Ann Crotty
LONG before Africa became a fashionable destination for international investors, South African Breweries (later to become SABMiller) took what it saw as a logical strategic step to develop its business outside South Africa.
Yesterday’s SABMiller results for the year to March revealed the ongoing benefits of that strategy with operating profit on an organic, constant currency basis up 20 percent at SABMiller Africa.
Revenue was up 18 percent with revenue per hectolitre up 10 percent following selective price increases and higher premium brand sales of Castle Lite in particular.
Behind the impressive figures that are turned out at each reporting session are dramatic stories about how one of the largest beer companies in the world is able to thrive in frequently challenging environments.
In essence, as SABMiller tells it, it is about “persevering, improvising, working with local communities and being able to ‘make a plan’”.
It is also, as the results highlight, about choosing partners well. The tie-up with French group Castel, which is being steadily extended, has been particularly useful in boosting operating margins in Angola and Nigeria.
At the recent World Economic Forum (WEF) on Africa summit, SABMiller Africa’s corporate affairs director, Hloni Matsela, told Business Report that the group had been upbeat about Africa “for a long time” with the initial vision driven strongly by former chief executive Graham Mackay back in the early 1990s. “There are still problematic spots but in the main the continent is more democratic and is developing.”
On the issue of infrastructure, which was a key focus at the WEF meeting, Matsela agreed that a lack of roads, in particular, was holding back development. “Roads are probably the most critical aspect of infrastructure, they are a catalyst for other development. There are certain things a business can compensate for… if there is no electricity you can ‘make a plan’ but it is very difficult for private business to build roads.”
Matsela acknowledged that while technology made this less of a problem for some businesses, such as banking, for most businesses roads were needed to bring in materials to build and then run operations.
“The infrastructure issue tends to be inter-related, if there are no roads then it’s likely there’s no electricity and little or no banking.”
Poor infrastructure tends to be accompanied by increased opportunity for corruption as business people negotiate the challenges of spending a few days travelling just a few hundred kilometres or trying to deal with heavily congested ports.
As for adapting to local conditions, Matsela said this was a hallmark of the company’s business style. “We’ve learnt a lot of lessons from South Africa, which are applicable in many of our other global operations.”
In many African countries SABMiller is self-reliant when it comes to the provision of electricity. But it also has enterprising ways of addressing the issue from a customer perspective.
In Uganda it is piloting a mobile spaza shop, which runs on electricity from a solar panel that supplies sufficient energy to run fridges and lights.
In a project that aims not only at raising the potential for local consumption but to build engagement with local communities, SABMiller continues to develop sources of local supply of starch for the beer-making process.
In Mozambique it has assisted 1 500 small farmers who are growing cassava as a source of starch to supply to SABMiller.
This helped to develop local communities, but from an SABMiller perspective provided a cheaper raw material input, Matsela said.