandprovideestimatesoftotaleconomy-wideemployment,incomeandreturnsoncapital.

Essentially,theSAMoffersacompletemodeloftheeconomyathand,focusingonrelationshipsamongproductionactivities(splitbetweenvariousindustries),labour,households,andthepublicsector.Inaddition,theSAMoffersawaytoanalysethetotalimpactonSouthAfricanemploymentandincome,includingthedistributionamongdifferentskillsandpopulationgroups.

Theresultspresentedinthisreportderivemainlyfromthefollowingdatasources:

•Publisheddataandreportsfromofficialsources,suchasStatisticsSouthAfrica,theNationalTreasury,theSouthAfricanReserveBankandtheDepartmentofTradeandIndustry

•Publicandinternalmanagementdocuments,aswellasemailsandotherwrittenandverbalcommunicationfromSABstaff,supplyinginformationonSAB’skeyfinancialstatistics,taxcontribution,productioncosts,employmentandlabourremunerationnumbers

•Estimatesoftotalliquorsalesvolumes(andvalue)for2009splitbetweenbeer,wine,spiritsandflavouredalcoholicbeverages–suppliedbySAB

•InformationpublishedonthewebsitesofthelargestSouthAfricanliquormanufacturers

•Quantec’sinput-outputtablesfortheSouthAfricaneconomy(usedtomapthedirect,indirectandinducedimpactsofSAB’soperationsinSouthAfrica)

40

Impact including gross domestic fixed investment (Rand million)

DescriptionDirect impact

Indirect impact


Induced impact

Economy-wide impact

Initial injection

Sales-Net 32,740 32,740 32,740 32,740 32,740

Sales-Netatconsumerprices 54,653 54,653 54,653 54,653 54,653

Grossdomesticfixedinvestment 3,067 3,067 3,067 3,067 3,067

Output by industry (intermediate at user-prices)

Agriculture,forestryandfishing 2,336 1,570 3,906 3,224 7,130

Miningandquarrying 52 2,353 2,404 3,587 5,991

Foodandbeverages 60,442 5,838 66,279 8,386 74,665

Textiles,clothingandleathergoods 64 266 331 2,765 3,096

Woodandpaper;publishingandprinting 1,418 1,297 2,715 3,140 5,855

Petroleumproducts,chemicals,rubber andplastic

1,856 3,728 5,585 10,135 15,720

Othernon-metalmineralproducts 658 732 1,390 634 2,024

Metals,metalproducts,machineryandequipment

1,876 3,328 5,205 2,343 7,548

Electricalmachineryandapparatus 14 619 633 714 1,347

Radio,TV,instruments,watchesandclocks 8 341 348 1,651 1,999

Transportequipment 835 7,021 7,856 3,686 11,542

Furniture,tobaccoandothermanufacturing

24 435 458 2,226 2,684

Electricity,gasandwater 463 639 1,102 2,202 3,304

Construction(contractors) 412 3,419 3,831 1,429 5,260

Wholesaleandretailtrade,cateringandaccommodation

619 694 1,314 25,773 27,086

Transport,storageandcommunication 325 1,525 1,850 11,212 13,062

Financialintermediation,insurance, realestateandbusinessservices

3,372 5,392 8,764 20,680 29,445

Community,socialandotherpersonalservices

1,694 1,036 2,730 7,865 10,595

Total output (at consumer prices) 76,468 40,233 116,701 111,652 228,354

Outputmultiplier 1.4 0.7 2.1 2.0 4.2

Capital requirement

Buildingsandconstructionworks 16,306 13,063 29,369 55,315 84,684

Machineryandotherequipment 8,233 4,376 12,609 14,800 27,409

Transportequipment 1,027 1,184 2,211 7,025 9,237

Total capital requirement 25,566 18,623 44,89 77,141 121,329

%ShareofRSAcapitalstock 0.5 0.4 0.9 1.5 2.4

Appendix 2: The impact of SAB on the South African economy – 2009

41

Direct impact

Indirect impact


Induced impact

Economy-wide

impact

Labour income by skill

Highskill 2,896 1,525 4,421 6,043 10,463

Mediumskill 1,777 940 2,717 6,194 8,911

Lowskill 1,941 1,185 3,126 3,767 6,893

Labourincome-Formalsector 6,614 3,650 10,264 16,004 26,268

Informal sector 134 176 310 1,094 1,404

Total labour income 6,748 3,826 10,574 17,098 27,672

Employment by race (number)

