sabmiller plc we’re working in africa · although sabmiller plc’s primary listing is on the...

SABMiller plc

We’re working in AfricaSABMiller plc

(Registration No. 3528416)

Registered office

SABMiller House,Church Street West,Woking, SurreyGU21 6HS

Head office

One Stanhope Gate,London, EnglandW1K 1AF

For further information please go to www.sabmiller.com

SAB MILLER AFRICA COVER 10/10/05 10:08 pm

gains being realised are real and not justbeautifully presented self-promotion – and aretrusted as such by an interested public.

What is genuinely interesting about theselection of examples that SABMiller havecovered in this report is the diversity of issuesand approaches that are described.

Some, like HIV/Aids, combine the humanityand necessity of dealing sensitively andeffectively with Africa’s greatest scourge with aclear business case. Others are less obvious.Helping the establishment of small businessesto form part of the retail chain, developing newproducts using locally sourced materialsthoughtfully purchased from small farmers;these go to the heart of what Africaneconomies are going to need if they are togrow stronger.

The beating heart of any economy is its SME sector. SABMiller’s support andencouragement for this sector is, we wouldargue, one of the best long-term investments it can make.

From the farmers who grow the barley,wheat and hops, to the breweries and bottlingplants, the wine bars and beer cellars in therichest cities in the world, the dusty andisolated communities of rural Africa, SABMillertouches the lives of tens of millions through itsbusiness activities. Its impact can be felt at anational, regional and local level through thegeneration of economic activity, the taxes itpays, and the employment it creates. It doesnot take too long to work out that the groupsupports thousands of livelihoods and therebytens of thousands of lives.

The proof of course will be in the doingrather than the talking (again something thatapplies equally to governments, NGOs andcompanies). The challenge will therefore be to deliver on the fine words and ambitions insuch a way that silences the sceptics, many ofwhom see multinational corporate involvement

in weak economies as the thin end of a wedgethat is making the world safe for a ‘bigcompany’ model of the market, and which willleave weak economies and small businessesstruggling in their wake.

This just does not have to be so. It is in the private sector’s interest to have diverse and robust economies that operate within aframework of good governance, well managedrisks and a fair social environment. Economiesthat grow in sustainable ways both supportpeople and are good for business.

There are increasing signs that Africa is at a stage in its own development where there are genuine opportunities for thoughtfulinvestment which will, in turn, unlock realopportunities for companies and for people. It is heartening to think that some largecompanies recognise that fact, and want to beboth a driver for change and a part of a newshared prosperity.

In no small way, the existence of suchcompanies will be a vital, if not the best, wayto overcome poverty – provided they investwisely with people in mind, openly account forwhat they do and explain what they cannot dowithout the help of others.

Our best wishes to SABMiller in continuingto deliver on this challenging agenda.

Richard Sandbrook and Will Day

October 2005

Sandbrook and Day are independent sustainabledevelopment advisers specialising in private-sector initiatives. They act as special advisers tothe United Nation’s Development Programme’sGrowing Sustainable Business Initiative.

Business and development: Future challenges 21

“Private-sector involvement in development will only be

effective and sustainable if it is based on a hard business

case and good business practices.”

Graham Mackay, 2005

We have a large part of our business, our history and our pride invested in the African continent. Castle,Kilimanjaro, Mosi, 2M, Eagle, St Louis, Chairman’s ESB,Castle Milk Stout, Rhino and Nile Special are just some of our brands which have become household namesthroughout Africa.

Today, over 100 years after the South African BreweriesLtd, our original brewing company, was founded inJohannesburg, we are a thriving African-originated multi-national with a brewing presence in almost 50 countriesacross five continents and a portfolio of strong brands and leading market shares in many of the countries inwhich we have brewing operations.

We’re working in Africa

Contents

2 Our African operations4 The private sector’s role in African development 6 A day in the life of our African businesses20 Business and development: future challenges

SAB MILLER AFRICA COVER 11/10/05 1:44 pm

We’re working in Africa 1

2005 has become a critical year for development. TheNew Partnership for Africa’s Development (NEPAD), theCommission for Africa, the G8 Summit at Gleneagles andthe United Nations’ review of the Millennium DevelopmentGoals have combined to make Africa, along with climatechange, one of the top issues on the global agenda. Thishas caused many multinational companies, ourselvesincluded, to look more closely at how we can mosteffectively contribute to development.

This report is based on a day in the life of our company’s operations in Africa. We have chosen 19 May 2005, the day our preliminary results were announced. We show how – by virtue of our day-to-daybusiness activities, profitability, corporatesocial investment, and responsible andaccountable behaviour – the company hascontributed to economic growth, created jobsand provided some life-changing opportunitiesfor people living in the countries in which weoperate. Some of these people are ouremployees, others are in our supply and

distribution chains, some work in businessesthat have grown through our corporate socialinvestment projects, and still others are peoplewho have benefited from our HIV/Aidsprogrammes.

But none of these people would havebenefited unless our business had performedwell. It is our performance that has enabledus to make a sustained contribution to thehealth and prosperity of African people, their local communities and the economies in which they work.

