As African consumers steadily move out of informal or illicit alcohol drinking habits to a more formalised category, companies like SABMiller are casting their nets deeper for a good catch of this market.
In an interview with Bloomberg TV yesterday, SABMiller managing director Mark Bowman said Africa had a confluence of good gross domestic product growth of 5 percent to 6 percent and a young population that was coming of legal age.
Like other companies venturing into countries elsewhere in Africa, finding a market is not always easy. Bowman agreed, saying that most of the major players were established in the market, so it was more difficult to find areas to invest further. In Nigeria, SABMiller would have to compete with multinational companies such as Diageo, Heineken and Castel.
According to KPMG’s “Fast-moving consumer goods in Africa” report, beer companies are among the largest listed companies on continental stock exchanges. In Nigeria, Nigerian Breweries and Guiness Niger have market capitalisation of about $6.7 billion (R71.6bn) and $1.7bn, respectively.
Bowman said African consumers were moving towards beer as a desirable product. “That’s good for our business, that’s good for government in the sense that this brings them into the tax net and obviously that’s good for the development of our supply chains, so hopefully we can contribute to some of the development of the economy,” Bowman said.
SABMiller is not afraid to say that it is entering these markets to make money; that its target for Africa is one of double-digit dollar earnings growth.
The company is eyeing Nigeria as its big market. The country boasts a population of close to 170 million people. SABMiller has recently invested in three breweries in Nigeria and says the business is starting to take shape in the country.
Mineral resources
It seems Mineral Resources Minister Ngoako Ramatlhodi is too far ahead of everyone else with the legislation on mineral resources. This week he promised to address stakeholders’ concerns on some of the issues contained in the Mineral and Petroleum Resources Development Amendment Act.
South Africa has been estimated to have the fifth-largest shale gas reserves in the world, although it is not recognised as a traditional oil and gas jurisdiction.
Recently there has been greater interest shown by oil and offshore companies, with about $1 billion (R11bn) expected to be spent on exploration. This is great for much-needed foreign investment, and the ironing out of issues contained in the amendment act will be an important step to remove hurdles in the industry.
Ramatlhodi noted the potential of the petroleum sector in shale gas and offshore deep water oil and gas to drive the country’s development. He said that since his appointment he had been consulting with stakeholders on their issues with the act – which is good to hear.
He also noted that an inter-ministerial committee had been established to hear the issues and provide much-needed certainty that would encourage investment.
But this was not enough for investors. Ramatlhodi said: “Having spent time listening to stakeholders, and taking cognisance of the fact that under our constitution, a bill before the president can only be referred back to Parliament if it cannot muster a constitutional test, I am ready for any eventuality.
“In the event the current bill is assented to in its [current] form, I commit to a rigorous and transparent engagement with stakeholders on draft regulations.”
He also said South Africa should separate the oil and gas sector from the jurisdiction of the country’s mining laws.
Jacques Botha, the chief economist at Afriforesight, suggested that the oil and gas sector should in fact fall under the stewardship of the Department of Energy, as most oil companies dealt with this department.
Edited by Banele Ginindza. Contributions by Nompumelelo Magwaza and Dineo Faku.