Black 33,606 38,021 71,626 182,333 253,960

Coloured 5,077 6,071 11,148 26,280 37,428

Asian 1,714 1,809 3,524 9,887 13,411

White 6,088 9,027 15,115 35,841 50,956

Total employment (including informal sector)

46,485 54,928 101,413 254,341 355,755

Employment by gender (number)

Male 27,818 37,723 65,541 140,571 206,111

Female 18,667 17,206 35,873 113,770 149,643


46,485 54,928 101,413 254,341 355,755

Employment by skill (number)

Highskill 4,128 5,054 9,182 21,714 30,896

Mediumskill 11,558 17,006 28,564 84,707 113,271

Lowskill 24,421 23,842 48,263 84,506 132,769

Employment - Formal sector 40,107 45,903 86,010 190,926 276,936

Employment-Informalsector 6,378 9,025 15,404 63,415 78,819

Total employment 46,485 54,928 101,413 254,341 355,755

42

Direct impact

Indirect impact


Induced impact

Economy-wide

impact

Employment by industry



Foodandbeverages 11,777 292 12,070 4,219 16,288


Woodandpaper;publishingandprinting 836 1,269 2,106 3,112 5,218

Petroleumproducts,chemicals,rubberandplastic 812 968 1,779 2,382 4,162


Metals,metalproducts,machineryandequipment 2,385 2,379 4,764 2,080 6,843

Electricalmachineryandapparatus 18 286 304 377 681

Radio,TV,instruments,watchesandclocks 7 56 64 287 351


Furniture,tobaccoandothermanufacturing 161 440 601 1,949 2,550

Electricity,gasandwater 271 385 656 1,265 1,921

Construction(contractors) 1,068 8,607 9,675 3,845 13,520

Wholesale,retail,cateringandaccommodation 5,042 4,734 9,776 119,520 129,296


Finance,insurance,realestateandbusinessservices

10,002 13,191 23,193 41,051 64,244

Community,socialandotherpersonalservices 3,708 6,190 9,898 39,232 49,130


Employment multiplier (In terms of direct jobs)

Employmentmultiplier(excludinginformal) 2.1 4.8 6.9

Employmentmultiplier(includinginformal) 2.2 5.5 7.7

%ShareofRSAemployment 0.8 2.1 2.9

Government income

Directtaxes-Corporate 2,256 928 3,184 4,085 7,269

Directtaxes-Personal 1,160 743 1,903 3,138 5,040

Indirecttaxes 9,010 2,379 11,389 4,377 15,766

Total government tax revenue 12,426 4,050 16,476 11,599 28,075

%Shareofgovernmenttaxrevenue 2.0 0.7 2.6 1.9 4.5

Value added

Grossoperatingsurplus 9,069 7,415 16,484 22,071 38,555

Labourincome 6,748 3,826 10,574 17,098 27,672

Valueaddedatfactorcosts(GDP) 15,817 11,240 27,058 39,169 66,227

GDP multiplier 0.5 0.3 0.8 1.2 2.0

% Share of RSA GDP 0.7 0.5 1.3 1.8 3.1


43



Indirect impact


Induced impact

Economy-wide

impact

Initial injection

Sales-Net 22,653 22,653 22,653 22,653 22,653








Woodandpaper;publishingandprinting 1,337 940 2,277 1,987 4,264

Petroleumproducts,chemicals,rubberandplastic

327 2,416 2,743 6,496 9,238

Othernon-metalmineralproducts 428 470 898 402 1,300


1,475 2,245 3,720 1,487 5,208






Construction(contractors) 235 2,154 2,389 905 3,293


427 459 887 16,141 17,028

Transport,storageandcommunication 216 992 1,208 7,139 8,347

Financialintermediation,insurance,realestateandbusinessservices

1,537 3,365 4,902 13,184 18,086

Community,socialandotherpersonalservices 1,162 684 1,847 5,056 6,903



Capital requirement



Transportequipment 728 768 1,496 4,462 5,958



Appendix 3: The impact of the SAB’s beer interests on the South African economy – 2009