SAB MILLER AFRICA TEXT 10/10/05 10:08 pm Page 1

Company development in Africa

• South African Breweries Limited 1895• Delta Corporation (Zimbabwe) 1910 • Swaziland Breweries Limited 1976 • Kgalagadi Breweries Limited (Botswana)1980 • Botswana Breweries Limited 1980• Lesotho Brewing Company 1981 • Tanzania Breweries Limited 1994 • Zambia Breweries Limited 1994• Cervejas de Moçambique 1995• Nile Breweries Limited (Uganda) 1997• Accra Brewery Limited (Ghana) 1997 • Chibuku Products Limited (Malawi) 2000 • Coca-Cola Bottling

Luanda SARL (Equity stake) 2000• Coca-Cola Bottling

Sud de Angola SARL 2001 • Castel Group (Strategic alliance) 2001• East African Breweries Limited (Kenya) 2003• JV with Castel Group

(Morocco & Algeria) 2004

2 Our African operations

Our African operations

Creating local wealth: listing on local stock exchanges

Although SABMiller plc’s primary listing is on the London Stock Exchange, with a secondary listing on the Johannesburg Stock Exchange, five of thecompany’s African businesses are also listed on local stock exchanges.

Group turnover (US$14,543m)

North America 36%

Central America 4%

Europe 20%

Africa & Asia 12%

South Africa 28%

Group EBITA breakdown* (US$2,409m)

North America 22%

Central America 4%

Europe 19%

Africa & Asia 16%

South Africa 39%

* Pre-goodwill amortisation, excluding central administration and exceptional items.

Group lager sales volume** (148m hectolitres)

North America 33%

Central America 1%

Europe 23%

Africa & Asia 25%

South Africa 18%

** Excludes contract brewing.

We have financial and beverage interests in 29 Africancountries, including those in which our strategic partner,Castel, operates. Our South African beer and soft drinksbusiness is run by the South African Breweries (SAB) Ltd.The rest of our African operations are managed bySABMiller Africa and Asia. Both companies areheadquartered in Johannesburg. Our main products inAfrica include lager, carbonated soft drinks, water, wine,spirits and traditional beer made from sorghum.


Key facts

South African Breweries Ltd:• injected US$1.6 billion into the South African

economy in taxes and salaries during 2004• employs 8,232 people, including those

working in the soft drinks division• is investing US$900 million in improved

facilities and operations for the period 2005to 2009

SABMiller Africa and Asia:• injected US$266 million into African

economies in taxes and salaries during 2004• employs 6,061 people in Africa• has invested in excess of US$750 million

in African economies (includes actualinvestment and capital expenditure) since 1994

Our African operations 3

These are Accra Brewery Limited, Cervejas de Moçambique, Kgalagadi Breweries Limited,Tanzania Breweries Limited and ZambiaBreweries Limited

Morocco

Algeria

Mali

Ghana

BurkinaFaso

TogoBenin

Coted’lvoire

Senegal

ChadNiger

Ethiopia

Angola

Botswana

Zambia

South Africa

Tanzania

Mozambique

Cameroon

Swaziland

Lesotho

Kenya

Uganda

Gabon

Zimbabwe

Malawi

CentralAfrican Republic

DemocraticRepublicof Congo

Tunisia

South African Breweries Ltd

Castel (14 countries)

SABMiller (9 countries)

Castel & SABMiller (3 countries)

SABMiller Associates (2 countries)


As a multinational with African origins andinterests in 29 African countries, SABMiller isincreasingly asked about the role of business in the continent’s development. What shouldbusiness be doing, and how can SABMiller help?By far the greatest contribution business canmake (and it is a very great contributionindeed) is to run successful, profitablecompanies – contributing to tax revenues,investing in local economies, and payingsuppliers, distributors and employees.

These basic business functions have an evengreater and more positive impact than CorporateSocial Investment (CSI) programmes, which aimexplicitly to meet developmental challenges. Infact, without profits no company can evenengage in CSI programmes.

Simply put, private sector involvement in development will only be effective andsustainable if it is based on a hard businesscase and good business practices. Companiesare best placed to contribute to development

4 The private sector’s role in African development

The private sector’s role in African development: the critical importance of the business case

Graham Mackay, Chairman, Africa World Economic Forum, Cape Town, June 2005.


when they are making healthy profits, allowingthem to invest further in local economies andcommunities, and creating a virtuous circle.

How these profits are made is, of course,important. They will only be sustainable ifcompanies are seen by all stakeholders to be operating in a responsible and accountablemanner.

Fundamentally though, there is nocontradiction between what is good forbusiness and what is good for development.Indeed, the two are inextricably linked. Whendevelopment indicators are deteriorating,people get poorer and businesses suffer. Andwhen businesses suffer, they are less able toafford a contribution to meeting developmentchallenges.

That’s why business is so important indevelopment, and it’s why we’re publishing thisreport. We don’t claim to have all the answers,and we’re not suggesting that we have doneenough. There is still much to be achieved byall stakeholders from both the public andprivate sectors if Africa is to have any chanceof reaching the development targets set by theUnited Nations in its Millennium DevelopmentGoals. We, as much as any company, are in acontinuous learning process – trying out newideas, collaborating with other organisationsand building on successes where we can.

But in the long term, the success andsustainability of the private sector’s investmentsin Africa are critically dependent on theinvestment climate. And governmentsincreasingly recognise that private-sectorinvestment in Africa is a part of the solution to the continent’s challenges – as much as the complex issues of debt, trade and aid. So governments and private-sector bodiesneed to collaborate in creating policies that will encourage such private investment.

