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Independent study shows SAB makes a significant contribution to SA's economy, tax revenue and jobs

18 October 2010

Including all multiplier effects, in 2009 SAB Ltd:
- Contributed R66.2-billion, or 3.1%, to SA's GDP
- Supported 355 000 jobs, or 2.9% of total employment
- Paid R10.2-billion in direct tax contributions, or 1.7% of the total tax haul
- Generated R28.1-billion in government revenue, or 4.5% of total tax revenue

[Johannesburg: 14 October 2010] The South African Breweries (SAB) economy wide contribution to South Africa's gross domestic product (GDP) amounted to approximately R66.2-billion, or 3.1%, in 2009 and the company supported 355 000 jobs, according to a study undertaken by independent economics group Econex.

The Econex report, released today, shows that as the leading player in the beer industry, SAB is a major force in the South African economy. The company's beer and soft drinks divisions provide employment and income to hundreds of thousands of households and make a significant contribution to the economy and government's tax revenue.

SAB MD and Chairman, Norman Adami, says the purpose of the study was to assess the direct, as well as the multiplier effects, of SAB and the liquor industry on employment, GDP, tax revenue, labour remuneration and capital stock in South Africa.

"The findings from this analysis reflect the economic importance of the liquor industry, and SAB in particular, to South Africa. SAB is not only an indispensable source of government tax revenue, but the company's operations also have high spin-off effects on employment creation and overall economic activity in SA.

"These findings further reinforce our commitment to demonstrating leadership in every dimension of our business," says Adami.

Econex team leader Linette Ellis says the liquor industry and its direct suppliers provided employment to about 87 000 workers and generated tax revenue in excess of R19-billion during 2009.

"However, the direct economic impact of the liquor industry constitutes only a small fraction of the overall economic contribution made by the industry. In the process of manufacturing, packaging, marketing and delivering alcoholic beverages, the liquor industry stimulates economic activity amongst a range of upstream and downstream industries. These generate additional income and tax revenue, which is in turn spent in the economy, inducing further economic benefits."

The study estimates that, including all the multiplier impacts, the liquor industry contributed R94.2-billion, or 4.4%, to GDP in 2009, generated in excess of R41-billion in government revenue and sustained close to 550 000 jobs. A significant portion of this contribution can be traced back to SAB.

The top three findings of the study relate to SAB's impact on the economy, on jobs and on tax revenue:

- Contribution to GDP: SAB's economy-wide contribution to SA's GDP amounted to R66.2-billion in 2009, or 3.1% of the country's GDP. Some 46%, or R43.5-billion, of the GDP generated by the liquor industry can be traced back to the economic impact of SAB's beer division. The company's GDP multiplier is estimated to be 2.02, indicating that for every R1.00 in sales revenue generated by SAB (i.e. turnover at company level), R2.02 is added to the country's gross domestic product.

- Contribution to job creation: With a workforce of 9,390 and sales revenue of R32.7-billion, SAB is one of the largest manufacturing firms in South Africa. However, this initial injection of economic activity by SAB is only the tip of the iceberg - when the economic multiplier effects of SAB's operations are also taken into consideration, SAB and its value chain supported more than 355,000 jobs throughout South Africa and generated R27.6 billion in labour income during 2009.

Despite the trying economic times and dramatic job losses seen throughout the South African economy, SAB did not succumb to the pressure to cut costs by retrenching workers. According to the March 2010 Quarterly Employment Statistics (QES) report from Statistics South Africa, total employment in the formal non-agricultural sector declined by 4.1% between December 2008 and December 2009, while 7.1% of the jobs in the manufacturing sector were destroyed over the same period. In sharp contrast, SAB increased its labour force by 2.7%, creating employment opportunities for another 250 workers during 2009.

Equally impressive is the remuneration that SAB offers its workers. Whereas the average monthly wage in the manufacturing sector came in at R9,178 during 2009, the average SAB employee earned R23,307 per month during 2009. More than three quarters of SAB's employees are from previously disadvantaged race groups, and 58% of its workers are black. Even at the highly skilled level, workers from previously disadvantaged backgrounds account for almost half of SAB's employees.

- Contribution to government tax revenue: The report showed that during the 2009/2010 fiscal year, the National Treasury received R10.2-billion in tax revenue directly from SAB, its employees and consumers of its beverages.

To put this in context, this would be more than enough to finance both the government's planned Comubia housing development and the N2 Gateway project; or enough to finance the construction of the Soccer City stadium, the Green Point stadium, Durban's Moses Mabhida Stadium and the Peter Mokaba Stadium in Nelspruit; or close on the total amount that government has spent since 1992 on electrifying 4.9 million households, 5,000 schools and all health clinics in South Africa.

The largest proportion of tax raised from SAB (53%) came from specific excise tax - with R5.4 billion being raised from SAB's products in excise duties alone, more than a quarter of all excise tax paid in South Africa.

When the government income generated by all the multiplier effects of SAB's operations throughout the economy are also taken into consideration, the tax revenue added by SAB and its upstream and downstream partners increases to R28.1-billion, or 4.5% of government's total tax haul during 2009.

Social investment and responsible drinking initiatives

As the leading alcoholic beverage company in SA, SAB has a responsibility to lead the attack on alcohol abuse. After an indepth local and international study, in 2009 SAB announced an innovative plan of action that saw the company taking the lead in tackling alcohol abuse in South Africa. The strategy is a continuation of decades of work to address irresponsible consumption by investing in a number of high profile initiatives. These include a new approach to marketing, including removing billboard advertising in high abuse areas; a new commercial code of good practice for working with trade partners and customers to drive more responsible trading practices; new codes of employee conduct and launching a number of high impact campaigns.

These campaigns are aimed at reducing drinking and driving through the highly effective Reality Check marketing campaign and investing in alcohol evidence centres. Further significant investments have been made in combating FAS (Foetal Alcohol Syndrome), addressing underage drinking and supporting independent industry bodies.

For further information, please contact SAB spokesperson Robyn Chalmers on 082 924 2267.

Notes to editors:
The study was commissioned by SAB and conducted by Econex (Pty) Ltd, with the aid of Quantec Research. SAB provided the data and other information on the direct economic impact of SAB as well as estimates of liquor sales volumes and value by category, and these were supplemented by independent research undertaken by Econex. The Social Accounting Matrix (SAM) for South Africa, developed and published by Quantec, was modified and employed by Quantec to estimate the ripple effects of the liquor industry, the malt beer industry and SAB's operations throughout the South African economy. The economic impact assessment was based on the latest available annual data, with 2009 used as the base year for the multiplier calculations.

Note, the news release was first published in its local market on 14/10/2010.

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