44

Direct impact

Indirect impact


Induced impact

Economy-wide

impact


Highskill 2,193 988 3,181 3,829 7,010

Mediumskill 1,353 518 1,871 3,925 5,796

Lowskill 959 800 1,760 2,400 4,160

Labour income - Formal sector 4,505 2,306 6,811 10,154 16,966

Informalsector 93 114 207 690 897



Black 24,270 24,307 48,578 115,453 164,031

Coloured 3,688 4,082 7,770 16,653 24,423

Asian 910 1,192 2,103 6,251 8,353

White 3,812 5,967 9,779 22,720 32,499


32,681 35,548 68,229 161,077 229,306


Male 19,683 24,130 43,813 89,057 132,870

Female 12,998 11,418 24,416 72,020 96,436


32,681 35,548 68,229 161,077 229,306


Highskill 2,508 3,472 5,980 13,755 19,734

Mediumskill 9,562 9,917 19,479 53,582 73,061

Lowskill 15,949 16,321 32,270 53,795 86,065



Total employment 32,681 35,548 68,229 161,077 229, 306

45

Direct impact

Indirect impact


Induced impact

Economy-wide

impact






Woodandpaper;publishingandprinting 729 878 1,607 1,975 3,582


132 608 740 1,525 2,265



1,868 1,584 3,452 1,318 4,770





Electricity,gasandwater 120 204 324 811 1,135





5,710 8,318 14,027 26,170 40,197

Community,socialandotherpersonalservices 2034 4,067 6,101 25,205 31,306






Government income


Directtaxes-Personal 675 518 1,192 1,990 3,182

Indirecttaxes 7,757 1,766 9,523 2,756 12,278



Value added


Labourincome 4,598 2,420 7,018 10,845 17,863


GDP multiplier 0.5 0.3 0.8 1.1 1.9

% Share of RSA GDP 0.5 0.4 0.9 1.2 2.0


46



Indirect impact


Induced impact

Economy-wide

impact

Initial injection

Sales-Net 10,087 10,087 10,087 10,087 10,087


Grossdomesticfixedinvestment 945 945 945 945 945


Agriculture,forestryandfishing 0 489 489 1,159 1,649

Miningandquarrying 4 877 882 1,295 2,177


Textiles,clothingandleathergoods 15 91 106 984 1,090

Woodandpaper;publishingandprinting 81 357 438 1,153 1,591


1,529 1,313 2,842 3,640 6,482

Othernon-metalmineralproducts 230 262 492 232 724


402 1,083 1,485 856 2,340




Furniture,tobaccoandothermanufacturing 13 169 182 796 978


Construction(contractors) 177 1,265 1,443 524 1,967


192 235 427 9,632 10,059

Transport,storageandcommunication 109 533 642 4,072 4,715


1,835 2,027 3,862 7,497 11,359

Community,socialandotherpersonalservices 532 352 883 2,809 3,692



Capitalrequirement



Transportequipment 299 416 715 2,563 3,278



Appendix 4: The impact of the SAB’s soft drinks interests on the South African economy – 2009