The importance of partnership cannot be overstated. Indeed, effective partnerships

have been the key to some of our biggestsuccesses in Africa, most recently in Uganda.There, SABMiller’s subsidiary, Nile Breweries,has successfully collaborated with thegovernment and the Serere Animal andAgricultural Research Institute to create EagleLager – a project that has resulted in thecreation of 8,000 jobs for Ugandan farmersand the production of high-quality, low-costsorghum beer that now enjoys a market shareof over 20%. The project is featured on pages8-10 of this report.

This is just one example of the manysuccessful projects involving both public andprivate sectors throughout Africa, and indeedthe world. Like any good joint venture betweenbusiness partners, those that are most likely to succeed are based on a genuine businesscase with the potential to meet the needs and expectations of all parties.

Graham Mackay

Chief Executive

October 2005

The private sector’s role in African development 5

“By far the greatest contribution business can make

(and it is a very great contribution indeed) is to run

successful, profitable companies.”

Graham Mackay, 2005


6 A day in the life of our African businesses8am,London

Brewery log: Tanzania Breweries Ltd (TBL)

Behind the projects and initiatives described in the pages which follow, our breweriesthroughout Africa keep up a steady routine of production, delivery and sales. This isSABMiller’s business: producing beer. We include this running log of events from TBLas a reminder of the ongoing processes that take place daily in our breweries, depotsand bottling plants all over the continent.

Africa’s contribution to the 2005preliminary results

SABMiller Africa and Asia showed strong growth in volume, turnover andEBITA (earnings before interest, tax and amortisation). As a result, since2002 the business has almost doubled reported volumes and more thandoubled turnover and EBITA. South African Breweries Ltd delivered strongcomparable volume growth of 4%, and full year EBITA growth of 20%.

SABMiller’s preliminary results presentation for 2004/5 is under way.Earnings per share have increased by 33%, the volume of beer has grownorganically by 4% to 148 million hectolitres, turnover is up by 15% andEBITA has improved by 27%.

Chief executive Graham Mackay presents the group’s near-term outlook drivers. He discusses the performance of the company’s two African businesses and highlights the fact that improved economicstability in some African countries is positively impacting on the company’sfinancial performance.

“SABMiller Africa and Asia is performing extremely well, and seems wellset to continue. It’s clear that even in an area of the world which is seen ashigh risk, the net effect of the portfolio has been steady growth. Economicstability, which is on the increase, is playing an important role: incomes arerising and investment in infrastructure is improving. That’s driving demandand, in turn, the volume of beer we sell.

“South Africa Breweries Limited’s performance has been exceptional.The painful period of industrial and employment restructuring in South Africa over the past 10 years has more or less worked its way out of the system. And the key indicators are all moving in the right direction.Headline inflation is at historically low levels. This has resulted in the cost of borrowing being reduced. Consumer spending has recently begun to respond and GDP growth is becoming more stable. There’s robustconsumer expenditure which, of course, is a benefit to us. All of this createsa virtuous circle which gives us confidence that the positive economicenvironment in South Africa is set fair to continue in this vein for some time.”


Fighting HIV/Aids in the community

Zambia Breweries runs community events to promote awareness andunderstanding of HIV/Aids. These events are beginning to change attitudes,leading to a large increase in the proportion of people being tested outsideof the workplace.

Chimango Chikwanda is giving a presentation on effective HIV/Aids strategiesto business leaders. She is Zambia Breweries’ (ZB’s) HR Director, and hasbeen invited to speak because 80% of ZB’s employees have been tested forHIV – a remarkably high proportion.

But for Chimango the focus is not just on testing employees, but testingeveryone in the community. No company, she says, can be healthy when thecommunity in which it is based is sick. What’s more, a good HIV/Aids policy –one that reduces the human cost of the condition – need not be expensive.

She illustrates this by telling her audience about a community event thatshe organised in partnership with the Centre for Infectious Diseases in Zambiaand a support group called Living Positive. The event was held in Lusaka’sGeorge Compound, an unplanned high-density residential area, and involvedgiving free voluntary counselling and testing (VCT) to anyone who attended. It was publicised with door-to-door calls, radio advertising, free T-shirts andvisits to churches and schools in the area.

It was a great success. Over 1,000 people were tested, with 55 trainedZB employees providing counselling. The event changed attitudes andawareness enough to push employee testing rates up to 80% in Lusaka, and testing in the community as whole also improved considerably. Shortly afterwards, one of ZB’s employees took the momentous decision to disclose his HIV status, confident that his wife, children and employer would support him.

However, as 130,000 people are estimated to live in George Compound,there is much more to be done. Chimango has plans for another event nextyear – and many of ZB’s corporate neighbours, including BP, Marlboro andParmalat, have expressed an interest in co-operating.

A day in the life of our African businesses 7 9am,Lusaka

6:00am

Packaging workers clock in for themorning shift. On average, thebrewery will package 48,000 casesof beer during the course of the day.

6:35am

Preloaded delivery vehicles depart.The longest journey will be toSongea, which is 990 kilometresaway from Dar es Salaam.


Securing government partnership

Nile Breweries has qualified for low excise rates from the Ugandangovernment because it uses locally grown sorghum for its Eagle Lager. This highly successful public-private sector partnership has resulted intangible benefits for the Ugandan economy, local farming communities and Nile Breweries.

