The South African Breweries Limited

1
The South African Breweries Limited
EMPOWERMENT THROUGH THE VALUE CHAIN
2
SABs commitment to BEE

• AT SOURCE
• Taung Barley Farmers
• DISTRIBUTION
• Owner Drivers
• Distribution Operators
• HoneyBEE
• Customised Delivery Service
• PROCUREMENT
• SAB KickStart and Commercial Equity
• RETAIL
• Mahlasedi Taverner Training Programme
• JOINT VENTURES
• Coleus Packaging

3
SABS Commitment to BEE

• SABs view - crucial not only to business
  success, but also to the companys particular
  identity as a company with its roots firmly in
  South Africa
• SABs broader Black Economic Empowerment
  strategy
• Aligned to the DTI Scorecard and the Empowerment
  Act
• Includes four main areas of focus
• Shareholding
• Internal empowerment, including employment equity
• External empowerment, including procurement,
  commercial equity and joint ventures
• Social investment

4
SABS Commitment to BEE

• Our philosophy empowerment works best when all
  the parties involved have a vested interest in
  its success
• As a starting point, BEE must be commercially
  driven
• Commercial equity started in the mid-80s
• By the end of the 2004 financial year, SAB was
  contracted to 1 500 PDI-owned businesses with a
  total contract value of R938m
• SABs won the inaugural Business Map Foundation
  Black Economic Empowerment Award for the Most
  Progressive Established Company of the year
  (2003)
• SAB Ltd was singled out for the steps it had
  taken to improve its equity targets and for its
  overall employment equity plan

5
At source
6
Barley Farmers

• One of SABs key BEE projects the development
  of barley farmers in the Taung area is growing
  from strength to strength.
• Since inception in the early 1990s, the number
  of barley farmers in the Taung and Vaalharts
  areas has increased from 55 to 178 in 2004, while
  the value of their harvest has grown from
  R2.4-million in 1998 to R15.4-million.
• In the off-season, these farmers grow other
  crops, including groundnuts and maize, to ensure
  year-round sustainability.
• Enterprise Development assists with mentoring
  farmers
• Funding of crop R12,2m for 4 months

7
 
The South African Barley Industry
IRRIGATION Taung 178 farmers Vaalharts 197
Commercial Farmers
Vaalharts Taung Irrig. Schemes
Douglas, Barkley West Rietrivier Areas
 
DRYLAND 405 Farmers
Hopetown Area
 
Caledon, Swellendam Bredasdorp Area
IRRIGATION 58 Commercial Farmers
8
Distribution
9
Owner-drivers

• Programme founded in 1987 to enable company
  employees to become independent businesspeople
  while ensuring high levels of customer service
  and productivity.
• The programme consists of two phases, the
  development phase and asset acquisition phase.
• The ultimate goal is that the drivers own their
  vehicles and are able to run sustainable
  businesses.

10
Owner-drivers

• More than R2.4-billion invested since inception
  (1987)
• Numbers 248 owner-drivers
• Sales 58 percent of total delivered
  volume
• Areas 39 depots nationwide
• Assets R700 000 (each truck)
• Average turnover R600 000 per annum

ODs have potential to be asset millionaires in 10
years
11
SABs commitment
12
Distribution operators

• Launched early 2006
• New phase of Owner-Drivers
• Owner-Drivers will now be able to operate fleets
  of their own, not just one truck which they have
  to drive
• High potential candidates sought from
  Owner-Driver ranks
• Our Distribution Operators already own 45
  vehicles between them
• Estimates show that earnings should reach about
  R200 000 net per vehicle per annum, a sizeable
  business operation

13
HoneyBEE

• SAB delivers to some 23,000 outlets
• Distribution at the heart of SABs strategic
  advantage
• HoneyBee creates franchised distribution centres
• Launched November 2005
• In line with dtis Small and Medium Enterprise
  Development Programme
• Owners sourced from within SABs ranks
• Immediate ownership of 25, growing to 95 within
  short space of time
• First centre opened in Westonaria projected to
  turn over R240-million in first year of operation

14
Customised Delivery Service Program

• Opportunity for entrepreneurs looking for a new
  challenge
• Pilot stage began in April 2004
• Look for entrepreneurs with a proven track record
  in business and the experience to run a fleet of
  trucks profitably to service smaller clients in
  the on-premise beer market in urban areas.
• Entrepreneurs are sourced from within SABs ranks
  to start with, drawing in existing drivers and
  Owner-Drivers who have decided to move in a new
  direction.
• Each fleet owner registers his company as a
  closed corporation and purchases his trucks with
  the help of SAB.

15
Retail
16
Retail Normalisation

• Licensing of retailers is still the most
  important liquor industry issue requiring urgent
  attention it is a provincial competence
• 74 of outlets currently unlicensed
• True economic transformation within the liquor
  industry will ultimately be achieved through the
  licensing of retailers
• 54 of outlet owners are black women
• Increased employment and job creation
• Licence conditions would assist in combating
  alcohol abuse and the sale of liquor to those who
  are under age
• In addition, the fiscus would benefit from
  increased tax income.
• Estimates show that if 135 000 of the illegal
  shebeens became licensed, the income to
  government from VAT and income tax would amount
  to some R1-billion per annum

17
Retail Normalisation

• SAB has developed a 4-pronged approach to address
  normalisation
• Licensing officers and licensing workshops
• Lobbying for Provincial Legislation
• Business skills training taverner training
• Securing funding

18
Retail Normalisation Mahlasedi Training
Programme

• To assist with retail normalisation, SAB embarked
  on the Mahlasedi Training program
• Piloted in 2001
• Trained 2000 taverners in last 2 years

