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Investing in Africa - its about more than tax

28 November 2010

The charity and NGO, ActionAid, has this week published a report on SABMiller's tax affairs. It makes a number of allegations, all of which we reject very strongly - the details of our formal response can be found here.

While compliance with tax laws underpins all of our corporate governance practices, to focus solely on tax issues detracts from the broader economic impact that companies can have in developing markets.  Find out more about our economic contribution to society on pages 10 and 11 of our 2010 Sustainable Development Report available here.

We are very proud of our record in investing in Africa.  In 2009/10 we invested more than US$500 million in Africa and further expanded our operations with new breweries or acquisitions in Tanzania, Mozambique, Nigeria, Ghana, Southern Sudan, Uganda and Ethiopia.

But our economic impact goes beyond this investment. For example, a report by Ethan Kapstein in 2009 assessed the socio-economic impact of our business in Uganda and it found that for every person we employ another 100 jobs are generated in the broader economy. The report also showed that 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.

We believe that 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. We will continue to invest in Africa and continue to have a positive impact on the economies in which we operate.

We believe that everyone - businesses, governments and campaign groups - should have a shared agenda to reduce poverty and improve quality of life. We want to engage with anyone who shares our commitment to Africa and have an open debate about the best ways to do this.

We are also committed to behaving in a transparent and ethical way. Engaging in open debate is an important part of this and with that in mind we invite your comments below.

  • Martin on 29 November 2010 at 11:30:21

    Andy, you say that "compliance with tax laws underpins all of our corporate governance practices", but ActionAid hasn't suggested that SABMiller is not in compliance with tax laws. The whole point is that companies can do this legally, which is why we are calling on SABMiller to set out how it reconciles its tax planning - aggressive or otherwise - with its commitment to social responisbility.

    ActionAid works on a multitude of issues across 45 countries, so while I'd agree with you that "to focus solely on tax issues detracts from the broader economic impact that companies can have in developing markets", that doesn't mean that some focus on tax isn't useful or necessary.

    Why not write a blog post dealing with the specifics of our report and responding to our detailed recommendations? That would surely be the best way to engage in open debate.

    Reply from Andy Wales, SVP Sustainable Development
    on 29 November 2010 at 20:10:00

    Over the last few months we have had an open dialogue with your research team and we are very disappointed with the conclusions drawn in your report. We have endeavoured to answer your questions at each stage of the process and our letter to you of 11 November provides a detailed response to specific points raised in the report. We have uploaded the letter here
    www.sabmiller.com/files/pdf/Response_Action_Aid.pdf
    (please copy and paste this link into your browser).

    In the past ActionAid has made some constructive contributions to the debate on tax. We support your recommendations regarding improved management of taxation in developing countries, including greater investment in the capability of local tax authorities and that business should be taxed fairly. Your report ‘Accounting for Poverty' report states: "Governments should aim to strike an optimal balance between raising revenue and attracting investment that benefits poor people when setting corporate tax rates and offering tax incentives." We agree, but we do not believe that you undertook this particular piece of research in the same spirit.

    Our businesses make a very substantial contribution to the economies of the countries in which we operate supporting economic growth, social development and environmental protection, this has been verified by independent research and analysis. And I firmly believe that the growth of responsible businesses like ours can continue to make a very significant contribution to sustainably lifting people and communities out of poverty.

  • Casper Knudsen on 29 November 2010 at 14:28:34

    Hi!

    I'm very happy to hear that you also believe that business and development should join hands in a lovely threesome, third-party being responsibility. Not just a beautiful vision, but a question of whether business leads to death or development.

    That's why I would like to hear your answer to ActionAids allegations of whether or not you find it morally acceptable to dodge taxes in the countries you are using for your business.
    SInce you are probably busy guys the answer could even be put in a simple yes/no.


    Thank you so much.
    Best wishes,

    Casper
    Activista Denmark

    Reply from Andy Wales, SVP Sustainable Development
    on 29 November 2010 at 18:46:00

    We do not participate in aggressive tax planning in Africa, or any other area of our operations. We engaged in a long period of dialogue with ActionAid, in which we provided a substantial amount of information on our business structures and consequently are very disappointed with the conclusions drawn in the report.

  • Casper Knudsen on 29 November 2010 at 23:25:02

    I can see that it must be frustrating that the fact that you engaged in the dialogue did not lead ActionAid to back off. However, as far as I have understood it is very clear that you have been paying a very small amount in taxes in eg Ghana. Can you confirm this?
    If so (I believe this is a fact widely accessible in public files) - what do you, being Head of Sustainable Development, think about this? How does this fit your strategy for sustainable development?

    Reply from Andy Wales, SVP Sustainable Development
    on 30 November 2010 at 15:02:00

    Casper, thanks for your continued interest. Our business in Ghana is in the early stages of development within the SABMiller group. The reasons for its low profitability, and hence low tax payments, relate to the intensely competitive nature of the local market in which it is a relatively small participant; escalating input costs; a significant depreciation in the local currency which impacts overall costs; and a recent increase in excise tax which has depressed consumer demand.

    Corporation tax is a poor guide to the total tax contribution in countries like Ghana. In 2009 our business in Ghana paid GHS16.7m (approximately US$12m) in total tax contributions to the Ghanaian Revenue, including excise taxes and VAT. This amounted to approximately 33% of gross revenue and exceeds our profit before tax. In addition, the company has invested extensively in capital expenditure over recent years to boost its business prospects and the SABMiller group will be investing capital of approximately US$7m in a much needed business recovery programme.

    As I've outlined above, our strategy for sustainable development is founded on the basis that so long as companies operate in a responsible and accountable manner, good business is good for development. For us a healthy, growing economic environment in the communities where we operate is the key to achieving business success. And, successful business is a key ingredient of healthy, growing economies -as highlighted in the research by Professor Kapstein of INSEAD business school. If we are to consider how business can contribute to economic growth, social development and environmental protection, we must take a broader view.

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