Peter Stuttard, Nile Breweries’ finance director, is meeting representativesfrom Uganda’s Ministry of Finance. Peter is part of a delegation fromUganda’s beer industry. They discuss the impact on the economy – and onUganda’s informal alcohol market – of the government’s decision to reduceexcise on beers made with locally produced primary raw materials.

Efforts to turn people away from the informal and unhealthy alcoholmarket have proved difficult because of the relatively high price of regularbeer. Because barley is difficult to grow in Uganda, brewers have typicallyimported it, pushing up costs. As a result, attempts to include moreUgandans in the formal alcohol market have proved difficult.

Four years ago, Nile made a business decision to explore the possibilityof introducing a high-quality affordable beer into this market. The result is Eagle Lager. Its development provides a good illustration of howbusinesses can work in partnership with governments to boost theeconomy and to improve people’s lives.

Nile approached the Ugandan government and put forward a case forcollaboration. The government saw the project’s potential for job and wealthcreation, thus contributing to its Poverty Eradication Action Plan, which isclosely linked to the UN’s Millennium Development Goals. So it agreed tosubject the beer to a reduced excise rate of 20%, rather than the 60%charged on those made from imported ingredients. This meant that Eaglecould retail at a third less than the price of lagers that use imported barley.

In addition, the government contributed the expertise of the SerereAnimal and Agricultural Research Institute (SAARI), with which Nilecollaborated in a seed multiplication exercise. In 10 weeks they had developed a new variety of sorghum – dubbed Epuripur or Special Sorghum.

As a result, in just four years Eagle Lager has achieved a 20% market share. In the next financial year Nile plans to spend US$1 million on sorghum – 60% of which will go to the farmers, with the other 40%going on transport, procurement and processing. The company has nowrecouped its initial investments.

Much remains to be done because illicit alcohol still accounts for 68% of the Ugandan beer market, losing the government substantial potentialrevenue. So Nile will continue to look for efficiencies in Eagle’s production inorder to bring the price down further.

But the project has already been a major success, and the governmentnow uses the Eagle project as an example of best practice in itspartnerships with the private sector.

8 A day in the life of our African businesses10am,Kam

pala

9:01am

After going through their paperwork, productionsupervisors and departmental heads meet toagree the day’s schedule. Sales representativeshead out to meet their customers.


Country Uganda

Beer type Sorghum beer

Alcohol content by volume 5.5% ABV

10:00am

The Corporate Affairs Director meets with representatives from the Tanzaniangovernment. TBL is involved in a newcampaign to reduce drink-driving.

A day in the life of our African businesses 9

Made from a locally grown variety of Ugandan sorghum called Epuripur,Eagle Lager is a high-quality affordablelager that is ‘proudly Ugandan’.


10 A day in the life of our African businesses

Working with farmers

As a result of using locally grown sorghum for its Eagle Lager, NileBreweries has enabled 8,000 Ugandan farmers to earn a better living for themselves and their families.

Alex Isiagi has been in the fields since 7am, alongside two members of his family and two local men. By the end of the day, they will have cut down five acres of sorghum and laid it out to dry.

This is Alex’s first sorghum crop, and he will get 900,000 Ugandanshillings (US$480) for it. He is making plans for the most efficient ways ofusing his land, calculating how often to rotate crops in order to maximisetheir yield. He estimates that he can increase his income to three millionshillings (US$1,600) – four and a half times more than the income of mostUgandans, which stands at less than US$1 per day. This means he caneducate his children and build a brick house.

His sorghum is bought by Nile Breweries for its Eagle Lager, a productthat has had a significant impact on the formal alcohol market in Ugandabecause it is a high-quality and affordable lager.

It was no easy task for Nile to persuade farmers to grow sorghum. For subsistence farmers any mistake means going hungry, so they arenaturally extremely cautious about what they grow – especially as even the relatively small amounts of cash required to open up new land aredifficult to come by.

But by guaranteeing prices of 280,000 shillings (US$150) per tonne,with purchase agreements signed in advance, Nile has managed to go from 350 farmers growing this new strain of sorghum four years ago to 8,000 today. This year those farmers produced 3,000 tonnes of sorghum, up from just 240 tonnes in the first year, and sold it for 840 million shillings (US$450,000).

They have helped make Eagle a top-selling brand, giving Nile Breweries a 60% share of Uganda’s beer market in total.

11am,Kachum

bala

11:05am

Performance-management training begins.Today’s session will focus on setting goalsand measuring performance.


A day in the life of our African businesses 11 12pm,Accra

Building up local suppliers

When Accra Brewery (AB) decided to produce a beer using local Ghanaianingredients, it invested in a company called General Mills Company Ltd (GMCL).AB now has a reliable local source of maize grits, saving US$2.8 million inforeign exchange, and GMCL has become one of Ghana’s leading companies.

Bert Grobbelaar, technical director at Accra Brewery, is doing an inspectionof the Grits Milling Plant, owned by its supplier, GMCL. He pays attention to thesize and moisture content of the maize grits, and discusses them with DanielDampson, GMCL’s production manager.

GMCL is one of Ghana’s leading companies, but five years ago it was much less developed. Its dramatic growth came about because ABneeded to bring costs down and reduce its dependency on imported barley.AB determined that maize would be a viable substitute, but it needed adependable source of high-quality maize grits. It selected GMCL because of its ability to commit to a long-term relationship and to develop theinfrastructure to meet demand.

