INSEAD report on SABMiller operations in Uganda
12 June 2009
Reveals the contribution that business can make to economic development
Capetown. Today at the Africa World Economic Forum, SABMiller plc, one of the world's leading brewers, will release a report(1) by Professor Ethan Kapstein of INSEAD, which reveals the economic and social contribution made by its Ugandan subsidiary, Nile Breweries.
The study estimates the company's impact on issues such as household income, employment and government revenue, as well as its broader social and environmental impacts.
One of the most striking findings is the employment multiplier effect. Nile Breweries directly employs 430 people and another 27,000 jobs are provided by the direct value chain(2). Once indirect employment and induced employment(3) are considered, the total amount of jobs that are generated by Nile Breweries' presence in Uganda is over 44,000 - implying an overall job multiplier of 100 times.
This multiplication factor is significantly higher in Uganda than other countries such as Honduras, which is also featured in the report with an equivalent employment multiplier of 33. The difference can be largely explained by the fact that Uganda's value chain is very labour-intensive compared with other markets - particularly in agriculture and distribution.
Other key findings from the report include:
- In 2007 Nile Breweries and its employees were directly or indirectly responsible for generating value added of US$92M - value added incorporates salaries paid to households, taxes paid to the government, company profits, household savings and dividends
- The direct, indirect and induced effects of Nile Breweries operations on government tax revenues total US$55m - of which US$28M is directly paid by the company
- The lowest salary paid by NB is almost twice the Ugandan minimum wage
SABMiller CEO Graham Mackay said: "Good business is good for development - so long as companies operate in a responsible and accountable manner. For us a healthy, growing economic environment in the communities where we operate is the key to achieving business success. By better understanding our socio-economic impact, we can maximise our ability to make a difference through stimulating economic development."
Minister Hope Mwesigye, Uganda's Minister of Agriculture, Animal Industry and Fisheries said: "The report shows the unmistakable benefits that SABMiller's investment in Uganda has brought both to the company and to our country, with 44,000 jobs supported and $92 million added to Uganda's economy. We have all gained from Nile Breweries' commitment to working with us to develop value-added agriculture through local sourcing from thousands of Ugandan farmers. I encourage other leading global companies to see this as a model for how to partner locally to advance economic growth."
Beyond the quantitative, economic analysis, the report provides an overview of some of the broader social and environmental impacts of Nile Breweries both in its operations and along its value chain. In particular it looks at the effects on local farmers of the Eagle Lager project.
Since 2002 the company has championed the introduction of a beer - Eagle Lager - made exclusively from local raw materials, in this case sorghum. The purpose of Eagle was to provide low income consumers with a safe product that uses home grown agriculture and today this brand is responsible for 50% of Nile Breweries' sales and provides 8,000 farmers with approximately 70% of their income.
Professor Kapstein's analysis has enabled SABMiller to understand where it can make the greatest economic impact, thereby informing its strategies for other countries. For example, as a result of Eagle's success in Uganda, the company has extended its sourcing of raw materials from local smallholder farmers to include new markets and crops. Most recently, cassava has been trialled as a potential source of starch for brewing in Angola, with plans to recruit local farmers as suppliers.
Professor Kapstein says "Nile Breweries provides in important respects, a model of how the subsidiary of a multinational firm can operate in such as way as to promote the development prospects of the economy in which is it embedded."
The report concludes with recommendations of further steps that can be considered to build on success:
- To work closely with the agricultural community to ensure that it has the technical capability, financial resources, and market access needed for increased farm incomes
- Work with private sector and the Government to ensure that environmental policy becomes a priority
- Continue to invest in training
- Work with suppliers to ensure Uganda companies remain competitive
- Assist the Government in setting optimal taxes by providing fact-based reports that indicate the impact of different tax regimes on such variables as incomes and employment
In addition to Nile Breweries, the report also examines the economic impact of SABMiller's subsidiary in Honduras - Cervecería Hondureňa. It found that the company generated value added of US$405M and generates around 100,000 jobs. With 3,000 people directly employed by Cervecería Hondureňa, this implies a job multiplier of about 33 times.
(1)The Socio-Economic Impact of Nile Breweries in Uganda and Cervecería Hondureňa in Honduras Professor Ethan B Kapstein, INSEAD; René Kim and Willem Ruster, Triple Value. 2009
(2)Direct value chain - from farmers supplying raw materials, through to retailers selling the final product.
(3)Induced employment - employment provided by the additional spending of households as a result of the Nile Breweries value chain.
Notes to editors:
SABMiller is one of the world's largest brewers with brewing interests and distribution agreements across six continents. The group's wide portfolio of brands includes premium international beers such as Grolsch, Miller Genuine Draft, Peroni Nastro Azzurro and Pilsner Urquell, as well as market-leading local brands such as Aguila, Castle, Miller Lite, Snow and Tyskie. SABMiller is also one of the largest bottlers of Coca-Cola products in the world.
In the year ended 31 March 2009, the group reported US$3,405 million in adjusted pre-tax profit and group revenue of US$25,302 million. SABMiller is listed on the London and Johannesburg stock exchanges.
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|Bianca Shevlin||Corporate Media Relations Manager:||Tel: +44 20 7659 0172|