Johannesburg, 17 October2014 - The food giant, Tiger Brands, has taken two of its products off supermarket shelves for containing minuscule amounts of a cancer-causing colourant.
JOHANNESBURG - A long-term approach must be taken to reap returns from investments in Africa, Thabi Segoale, group executive of corporate strategy and business development at Tiger Brands, said yesterday.
“In spite of what you can do to prepare yourself for the journey … something will definitely go wrong, some things will not go according to plan,” Mr Segoale said at the Retail Congress Africa in Sandton.
“We certainly have our own stories of things we didn’t get particularly right over the past couple of years and have learnt a great deal from our experience.”
Much like continental kingpin Shoprite, Tiger Brands has benefited from first-mover advantage, having ventured outside SA 10 years ago.
Today, 25% of the company’s revenues are generated outside its home market.
It has not been all sunshine and roses as the group’s ill-starred acquisition of Dangote Flour Mills has seen it suffer hefty impairments.
The write-downs follow substantial losses since the Nigerian food business was bought in 2012. The losses have been partly attributed to an oversupplied market.
Tiger Brands bought a 63.4% stake in Dangote to have a business of scale in Africa’s biggest economy, a move that saw it pay a large premium to the book value of the business.
Mr Segoale said the “Asian subcontinent and the Latin American” region were on Tiger Brands’ radar. “It’s only a matter of time before we find the right opportunity.
“While it has always been our ambition to grow our business in several other emerging markets, it’s about timing and having to choose your battles … the middle class that is beginning to emerge is creating opportunities for consumer-packaged goods companies like ourselves,” he said.
Though the continent does present a compelling case for consumerfacing groups, there is a deficit between economic growth and the rate of infrastructure investment.
Other risks include the lack of suitable property, currency volatility, corruption and red tape.
Boris Planer, the chief economist at London’s Planet Retail, said infrastructure was not just about roads or trucks. “It’s a supplier base, regular electricity supply, bridges, car ownership, people and education,” he said.
According to Standard Bank, it is estimated that Africa will need to invest at least $100bn in the next decade to upgrade infrastructure if it is to realise its economic growth potential. Inter-African trade restrictions also pose a problem.
Frans van der Colff, GM of Fruit & Veg City Africa and International, said there had not been much progress in cross-border trade.
The company operates in Zambia, Zimbabwe, Mozambique, Angola, Mauritius and Namibia, and is about to open stores in Ghana, Tanzania and Dar es Salaam and “is busy with a deal in Nigeria”.
“It’s not easing up at the borders and there is a great responsibility on governments to make this whole process easier and we need to facilitate easier border crossings and the lowering of duties,” Mr van der Colff said.
“Time at the border gets passed on to the consumer. We need more efficient ports and airports.… We have a long way to go,” he said.
One of the African Union Commission’s goals is to create a continental free-trade area.
“As a potential investor into the rest of the continent, you are better served to capitalise opportunities if you understand the nuances of different territories,” Mr Segoale said. “There is always a way around some of the challenges in Africa. It takes, among other things, a willingness to invest ahead of the curve in both infrastructure and the people that work for you.”
Deloitte, in its Africa: A 21st Century Review study, which was released yesterday, said that by 2017 the continent was expected to become the second-largest market for investment by European consumer businesses.
In Deloitte’s view, the consumer opportunity rests on five pillars: the rise of the middle class, exponential population growth, the dominance of youth, rapid urbanisation, and fast adoption of digital technologies.