AB gave GMCL the working capital to upgrade its facilities and topurchase the maize up front. Because it was entering into a long-termpartnership, AB guaranteed that it would initially buy the maize for morethan the cost of importing it. If the agreement worked then the longer-termgains would far outweigh the set-up costs.

To fulfil its side of the bargain, GMCL worked hard to develop a networkof farmers and silos that would ensure a consistent supply of maize. It provided training to the farmers, helping them to grow the quantity andquality of maize required. And it guaranteed to buy the crop from them,which allowed the farmers to plan for the future.

As a result, the amount of maize GMCL delivers has increased from1,000 tonnes in the first year to 5,200 tonnes this year. What’s more, GMCLhas expanded and now supplies maize to feed-millers for feeding poultry. Itnow exports 20,000 tonnes of maize grits to other breweries in West Africa.

Because of their collaboration, AB has a reliable local source of brewingingredients, saving US$2.8 million in foreign exchange, and GMCL hasbecome a pan-African company. At the same time, almost 4,000 farmershave a reliable market for their maize, providing work for some 20,000workers. And Ghana has a new export industry.


Kick-starting small businesses

SABMiller’s Kickstart programme provides training, grants and mentorship foryoung South African entrepreneurs from disadvantaged backgrounds. In its10 years it has trained 22,000 people and helped to start 3,000 businesses.

Tebogo Modibane is calling her family to tell them about her new job atRoots Health and Beauty Spa in Soweto. For this beautician, a job at Rootsis a major opportunity – and all the more welcome after six months ofunemployment. But she is not the only new employee: Roots is expandingits workforce from six to 13 people this year.

Roots was set up by Thabang Kubheka-Molefi, who has increased herbusiness’s turnover by 2,600% since winning an entrepreneurship awardfrom SABMiller’s Kickstart programme in 2003. She applied for a place onthe programme because she found, six months after setting it up, that herbusiness was struggling. Accepted for one of the 15 to 20 places availablein each of South Africa’s nine regions, Thabang found the initial two-weekbusiness skills training course immensely valuable:

“I learned about marketing and how to develop a market strategy. I had never thought about it before, but I realised I could actually select my customers and really get to know them, who they are, where they live,where they eat, what radio stations they listen to.”

After this initial training, the candidates were given a month to prepare a business plan. A panel of judges in each region assesses these plans andawards grants to between five and eight of the most promising. Thabangcame third in her region and was awarded R40,000 (US$6,250), which she used to buy new equipment to attract the sort of clientele she wanted.She was also assigned a business mentor to guide and advise her overeight months.

As a result, Roots began to attract an older and more affluent customer base. Although ages range from 23 to 89, the majority are nowover 40 – male and female. Thabang’s mentor was impressed with hergrowing business acumen, and recommended that Roots be one of the two businesses chosen to represent the region in the national final. Thabang went on to win first place. This brought her a prize of R150,000(US$23,400), which she used to open a second shop in Spruitview in theEast Rand.

Kickstart has helped Thabang make Roots a success, and has givenher the confidence and business skills to aim high and achieve. It has alsoprovided less visible but no less precious opportunities for people likeTebogo, who might otherwise, despite her many skills, have remainedwithout a job. While Johannesburg’s unemployment rate is lower than thenational average, it is still very high – showing how much work there is stillto do for programmes such as Kickstart.

Unemployment is exacerbated by the fact that South Africa has one of the world’s lowest rates of entrepreneurial activity, and Kickstart waslaunched in 1995 to counter this. The original intention was to develop local entrepreneurship as a means of contributing to poverty alleviation.However, the organisers monitored the results closely, and realised that

12 A day in the life of our African businesses1pm,Soweto



the programme would be more effective if it were more ambitious. In 2002 the focus changed to creating successful, sustainable larger businesses –with new criteria for applicants to ensure that the business leaders of thefuture are selected.

Since it began 10 years ago, Kickstart has grown to become one of the largest privately funded entrepreneurship-development projects in Africa.In that time, it has invested R34 million (US$5.3 million), trained 22,000people and helped to start 3,000 businesses. Of the grant winners 90% arestill in business, their companies turning over R22 million (US$3.4 million)and signing contracts worth R6.5 million (US$1 million) each year. Inaddition to the applicants and prize winners, it has created many extra jobs, touching the lives also of their families, dependents and customers.

1:00pm

A health and safety inspection begins. This willensure that the brewery continues to comply withthe regulations set out in the government’s 2003Occupation Safety and Health Act.


14 A day in the life of our African businesses2pm,Dar es Salaam

Supporting local distributors

Tanzania Breweries Ltd (TBL) provides business training to the independentoperators who deliver its beer. This helped increase its sales by 9% lastyear – one of the most dramatic rises of any SABMiller subsidiary.

Augustine Kissinga, owner of Makambako Depot, is helping his employeesto load a delivery truck. They are busy. In an average week, they distribute175,000 bottles of beer.

It isn’t long since Makambako Depot was owned by TBL, whosemarketing department Augustine worked in. Then TBL decided to make thedepot independent, and Augustine successfully applied to run it. He usedhis savings and an affordable loan from TBL to set himself up, and thenbought the depot outright. Since then he has increased volumes by 40%.

Much of Augustine’s success results from business training that hereceived from TBL under a programme called ‘Faida Kwa Wote’ (‘profit forall’). The training has been given to over 200 independently owned depots,distribution centres, bulk buyers, and to sales people involved in theprocess of getting TBL’s beer from its three breweries to bars and retailoutlets throughout Tanzania.