47

Direct impact

Indirect impact


Induced impact

Economy-wide

impact


Highskill 703 537 1,240 2,213 3,453

Mediumskill 425 422 846 2,269 3,115

Lowskill 982 385 1,367 1,367 2,734


Informalsector 41 62 103 404 507



Black 9,335 13,713 23,049 66,880 89,929

Coloured 1,389 1,989 3,378 9,627 13,005

Asian 804 617 1,421 3,636 5,057

White 2,276 3,061 5,336 13,121 18,457


13,804 19,380 33,184 93,264 126,448


Male 8,135 13,593 21,727 51,514 73,241

Female 5,669 5,788 11,457 41,751 53,207


13,804 19,380 33,184 93,264 126,448


Highskill 1,620 1,583 3,203 7,959 11,162

Mediumskill 1,996 7,089 9,085 31,125 40,210

Lowskill 8,472 7,521 15,993 30,711 46,704




48


Indirect impact


Induced impact

Economy-wide

impact


Agriculture,forestryandfishing 7 2,231 2,238 5,192 7,430

Miningandquarrying 22 751 774 989 1,763



Woodandpaper;publishingandprinting 107 392 499 1,137 1,636

Petroleumproducts,chemicals,rubberandplastic680 360 1,039 858 1,897

Othernon-metalmineralproducts 196 326 522 318 840

Metals,metalproducts,machineryandequipment 517 795 1,312 761 2,073



Transportequipment 107 866 974 590 1,564

Furniture,tobaccoandothermanufacturing 120 169 289 698 987

Electricity,gasandwater 151 181 332 454 786



Transport,storageandcommunication 122 530 652 4,112 4,764


4,292 4,874 9,166 14,881 24,047







Government income

Directtaxes-Corporate 709 265 974 1,499 2,472

Directtaxes-Personal 485 225 710 1,148 1,858

Indirecttaxes 1,253 613 1,866 1,621 3,487



Value added


Labourincome 2,150 1,405 3,556 6,253 9,809


GDP multiplier 0.5 0.4 0.8 1.4 2.3

% Share of RSA GDP 0.2 0.2 0.4 0.7 1.1


49



Indirect impact


Induced impact

Economy-wide

impact

Initial injection

Sales-Net 45,306 45,306 45,306 45,306 45,306










782 5,182 5,963 14,683 20,646

Othernon-metalmineralproducts 1,283 1,097 2,380 861 3,241


2,018 4,555 6,574 3,411 9,984

Electricalmachineryandapparatus 20 860 880 1,043 1,923




Electricity,gasandwater 308 696 1,003 3,206 4,210



845 975 1,820 39,736 41,556



3,853 7,266 11,119 30,330 41,449




Capital requirement






Appendix 5: The impact of the liquor industry on the South African economy – 2009

50

Direct impact

Indirect impact


Induced impact

Economy-wide

impact


Highskill 3,685 2,061 5,746 8,915 14,661

Mediumskill 2,850 1,421 4,270 9,162 13,432

Lowskill 2,831 1,611 4,442 5,417 9,859


Informalsector 489 244 733 1,623 2,356



Black 63,907 50,731 114,638 278,081 392,720

Coloured 11,101 8,255 19,356 39,825 59,181

Asian 2,134 2,322 4,456 15,246 19,701

White 10,170 11,537 21,707 54,608 76,316


87,312 72,845 160,157 387,760 547,917


Male 53,504 49,443 102,947 213,753 316,700

Female 33,808 23,402 57,210 174,007 231,217


87,312 72,845 160,157 387,760 547,917


Highskill 5,780 6,793 12,574 33,189 45,763

Mediumskill 23,503 20,764 44,268 129,981 174,249

Lowskill 47,754 32,487 80,241 125,738 205,979




51

Direct impact

Indirect impact


Induced impact

Economy-wide

impact








311 1,305 1,616 3,566 5,182

Othernon-metalmineralproducts 1,107 1,351 2,458 1,259 3,716


2,492 3,338 5,830 3,113 8,943






Construction(contractors) 1,291 12,476 13,767 5,929 19,696




13,666 16,431 30,097 61,772 91,868







Government income

Directtaxes-Corporate 2,595 1,295 3,889 6,037 9,927

Directtaxes-Personal 1,561 1,036 2,597 4,621 7,218

Indirecttaxes 15,392 3,594 18,986 5,677 24,663



Value added


Labourincome 9,855 5,337 15,191 25,117 40,308


GDP multiplier 0.5 0.3 0.8 1.3 2.1

% Share of RSA GDP 1.0 0.7 1.7 2.7 4.4


52



Indirect impact


Induced impact

Economy-wide

impact

Initial injection

Sales-Net 25,510 25,510 25,510 25,510 25,510










368 2,720 3,088 7,313 10,401



1,661 2,527 4,188 1,675 5,863








481 517 998 18,173 19,171



1,731 3,788 5,519 14,843 20,362

Community,socialandotherpersonalservices 1,309 770 2,079 5,693 7,772



Capital requirement



Transportequipment 820 865 1,685 5,023 6,708



Appendix 6: The impact of the malt beer industry on the South African economy – 2009

