“Announcements of foreign direct investments (FDI) into South Africa are coming thick and fast at the moment. The Heineken (AS:HEIN) announcement comes close behind the COP26 announcement of US$8.5bn renewables funding for South Africa; the R15bn investment by Vantage Data Centres in a Johannesburg campus at Attacq’s Waterfall mega-development; as well as a substantial investment by Chinese technology giant Huawei in its cloud computing service in South Africa.
“These are hopeful signs for South Africa, not just the FDI but that the country is receiving international best practices. South Africa needs to urgently reverse its fall in standards which has seen us not only fall behind developed countries but even seen our margin of superiority as a knowledge economy drop against African countries.
“We can expect assertive action by Heineken. As the world’s second largest brewer it embraces best of breed technologies in every respect. It will set the standard in this country’s liquor sector for carbon emissions, for instance. It is focused on driving a renewable energy step change in its production sites: tripling green electricity and piloting new technologies in renewable thermal energy. The company is rapidly expanding its low carbon farming programme from 8 to 15 countries by 2022.
“Heineken would have had a close eye on Distell’s growing Africa footprint, with thoughts of growing that. Distell’s businesses in Kenya, Nigeria and Mozambique all recorded strong double-digit growth as its in-country production philosophy has grown the business across the continent. Distell’s African markets, outside South Africa, last financial year delivered strong revenue growth of 12.7% on sales volumes which increased by 11.7%. It grew even faster on the African continent outside the Botswana, Lesotho, Namibia and eSwatini (BLNE) countries, where revenue grew by 19.9% and volumes by 20.3%.
“I would expect to see Heineken continue to use South Africa as a base to accelerate this expansion. For instance, earlier this year it announced a US$183.14 million investment in Brazil to expand its Ponta Grossa brewing plant.
“Workers at Distell (JO:DGHJ) might fear for their livelihoods in a best-practice environment, given that earlier this year Heineken retrenched 8,000 jobs globally during the Covid-induced slowdown. I would not expect to see any local retrenchments. It is my experience in dealing with mergers and acquisitions that new buyers seldom interfere with the skills base of a target company – that after all is what they are buying.”