TBL introduced the training because it understood that by making itsdelivery people and bulk buyers more profitable, it could do the same foritself. So the training is practical and business-oriented, and aimed atmaking the distribution process as efficient as possible. These efficienciesare vital if TBL is to satisfy the growing demand for beer among anincreasingly affluent but still largely rural and dispersed population.

These efficiency drives and the close co-operation with partners haveproduced clear results. Augustine and his fellow distributors have seenprofits rise, and TBL reported 9% growth last year – one of the best in thewhole SABMiller group.

3:15pm

Workers begin loading vehicles for the nextday’s deliveries. On average 28,000 casesof beer leave the brewery every day.



Driving for success

SAB Ltd set up an owner-driver scheme to improve the delivery of itsproducts throughout South Africa in 1987. The company has investedUS$312 million in the project. As a result, 1,000 jobs and 248 independent,sustainable businesses have been created.

Victor Mndaweni is driving his truck along the main highway betweenJohannesburg and Pretoria. As one of SAB Ltd’s owner-drivers, he has only praise for the company that gave him the opportunity to start his ownbusiness. “I’m on top of the world, because my dream of being my ownboss is a reality”, he says.

In 1995, after spending 10 years training drivers for SAB Ltd, Victordecided to use his experience to go into business as a driver. “I see myself as a role model to all the young men who want to start their owncompanies but are scared of failing”, he says, adding that many of theyounger drivers whom he trained often come to him for help and advice.

SAB Ltd is one of only a few companies that can deliver its products to any area of South Africa within 24 hours of an order being placed, so itrelies heavily on its drivers. It introduced the Owner-Driver programme in1987 to improve customer service and productivity, and to enable companyemployees to become independent businessmen.

The scheme has proved popular. Applicants must show that they can provide a cost-effective and reliable delivery service, ensure excellentcustomer service, and maintain their vehicles. When successful applicantsfirst join the scheme, they rent a truck, which remains SAB Ltd’s propertyfor between one and two years. Then, after appropriate training, the driverbuys the truck, enters into a 10-year cartage agreement, and startsdeveloping the business.

Today, the programme accounts for more than half of all SAB Ltd’sdeliveries, and involves 250 drivers. Each of these drivers employs a crew of at least four, so the project has provided at least 1,000 jobs and created250 independent, sustainable businesses.

3pm,Pretoria

4:04pm

TBL’s Barley Development Manager meets with farmersin Arusha to discuss the quality of the current barleycrop, which is soon to be harvested and processed into malt at the company’s malting plant in Moshi.


Fighting HIV/Aids among employees

When Leso Rankgabo publicly acknowledged that he was HIV positive, he became the first employee in Botswana to do so. His courageous actchanged attitudes and behaviour, and the proportion of SABMiller’semployees in Botswana being tested for HIV has increased to 58%.

Leso is sitting with a worker who has just tested positive for HIV. The man is fearful, but Leso, who has been HIV positive since 1992, speaksencouragingly. “HIV need not be a death sentence”, he says, “but abeginning of a new chapter in one’s life – a chapter filled with love,compassion, renewed health and hope. With these possibilities, I knowwithout a doubt that we can live fulfilling lives. But without action, we are doomed.”

His words are true not just at the personal level, but at the national and international level too. For any company doing business in Africa, HIV is a fact of life. Currently, 7.6% of the economically active population ofSub-Saharan Africa is infected, and reduced labour productivity is alreadyevident. In Botswana, the prevalence rate is 37.3%, meaning that HIV/Aidsis even more of an issue for companies there.

SABMiller is committed to taking action against HIV/Aids, and Leso, an employee of Kgalagadi Breweries Ltd (KBL), SABMiller’s Botswanasubsidiary, plays an important part. In 2004 after living with HIV for 12 years, Leso decided that he wanted to be open about his status with hiscolleagues at KBL. Before doing anything, he talked to Mokgadi Nteta,KBL’s HR director. To support him in making his decision, she arranged for him to see a counsellor who was HIV positive so that he could talk the issue through with someone who had real insight. Just one week later, Leso returned, firmly convinced that he would be doing the right thing by publicly acknowledging his status.

Anticipating that employees would want to ask his advice once hisstatus was public, Mokgadi asked Leso to take a two-month counsellingcourse so that he would have the skills to deal with all the issues they wouldraise. Leso agreed. As soon as he had finished this training, he announcedhis status, becoming the first KBL employee to do so. To begin with, someof his colleagues were shocked and found it difficult to adjust. Like everyonewho works for SABMiller, they had been through Aids-awareness training.But there is a difference between knowing something intellectually, andovercoming a natural emotional response. It took time for his colleagues to work through their worries and to be able to use the same lavatory andwashbasins as him. But they trusted and cared enough about Leso thatthey managed it.

Leso is now one of KBL’s three full-time HIV/Aids counsellors, and theonly one who used to work on the factory floor. As a counsellor he forms acrucial part of KBL’s voluntary counselling and testing (VCT) programme,

16 A day in the life of our African businesses4pm,Gaborone


educating employees and talking to people who are thinking of takingan HIV test, or who have testedpositive. VCT is provided free to allemployees, as well as their partnersand up to three dependents. Anywho test positive are also providedwith free treatment, includingantiretroviral (ARV) drugs.