53

Direct impact

Indirect impact


Induced impact

Economy-wide

impact


Highskill 2,287 1,170 3,457 4,311 7,768

Mediumskill 1,436 647 2,083 4,419 6,502

Lowskill 1,041 906 1,947 2,702 4,649


Informalsector 104 128 233 777 1,010



Black 26,138 25,894 52,032 123,444 175,476

Coloured 4,008 4,332 8,340 17,806 26,146

Asian 1,008 1,257 2,265 6,683 8,948

White 4,255 6,290 10,545 24,292 34,837


35,408 37,773 73,181 172,226 245,407


Male 21,388 25,627 47,015 95,221 142,236

Female 14,020 12,146 26,166 77,005 103,171


35,408 37,773 73,181 172,226 245,407


Highskill 2,779 3,663 6,442 14,707 21,148

Mediumskill 10,307 10,561 20,868 57,290 78,158

Lowskill 17,337 17,307 34,644 57,518 92,162




54

Direct impact

Indirect impact


Induced impact

Economy-wide

impact






Woodandpaper;publishingandprinting 780 938 1,718 2,112 3,829

Petroleumproducts,chemicals,rubberandplastic 141 650 791 1,630 2,422


Metals,metalproducts,machineryandequipment 1,997 1,693 3,690 1,409 5,100









Finance,insurance,realestateandbusinessservices 6,054 8,783 14,838 27,981 42,819




Employmentmultiplier(Excludinginformal) 2.0 4.3 6.3

Employmentmultiplier(Includinginformal) 2.1 4.9 6.9


Government income


Directtaxes-Personal 754 585 1,340 2,240 3,580

Indirecttaxes 8,693 1,985 10,678 3,102 13,781



Value added


Labourincome 4,869 2,851 7,720 12,209 19,929


GDP multiplier 0.5 0.3 0.8 1.1 1.9

% Share of RSA GDP 0.6 0.4 1.0 1.3 2.3


55

No Commodities/activities No Commodities/activities

1 Agriculture,forestryandfishing 1 Agriculture,forestryandfishing

2 Miningandquarrying

2 Coalmining

3 Goldanduraniumoremining

4 Othermining

3 Food, beverages and tobacco

5 Food

6 Alcoholic beverages: Spirits and wine

7 Alcoholic beverages: Malt beer excluding SAB Ltd

8 Alcoholic beverages: Malt beer - SAB Ltd

9Non-alcoholic beverages: Soft drinks and carbonated waters - SAB Ltd

10 Alcoholicandnon-alcoholicbeveragesexcluding6to9

11 Tobacco

4 Textiles,clothingandleathergoods

12 Textiles

13 Wearingapparel

14 Leatherandleatherproducts

15 Footwear

5 Woodandpaper;publishingandprinting

16 Woodandwoodproducts

17 Paperandpaperproducts

18 Printing,publishingandrecordedmedia

6Petroleumproducts,chemicals,rubberandplastic

19 Cokeandrefinedpetroleumproducts

20 Basicchemicals

21 Otherchemicalsandman-madefibres

22 Rubberproducts

23 Plasticproducts

7 Othernon-metalmineralproducts24 Glassandglassproducts

25 Non-metallicminerals

8 Metals,metalproducts,machineryandequipment

26 Basicironandsteel

27 Basicnon-ferrousmetals

28 Metalproductsexcludingmachinery

29 Machineryandequipment

30 Electricalmachinery

10Radio,TV,instruments,watchesandclocks

31 Television,radioandcommunicationequipment

32 Professionalandscientificequipment

11 Transportequipment33 Motorvehicles,partsandaccessories

34 Othertransportequipment

12Furniture,tobaccoandothermanufacturing

35 Furniture

36 Otherindustries

Appendix 7: Commodities/activities of the 2009 SAM for South Africa (Quantec Research)

56

No Commodities/activities No Commodities/activities

13 Electricity,gasandwater37 Electricity,gasandsteam

38 Watersupply

14 Construction 39 Buildingconstruction

15Wholesaleandretailtrade,cateringandaccommodation

40 Wholesaleandretailtrade

41 Cateringandaccommodationservices

16 Transport,storageandcommunication42 Transport

43 Communication

17Financialintermediation,insurance,realestateandbusinessservices

44 Financeandinsurance

45 Businessservices

18Community,socialandotherpersonalservices

46Medical,dentalandotherhealthandveterinaryservices

47 Community,socialandpersonalservices-other

48 Government


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The South African Breweries Limited65 Park Lane, Sandown, SandtonPO Box 782178, Sandton, 2146

Tel: +27 11 881 8111Website: www.sablimited.co.za

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