InBev to in­vest R2.8bn in SA

Ex­pan­sion is un­likely to cre­ate jobs, how­ever

The Star Early Edition - - BUSINESS REPORT - Sandile Mchunu

THE WORLD’S big­gest brewer, An­heuser-Busch (AB) InBev, said yes­ter­day that it planned to in­vest R2.8 bil­lion in ex­tend­ing its plants in South Africa and in two new pack­ag­ing lines for re­turn­able glass bot­tles at its Al­rode and Ross­lyn fa­cil­i­ties in Gaut­eng.

The com­pany said the in­vest­ment was part of its ex­pan­sion strat­egy for new pack­ag­ing lines and re­turn­able glass bot­tles.

It said the in­vest­ment would add to R1bn the brewer agreed to spend over five years as part of the reg­u­la­tor’s con­di­tion for AB InBev’s pur­chase of SABMiller.

How­ever, an­a­lysts warned yes­ter­day that the in­vest­ment would not re­sult di­rectly in the cre­ation of jobs, be­cause the com­pany was im­ple­ment­ing cost-cut­ting mea­sures.

BayHill Cap­i­tal eq­ui­ties trader Jor­dan Weir said the planned ex­pan­sion would be more ma­te­rial to the com­pany it­self.

“With InBev look­ing to of­fi­cially in­tro­duce the Bud­weiser brand, as well as other ma­jor African brands owned by AB InBev, such as Kil­i­man­jaro (Tan­za­nia) and Hero (Nige­ria), Inbev would need the ex­tra ca­pac­ity in or­der to meet the new de­mand. South Africa is listed within the top 20 coun­tries in the world for beer con­sump­tion per capita, and it is grow­ing.”

Weir said InBev had made it clear that its in­vest­ments would be cru­cial to driv­ing the com­pany’s lesser-known prod­ucts into new mar­ket.

“With new ex­pan­sion plans be­ing rolled out, the like­li­hood of a more au­to­mated pro­duc­tion line would mean that a ma­te­rial im­pact on the weaker job mar­ket en­vi­ron­ment in South Africa wouldn’t nec­es­sar­ily be on the cards in the fore­see­able fu­ture,” he said.

In 2016, AB InBev in­di­cated that it would in­vest in South Africa’s agri­cul­tural sec­tor, pro­mote en­ter­prise de­vel­op­ment and boost lo­cal man­u­fac­tur­ing – ar­eas that were cru­cial for job cre­ation.

The brewer said it would spend R1bn on in­vest­ment in agri­cul­tural de­vel­op­ment, en­ter­prise de­vel­op­ment, the pro­mo­tion of man­u­fac­tur­ing, ex­ports and jobs, and on mak­ing a con­tri­bu­tion to the im­prove­ment of so­ci­ety through sus­tain­abil­ity, al­co­hol harm re­duc­tion and ed­u­ca­tional ini­tia­tives over five years.

Neil Brown, fund man­ager and eq­uity an­a­lyst at Elec­tus Fund Man­agers, said AB InBev com­mit­ted to in­vest­ing in South Africa when the deal to ac­quire SABMiller was given the green light last year.

“AB InBev is the largest brewer in the world and is ex­tremely well man­aged.

Tough man­agers

“While AB InBev is a good brand man­ager, they are prob­a­bly best known for be­ing tough busi­ness man­agers, con­tin­u­ously cut­ting costs, and have best-in-class work­ing cap­i­tal man­age­ment,” Brown said.

How­ever, Brown said al­though AB InBev would spend the ap­pro­pri­ate amount of cap­i­tal on plant and pack­ag­ing, “we would be sur­prised if InBev in­creased their to­tal num­ber of South African em­ploy­ees”.

AB InBev said the agri­cul­tural de­vel­op­ment ini­tia­tive would help to es­tab­lish thriv­ing bar­ley, hop, maize and malt in­dus­tries in South Africa.

The com­pany also said that it would strengthen ru­ral em­ploy­ment and job cre­ation, ac­cel­er­ate the de­vel­op­ment of emerg­ing farm­ers, and en­able South Africa to be­come a net ex­porter of hops and malt by 2021.

The group said it would in­vest R610 mil­lion of the R1bn in de­vel­op­ing the ca­pac­ity of 800 new emerg­ing farm­ers, and de­velop the ca­pac­ity of 20 new com­mer­cial farm­ers, to add 475 000 tons of bar­ley to be malted (com­pared to 2015, when South Africa was a net im­porter of 75 000 tons of bar­ley), with the aim of cre­at­ing at least 2 600 new farm­ing jobs in South Africa.

PHOTO: TI­MOTHY BERNARD

AB InBev chief ex­ec­u­tive Car­los Brito mo­ments be­fore blow­ing a kudu horn dur­ing the list­ing cer­e­mony at the JSE in Jan­uary last year.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.