Just as important as thispractical, hands-on work is thechange in attitudes that Leso’sstance has inspired. To prove that he really was HIV positive, hevolunteered to take an HIV test in public. The effectiveness of hisexample is undeniable. After hedisclosed his status, the proportion of employees being tested rose to 58%. From a low percentage,Botswana has now almost reached the average testing rate for SABMiller’s employees in Africa.

There is still much progress to be made in Botswana, and KBL is stilldiscovering new ways of approaching the problems there. However, onerecent indication that progress is being made came when a female formercolleague of Leso’s recently became the second KBL employee to publiclydisclose her HIV positive status.


5:00pm

Employees leave for the day.

Our Life Threatening Diseases Policyoutlines the company’s commitment toconfidentiality, non-discrimination, respectfor the rights of employees and reducingand managing the impact of life-threateningdiseases on employees, their dependentsand the workplace.


18 A day in the life of our African businesses

6:00pm

The second shift in the brewery begins. New workerscontinue packaging. By this point, approximately3,000 hectolitres of beer have been bottled. Thisamounts to over 1.1 million bottles of beer.



Drinking responsibly

As one of the world’s largest brewers, SABMiller is committed to promotingresponsible consumption of its products and to combating abuse andmisuse. It has a demanding policy relating to the responsible use of alcoholwhich is set out in its Alcohol Manifesto. It supports this by investing R25.6 million (US$4 million) in Africa annually to promote responsible drinking.

Back in South Africa, work colleagues are stopping by the company pub for a beer at the end of their shift on the packaging line. Like all SABMiller’ssites, Rosslyn brewery has an onsite pub. This one is called ‘Lapologa’, aTswana word meaning ‘to relax’. This is a place where ‘going for a beer’means just that – people stop by to compare notes on the day’s events,have a single drink and relax before heading home.

SABMiller actively promotes sensible drinking. Alcoholic beverages,consumed responsibly by those not at risk, can be part of a balanced,healthy lifestyle, bringing people together and adding to the sense ofoccasion at celebrations. To promote this kind of consumption and tocombat alcohol abuse and misuse, SABMiller has made commitments with which every one of its subsidiaries and employees must comply. These are contained in the company’s Alcohol Manifesto which includes its Code of Commercial Communication. All SABMiller employees attendworkshops to assist in embedding the Manifesto in the day-to-day businessof the organisation, and a comprehensive guide entitled ‘The ResponsibleWay’ has been produced.

The Code of Commercial Communication sets out detailed policiesgoverning the group’s marketing activities. The Manifesto gives the bigpicture, with requirements for employee alcohol policies, working withretailers, encouraging research and educating consumers.

SABMiller does far more than it is required to by law. In South Africa, it invests heavily each year in promoting responsible drinking. In 2004 to support World Health Day on 7 April, it launched a major road-safetycampaign using the slogan ‘Drink responsibly. Drive responsibly. Liveresponsibly’. This complements its work with ARA, the Industry Associationfor Responsible Alcohol Use. SAB Ltd contributes 50% of ARA’s funds, andworks with the organisation to combat underage drinking and discouragedrinking when pregnant, for example.

Being such a large producer of beer, especially in South Africa, gives the company some influence. Hence, it has helped informal, unlicensed barsor ‘shebeens’ to gain licences and enter the formal economy, thus affordingthem protection and enabling standards to be enforced. To this end, thecompany has engaged with licensing authorities, and has also invested intraining for owners of shebeens. SABMiller believes in partnerships andworks with organisations such as ARA, licensing authorities, governmentsand retailers to encourage responsibility. By co-operating with as manystakeholders as possible, SABMiller aims to ensure that its products areenjoyed just as responsibly everywhere as they are at Lapologa.

6pm,Johannesburg

6:01pm

Local bars open for the evening.Outdoor bars called Nyama Chomasare a popular meeting place.

SAB MILLER AFRICA P19 ONLY.qxd 11/10/05 12:23 pm Page 19

2005 has been a pivotal year for thoseinterested (and invested) in Africa. Thecombination of the UK Commission for Africa,the G8 Summit with its focus on Africa andclimate change, and the Make Poverty Historycampaign, has served to put the continent’seconomic and social development onto thefront pages and editorial columns of theworld’s press. There is a growing consensusthat what is bad for Africa is bad for the world.At the same time, the review of the UN’sMillennium Development Goals has served to highlight the gap that exists between thevarious social, environmental and economictargets set by the world’s leaders, and thereality of slow progress in some parts of theworld – particularly wide in the case of manySub-Saharan countries.

For at least some of the companies thathave signed the UN Global Compact andadopted the 10 principles of business practice,the next step is relatively clear, particularly if theirbusiness is related directly to a Millennium Goal.Companies involved in the water, sanitation,health, infrastructure, and communicationssectors can have a direct impact on progresstowards the achievement of the MDGs throughthe link with their core business activities.

Happily, it is clear that an increasing numberof companies are trying to work out how todevelop products or services in ways that arerelevant to the needs of poor people, cancontribute to progress towards the MDGs and, importantly, make commercial sense. AsGraham Mackay says in his introduction, “Private-sector involvement in development will only beeffective and sustainable if it is based on a hardbusiness case and good business practices”.

For SABMiller, the link between healthyeconomies and its major product is, at firstglance, less obvious. Yet for a global companywith its roots in Africa, the practicalconsequences of underdevelopment have a

direct impact on its business: on its customersand staff, its supply chain, transporters andretailers. And looked at in more detail,agriculture, water, health, communications andlocal economic activity are all key aspects ofthe company’s business.

