VENTURES AFRICA – Professional services firm, Grant Thornton has described the high rate of mergers and acquisitions amongst South Africa’s food and beverage companies as a result of ideal opportunities made available by the sector to investors seeking expansion in the lucrative market.
According to the firm’s finance director, Steven Kilfoil, world-renowned retail chain, Walmart’s interest in acquiring South Africa’s Massmart, “We’re expecting more activity of this nature in the next few years,” he said.
In the firm’s recently published International Business Report on South African food and beverage sector, it stated the interests of foreign companies in the sector and put the number of global businesses currently considering company merger and acquisition opportunities at 20 percent. This highlights the sector’s resilience in the wake of recent global economic woes, coupled with benefits from consumer patronage both in value and upmarket categories.
According to Grant Thornton, this is providing avenues for consolidation and unlocking new opportunities for fresh growth.
In 2060, Africa, according to the African Development Bank (AfDB), would have a projected population of 1.1 billion people in the middle class; thus presenting consumer goods companies an opportunity for profitable investments.
Already, global companies are scaling up their investments in Africa; one of such is the world’s biggest food company Nestlé. The company has said it will invest $1.4 billion by 2015 in Africa to facilitate expansion of its African production capacity.
Local South African companies are also expanding, one of such is Tiger Brands which recently reached an agreement in principle with Nigeria’s Dangote Group‚ to purchase 63.35 percent stake in Dangote Flour Mills.
Tiger Brands through Peter Matlare, its Chief Executive Officer said the company’s ongoing expansion into new African markets is a key strategic thrust through acquisitions and exportation.
In addition to Tiger Group, Grant Thornton’s report on Mergers and Acquisitions activity also indicated that in the next 3 years, 46 percent of South Africa’s businesses seeking expansion via acquisitions will embark on cross border transactions.