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Post-coronavirus, Rentokil to expand in Africa to meet new hygiene demands

By David Whitehouse
Posted on Wednesday, 1 April 2020 11:26

Virus Outbreak South Africa
A security officer sprays a customer's hands with sanitizer inside a shop in downtown Johannesburg, South Africa, Friday, March 20, 2020. (AP Photo/Themba Hadebe)

Rentokil Initial, the global hygiene and pest control company, aims to expand in Nigeria, Ghana and Ethiopia once the coronavirus pandemic has been brought under control, Nkosinathi Solomon, the company’s managing director for sub-Saharan Africa, told The Africa Report.

The company is targeting Lagos, Abuja, Accra and Addis Ababa as priority cities for expansion, Solomon said.

  • Rentokil typically expands by acquisition, buying up local companies and then upgrading their operating standards to meet its global norms.
  • Talks with possible partners in the target cities range from early stage to more advanced. The company aims to “move quickly after the virus ends”, Solomon said. “We have a strategy of growth in Africa.”

Rentokil operates in South Africa, Kenya, Uganda, Mozambique, Mauritius and Tanzania. The shares, which are traded in London, have slumped with the rest of the market due to the economic standstill that coronavirus has caused.

Rentokil on March 25 withdrew its full-year outlook for 2020 and suspended dividend payments as the pandemic worsened.

The company has moved to conserve cash. Management have taken pay cuts, bonus schemes have been cancelled and a hiring freeze implemented. These and other steps with reduce costs by about 100 million pounds in 2020, says the company.

  • In Africa, Rentokil is having a “very difficult period” in the short term as many of client businesses have been forced to close, Solomon said. “Our customers are not able to operate.”

READ MORE: African Development Bank picks Citi for US dollar coronavirus bond sale

Disinfection

In South Africa, Rentokil has been classified as an essential service and is therefore allowed to remain open. Solomon said he hopes other countries such as Kenya and Mozambique adopt the same stance.

He is encouraged by the response to the crisis from governments in South Africa, Kenya and Mozambique which has been “swift and productive overall.”

Prevention, he says, is essential, as the health system in South Africa won’t be able to handle a large number of cases.

Disinfection is likely to be a greater share of Rentokil’s business in Africa once the pandemic is over, he says, though the shift is hard to quantify. “There will be increased demand post lockdown.” Handwashing products are also likely to get a sustained lift – even in shopping malls, people will want to wash their hands more, he says.

In the future, “there will be more awareness of hygiene,” he says, and government hygiene regulations and enforcement will be stricter. Demand for hygiene and disinfection services will be the highest in Africa’s urban centres as they have the best chance of contagion in an epidemic, he said. “It’s not rocket science. We see a positive long-term story.”

READ MORE: South African corporates step up to fight coronavirus

The Bottom Line

Provided it can weather the short-term financial storm, Rentokil is set to benefit from greater hygiene awareness.

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