Like any company, SABMiller has tobalance the often-competing timetables,demands and expectations of an ever-widening list of interested parties – staff,shareholders, customers, suppliers, localcommunities and governments. There is agrowing consensus that the role of companiesgoes beyond the Chicago school of thoughtthat ‘the business of business is business’.

The traditional approach of being a tightbusiness with some philanthropy at the marginworks to a point. It may offer short-term benefitwith a specific community and reflect well onthe company, and it should not be dismissedwholesale. However, more thoughtfulcompanies are developing approaches‘beyond philanthropy’ and are activelyexploring ways in which their core businessactivities can start to operate in ways that aregood for business (and by extension for theirshareholders), help to develop new markets(and hence product demand) and at the sametime contribute to wider social benefit – vital forlong-term economic success.

The question for many as they embark onthis redefinition of roles and responsibilities ishow far should this process go, and at whatstage does what is good for business encroachon what is the proper responsibility of others?

Like many people, we tend to be scepticalabout corporate (and, to be fair, NGO andgovernment) rhetoric unless it is matched withaction. It is one thing to produce a nicebrochure and quite another to get results onthe ground. One of the major challenges forany organisation engaged in this arena will behow to measure progress to ensure that the

20 Business and development: Future challenges

Business and development: future challenges


gains being realised are real and not justbeautifully presented self-promotion – and aretrusted as such by an interested public.

What is genuinely interesting about theselection of examples that SABMiller havecovered in this report is the diversity of issuesand approaches that are described.

Some, like HIV/Aids, combine the humanityand necessity of dealing sensitively andeffectively with Africa’s greatest scourge with aclear business case. Others are less obvious.Helping the establishment of small businessesto form part of the retail chain, developing newproducts using locally sourced materialsthoughtfully purchased from small farmers;these go to the heart of what Africaneconomies are going to need if they are togrow stronger.

The beating heart of any economy is its SME sector. SABMiller’s support andencouragement for this sector is, we wouldargue, one of the best long-term investments it can make.

From the farmers who grow the barley,wheat and hops, to the breweries and bottlingplants, the wine bars and beer cellars in therichest cities in the world, the dusty andisolated communities of rural Africa, SABMillertouches the lives of tens of millions through itsbusiness activities. Its impact can be felt at anational, regional and local level through thegeneration of economic activity, the taxes itpays, and the employment it creates. It doesnot take too long to work out that the groupsupports thousands of livelihoods and therebytens of thousands of lives.

The proof of course will be in the doingrather than the talking (again something thatapplies equally to governments, NGOs andcompanies). The challenge will therefore be to deliver on the fine words and ambitions insuch a way that silences the sceptics, many ofwhom see multinational corporate involvement

in weak economies as the thin end of a wedgethat is making the world safe for a ‘bigcompany’ model of the market, and which willleave weak economies and small businessesstruggling in their wake.

This just does not have to be so. It is in the private sector’s interest to have diverse and robust economies that operate within aframework of good governance, well managedrisks and a fair social environment. Economiesthat grow in sustainable ways both supportpeople and are good for business.

There are increasing signs that Africa is at a stage in its own development where there are genuine opportunities for thoughtfulinvestment which will, in turn, unlock realopportunities for companies and for people. It is heartening to think that some largecompanies recognise that fact, and want to beboth a driver for change and a part of a newshared prosperity.

In no small way, the existence of suchcompanies will be a vital, if not the best, wayto overcome poverty – provided they investwisely with people in mind, openly account forwhat they do and explain what they cannot dowithout the help of others.

Our best wishes to SABMiller in continuingto deliver on this challenging agenda.

Richard Sandbrook and Will Day

October 2005

Sandbrook and Day are independent sustainabledevelopment advisers specialising in private-sector initiatives. They act as special advisers tothe United Nation’s Development Programme’sGrowing Sustainable Business Initiative.

Business and development: Future challenges 21

“Private-sector involvement in development will only be

effective and sustainable if it is based on a hard business

case and good business practices.”

Graham Mackay, 2005

We have a large part of our business, our history and our pride invested in the African continent. Castle,Kilimanjaro, Mosi, 2M, Eagle, St Louis, Chairman’s ESB,Castle Milk Stout, Rhino and Nile Special are just some of our brands which have become household namesthroughout Africa.

Today, over 100 years after the South African BreweriesLtd, our original brewing company, was founded inJohannesburg, we are a thriving African-originated multi-national with a brewing presence in almost 50 countriesacross five continents and a portfolio of strong brands and leading market shares in many of the countries inwhich we have brewing operations.

We’re working in Africa

Contents

2 Our African operations4 The private sector’s role in African development 6 A day in the life of our African businesses20 Business and development: future challenges

SAB MILLER AFRICA COVER 11/10/05 1:44 pm Page 2

SABMiller plc

We’re working in AfricaSABMiller plc

(Registration No. 3528416)

Registered office

SABMiller House,Church Street West,Woking, SurreyGU21 6HS

Head office

One Stanhope Gate,London, EnglandW1K 1AF

For further information please go to www.sabmiller.com

SAB MILLER AFRICA COVER 10/10/05 10:08 pm Page 1

sabmiller plc we’re working in africa · although sabmiller plc’s primary listing is on the...

Documents