19
Retail Normalisation Mahlasedi Training
Programme

• During the 2006 financial year, the company will
  invest R18-million and 5 000 outlet owners will
  be trained
• Programme has expanded from 3 to 5 days and now
  also includes a mentoring component
• Course material is aligned to SETA unit standards
• One day dedicated to training on the SAB
  Responsible Trader programme
• THETA has contributed an additional R5m to the
  program
• To train 1 000 more taverners on Mahalsedi
• To train 1 000 taverners on SA Host Program
• Gearing up towards formalised township tours for
  2010

20
Retail Normalisation Mahlasedi Training
Programme

• Significant impact on sustainability of
  taverners
• Improved financial sustainability
• Average turnover increased by 30.52
• Debtors outstanding decreased by 28.78
• Outstanding creditors increased by 12.11 because
  cash flow improved
• Stock levels increased by 37.73 and stock outs
  were significantly reduced
• Savings and investments increased by 40.54 -
  which allowed taverns to buy more stock, increase
  turnover and increase profit.
• Investment in infrastructure
• A sample of 2 846 temporary licensees in Eastern
  Cape 37 had invested in additional capital
  infrastructure for their businesses
• Investment ranged from R10k R15k

21
Retail Normalisation - Funding

• Before an outlet can become licensed it needs to
  comply with infrastructural requirements -
• Separate male and female toilets
• Serving counter
• Separate drinking area (not part of the main
  living area of the home)
• Separate storage facility for alcohol-based
  products
• Most outlet owners do not have the necessary
  capital to invest in this infrastructure in order
  to apply for a licence

22
Retail Normalisation - Funding

• Arrangement between SAB and ABSA
• Facilitates access to business finance for
  shebeen owners to enable them to become tavern
  owners in partnership with SAB
• Facilitates growth of the new as well as the
  established tavern owners via the use of
  financial products, services and mentoring
• Demonstrates meaningful participation in the
  emerging black business market

23
Retail Normalisation - Funding

• Product offering
• Loan Facility Small Business Fund (term loan
  repayable over 5 years at P2)
• Transacting Account BizStart account including
  cellphone telephone banking
• Allows up to R500 cash deposits per day without
  any bank charges
• Transacting Vehicle Business Transact Card
• Pricing special pricing structure to match the
  risk profiles and appetite of this market and to
  support them in growing their businesses

24
Funding process
SAB rep receives marketing material/guidelines
from Absa Small Business
SAB rep engages with Permit holders on financial
offering from Absa
Permit holder goes to closest Absa branch
takes Permit, ID book and Proof of business
address (FICA requirements), Invoices for
building from NHBRC certified contractor, Proof
of having been in operation for at least 12
months, Proof of banking detail (any financial
institution) if applicable
Permit holder engages with pre-identified SB
staff member completes necessary application
forms (Application for loan, Application for
transactional account with Transact card, Credit
life assurance)
Transactional account to be activated card to
be issued
SB staff member ensures documentation correct and
couriers to HO for assessment
SB Fund committee assesses all applications
approves accordingly
Committee meets every Thursday - turnaround time
of 7 days maximum
25
Retail Normalisation overview
Funding
Licensing Assistance
Business Skills Training Mentoring
SA Customer Host Training
26
Procurement
27
Commercial equity spend
938
28
History of SAB KickStart

• Launched in May 1995
• Youth Entrepreneurial Competition
• Targeted at ages 18-35
• Total of R36 million investment to date
• Since 1995 over 2100 participants have been
  trained in business skills, and over 3400 have
  been set up in small businesses
• Major inroads made in promoting entrepreneurial
  awareness amongst the previously disadvantaged
  youth
• Captured the imagination of the South African
  public in the fight against the unemployment
  crisis
• Over the past 10 years, has become one of the
  largest entrepreneurship development projects
  undertaken by a private sector company

29
How The Programme Works

• Interested parties respond to a national press
  and media campaign
• Around 15-20 candidates are selected within 6
  regions to attend the programme
• Candidates attend an intensive business skills
  training course
• Candidates prepare business plans which they
  present to a regional panel of adjudicators
• The most promising business ideas selected are
  awarded grants with which to kickstart their
  businesses

30
How The Programme Works

• Grant recipients receive intensive mentoring to
  help get their businesses off the ground.
  Mentoring lasts for eight months
• Based on reports provided, each region selects
  two candidates to represent them in the national
  finals
• National competition top three winners stand the
  chance of winning additional prize money
• Top three winners also qualify for an additional
  six months of business mentorship

31
Successes 3-Year Review
32
Successes Key Stats
33
Joint ventures
34
Coleus Packaging (Rheem Crown)

• SAB saw the potential to create a major BEE
  opportunity and purchased Rheem from Highveld
  Steel sale finalised 2003
• Rheem produces 90 of the crowns used in South
  Africa
• Company now called Coleus - supplies SAB and its
  competitors and supplies a large number of
  beverage producers around the country
• SAB committed itself to significant plant
  improvements and to a 40 empowerment ownership
  within a certain timeframe
• Before BEE deal could be structured, major
  upgrades needed to be done to become a
  sustainable business
• Improvement areas identified - work began to
  rehabilitate the factory
• Coleus Packaging has substantially increased
  productivity
• SAB has now advertised for a 40 BEE partner

35

• Sponsorships

36
Corporate Sponsorships

37
Other Sponsorships
38
Conclusion
39

• BEE in all its forms is a necessary economic and
  social imperative but.
• Everyone must benefit
• Intervention must be demand-driven not
  supply-driven
• Sustainability is the key word
• Empowerment has been effected throughout the beer
  value chain

40
Thank You