Big brands look beyond South Africa to rest of continent
As South Africa contends with reforms to jumpstart its faltering economy, the country’s peers on the continent are reaping the benefits of Africa’s growth narrative.
Business is booming in the region. And with optics so important in the quest for for investors, homegrown and global businesses are thinking up ways to capitalise on the African growth story.
Executives from Standard Bank Group CEO Sim Tshabalala and Coca Cola Beverages Africa (CCBA) CEO Jacques Vermeulen to General Manager for Uber Eats in South Africa Alyssa Pretorius and Mastercard divisional lead for core products in Southern Africa Suven Kander, gathered last week for the Deloitte Africa Outlook conference in Johannesburg.
All agree the rest of Africa is good for business.
Region trumps South Africa
But the equation is not so straightforward in South Africa.
Tshabalala said decisive action on South Africa Airways and introducing a multi-year multiple-entry visa for businesspeople are among short-term measures and reforms South Africa could undertake to help its economy.
- “The political barriers to achieving… reforms don’t seem insurmountable, so I’m mildly optimistic South Africa might grow a bit faster than predicted in 2020,” he said.
In the interim, Standard Bank had, he said, set its sight on “expanding… operations into more dynamic parts of the world, particularly China and other African countries”.
- “South African manufactured goods are in demand in [other] African countries. Africa is now the world’s largest free trade area. Tariffs are going to fall over the next decade, which should make our products even more competitive,” explained the banker.
Ethiopia sparks interest
Over the next five years, Coca-Cola Beverages Africa will spend north of $400m (364m euro) in Ethiopia, said Vermeulen.
- “There are 108 million people [in Ethiopia] and there is an enormous opportunity for us to grow. We believe in the continent, that is why we are investing aggressively [in it],” Vermeulen told The Africa Report.
In the short term, CCBA is building two greenfield sites in Ethiopia. “In fact, we are busy with them as we speak. Last year, we finished a brownfield site,” Vermeulen added. The one greenfield site is in Hawassa (also known as Awassa) and the other one is in Addis Ababa.
- “We have an existing plant in Addis, but it is fully saturated,” said Vermeulen. Although CCBA is positive about Ethiopia, there are challenges “from a taxation and forex constraint perspective”.
“We are working with the government to see how we can partner and create opportunities for the people in Ethiopia,” said the CCBA boss.
Not to be left behind, CCBA plans to invest nearly $1bn (90bn euro) in South Africa over the next five years.
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The South African market has adapted well to the global move away from sugary drinks to zero-sugar beverages.
CCBA pushes localisation
This is not the case in the rest of the continent in the markets where CCBA operates.
The company has adopted a localisation ethos on the rest of the continent.
- One of the outcomes of this strategy, said Vermeulen, proudly, is the fact that “79% of our input material across our footprint… [is sourced locally where we operate]”.
In Uganda, CCBA has developed a local product for consumption solely in that market. “We are trying to create more of what the market wants,” he said.
The disparities and contrasts among the continent’s different markets have led to Uber Eats changing its delivery approach, according Pretorius.
In South Africa, for example, Uber Eats started a service in Soweto, the country’s biggest township, and instead of motorbikes, uses bicycles for delivery. This comes with the challenge of managing the hot chain. In Nairobi, Uber Eats has people delivering meals while moving around on rollerblades to counter congestion.
Someone has to pay for all those drinks and meals.
Globally, cash still represents 95% of transactions. Consumers believe cash is safe and secure, Kander said.
- “Cash is still a problem and is probably going to continue to be a problem. [But] cash is not safe, it is not secure – if it is gone, it is gone,” explained Kander.
In a testament to the continent’s resilience, Mastercard has opened a new office in Zimbabwe, where it has seen an opportunity in card payments.