Supporting South Africa: Food and beverage companies invest in the region’s economy

In a bid to ignite economic growth in South Africa, many food and beverage companies have recently made key investments in the country. From food giants establishing manufacturing facilities to enable local food production, to beverage leaders injecting hundreds of millions of dollars into strategic projects, it is clear that the global F&B industry is beginning to see the potential of South Africa’s lucrative market. 

Taste and nutrition company Kerry opened the “largest and most advanced taste manufacturing facility on the African continent” in May last year. Located in KwaZulu-Natal, South Africa’s most eastern province, the €38 million facility produces sustainable nutrition solutions for consumption across the African continent.

The facility is one of Kerry’s most environmentally efficient manufacturing sites with sustainable features including low energy usage equipment, solar power generation to reduce consumption from the local grid, waste heat capture and efficient water capture, reuse and reduction.

Speaking about the opening of the facility, South Africa’s deputy minister of trade, industry and competition, Nomalungelo Gina, said: “The project is recognised as a key strategic investment in the region of Kwa-Zulu Natal and within South Africa’s food manufacturing industry and has been included as part of the South African Presidential investment drive to stimulate sustainable, equitable and inclusive growth as the foundation for socio-economic transformation in the country. We are excited about this investment because it aligns very well with our re-imagined industrial strategy.”

Energy supply challenges 

Sustainability is key – particularly in energy-intensive industries like food and beverage.

Implementing sustainable systems is vital to the endurance of large companies in South Africa, as the country has been constrained by electricity supply shortages for years. Rolling scheduled power cuts (load-shedding) started in 2007 and have intensified exponentially, reaching around nine hours of power cuts daily in 2022.

The severe electricity shortfall has disrupted economic activity and increased operating costs for businesses, many of which rely on diesel generators, which are costly to both wallets and the environment.

In November last year, Nestlé installed a solar plant with a capacity of 966kW at its Babelegi manufacturing facility in Hammanskraal, around 100 kilometres from Johannesburg. The company ground-mounted 1,806 solar photovoltaic panels at the site, which produces Maggi noodles and Nestlé Cremora and expects the panels to generate 15.6% of the total electrical energy required at the factory each year.

Xolile White, technical director at Nestlé East and Southern African region, said: “We believe that this will help in energising the region’s increased efforts towards energy security, this way Nestlé Cremora and Maggi two-minute noodles not only remain tastier but also contribute to making better the environment”.

Similarly, at its Harrismith Factory in the eastern part of South Africa, Nestlé installed a ground-mounted system as well as solar photovoltaic panels on the roofs of new carport structures, sized with a capacity of 1,189kW. This equates to 10% of the total electrical energy requirement of the factory for the full year and will generate approximately 45% of the factory’s demand during daylight hours.

In October, ADM announced that it acquired leading South Africa-based flavour distributor, Comhan. The acquisition was designed to enable ADM’s continued development of its nutrition business in key growth markets including Africa, opening up opportunities for ADM’s customers in the region and building on the capabilities of the company’s existing offices in Nigeria and Kenya.

Big beverage business

Last year, through its subsidiary South African Breweries (SAB), and in a bid to ignite economic growth, AB InBev pledged to invest an additional R 920 million (approx. $63 million) into two breweries, boosting its total investment commitment for 2022 to R 4.5 billion (approx. $309 million).

According to SAB’s CEO, Richard Rivett-Carnac, the beer industry continues to be a key contributor to the South African economy. Rivett-Carnac cited a recent Oxford Economics study that revealed the nation’s beer industry contributed 1.3% of the national GDP in 2019. At that time, the sector sustained over 248,000 jobs, which was equivalent to 1.5% of national employment.

Statista cites that South Africa’s beer segment (revenue) amounts to $6.80 billion in 2023, and projects the market to grow annually by 9.27% (CAGR 2023-2027).

Rivett-Carnac said: “These investments will give us the capacity to not only contribute to the economy but also to be able to contribute to job creation, tax generation and procurement spend”. 

The commitment was set to create direct and indirect employment opportunities and help SAB continue transforming the industry through partnerships with black suppliers. A majority of the investment has been used to fund an expansion of the Prospecton brewery in Durban, which is expected to add an estimated R 3.1 billion (approx. $213 million) in tax revenue and create up to 24,000 jobs throughout the value chain.

The Covid-19 pandemic caused severe economic turmoil in South Africa, with an unprecedented drop in GDP due to lockdowns and restrictions. Rivett-Carnac explained that SAB intends to assist with economic recovery. “The budget delivered by the Minister of Finance in February ensured that economic recovery was prioritised by keeping the beer excise adjustment closer to inflation,” he said. “This has provided us with the financial space to grow the beer category responsibly and aid our government in our collective mission towards economic recovery and growth.”

Last month, beer giant Heineken announced the successful acquisition of Distell and Namibia Breweries, which have been combined with Heineken South Africa into a new Heineken majority-owned business, Heineken Beverages.

The acquisitions and establishment of Heineken Beverages are set to capture significant growth opportunities in Southern Africa. Heineken’s CEO and chairman of the executive board, Dolf van den Brink, said: “By combining the strengths of all three entities, we can leverage our expertise and resources to foster growth, create jobs and contribute to the overall economic development of the region”.

Driving the economy

Following an agreement with the Competition Authorities in South Africa, Heineken Beverages will move ahead with a public interest package which the company says “is a vote of confidence in the South African economy”.

The package was announced at the 2023 South Africa Investment Conference, which aims to drive investment into the country’s economy. Since the first investment conference in 2018, South Africa has attracted R 1.14 trillion (approx. $62 billion) in commitments.

The package includes an investment plan of more than €500 million over five years, investing more than €250 million towards the construction of a new brewery and maltery, establishing a €20 million supplier development fund and contributing €10 million towards a localisation and growth fund in South Africa over five years.

It will also create an innovation and R&D hub for the region and implement a ‘Tavern Transformation’ programme that will support around 1,000 tavern owners to become licensed, sustainable local enterprises over a five-year period.

Heineken SA managing director and Heineken Beverages MD designate, Jordi Borrut, commented: “This investment underscores our continued belief in the development and sustainability of South Africa. The 2023 SA Investment Conference is an incredible showcase of how private sector investment can help to transform a country and its economy. We are honoured to take part in this journey and invest further into South Africa – alongside the region as a whole.”

He continued: “We fully support the conference’s overall goals of socio-economic development, creating sustainable jobs, reducing poverty and driving back inequality. We remain committed to developing new business in local markets, as well as to build talent, create new employment opportunities, and have an overall positive effect on South Africa’s economy.”

In conclusion, the food and beverage industry is playing a significant role in igniting economic growth in South Africa. The investments made by these companies have created direct and indirect employment opportunities and helped the government in the collective mission towards economic recovery and growth.

The industry continues to be a key contributor to the South African economy and is set to foster growth, create jobs and contribute to the overall economic development of the region. It’s certainly an exciting region for economic growth for F&B players.