Nampak’s $160 million investment in a new canning plant in Angola has ensured that Bevcan’s customers will be more efficiently serviced and signals that Nampak’s African expansion is back on track.

By Ian Armitage

In 2009 President Jacob Zuma paid Angola a state visit. He took 150 South African business leaders with him; trade was top of the agenda.

He remains intent on paving the way for South African business to invest in Angola and in a recent trip to the country said: “To us it was important that we pay this visit to strengthen relations.”

Racked by almost 30 years of civil war, public infrastructure in Angola is weak. But because the country is abundant in natural resources it is seen as an untapped investment opportunity.

Angola is one of sub-Saharan Africa’s largest economies, with a rapidly expanding financial sector and huge potential in areas such as agriculture, telecoms and energy.

There are no shortages of opportunities for South Africans, just ask Nampak.

Its $160 million investment in a new Angolata canning plant – in Viana, a industrial area near the capital Luanda - has ensured that Bevcan’s customers Cuca BGI (part of the Castle Group) and Coca-Cola Bottling Luanda (managed by SABMiller) will be more efficiently serviced.

Angola is an increasingly important market for Bevcan and the first can production line can produce 1,800 cans per minute, which means a capacity of up to 750 million cans per annum.

Erik Smuts, the managing director of Nampak’s Bevcan, says there are huge opportunities in Angola. He cautioned though that it had not been an easy place to work.

“The big problem we’ve found is red tape. The high levels of bureaucracy are a problem as we discovered first hand.

“I would say that doing business in Angola takes more than money; you need to be patient,” he says. “But there are wonderful opportunities.”

Bevcan’s Angola project was initiated in 2004 and the official opening of the plant will take place on 29th June 2011 – it’s been a long time coming.

“This is Bevcan’s first and Nampak’s single largest greenfield investment outside of South Africa,” says Smuts. “Angola is the fastest-growing economy in Africa and one of the fastest growing economies in the world.

“We want to use the factory to secure Bevcan's current market of over 600 million cans per year, which we export from South Africa at present, and gain enough market share to justify installing a second line, which we have already laid the foundations for.

“We see this as a springboard for further investments into other types of packaging."

According to Bevcan, the Angolan market currently consumes around 1 billion cans per year.

The investment will reduce customers’ lead times significantly - from three to six months to one to two weeks, says Smuts.

“There will be less importation costs,” he explains. “The benefits of producing the cans in Angola is that we are creating direct jobs for locals and are more effectively servicing our customers. We will be more competitive in terms of price versus the cost of import, but the main benefits are in bringing down our customers' lead times, decreasing working capital costs in raw material stockholdings, storage and demurrage costs and also removing the logistical headache.”

The steel for the cans will be imported mainly from Europe; other raw materials will mostly come from South Africa.

Bevcan will also be manufacturing the can ends in South Africa, as this is cheaper than manufacturing them in Angola.

“Another great thing about this is that it alleviates the worry with respect to the Rand,” says Smuts. “We no longer have to worry about the strength of the Rand and whether producing 600 million cans in South Africa and exporting them to Angola will be profitable at the prevailing exchange rate.

“On the flip side, this will take work out of our Durban and Cape Town plants, which will now have spare capacity. We have to look at creating new local and export opportunities,” he adds.

Bevcan has also established Reclata, its Angolan recycling operation as a legal entity in Angola.

Smuts says this was done even before building the Angolata plant.

“We are committed to recycling and I think our Collect-a-Can operations in South Africa are testament to that,” he says.

Reclata is a partnership between Bevcan and its customers, which will recycle scrap from the can making process, as well as collect used beverage cans from the consumer market.

“We will model Reclata on our self-sustaining Collect-a-Can business, a JV between Nampak and ArcelorMittal SA. It has been collecting cans for 17 years,” Smuts adds. “In South Africa, over 70 percent of all beverage cans produced are collected for recycling.

“The set up costs will be high but it is important to begin recycling and raising environmental awareness in the country.”

Environmental awareness and CSR are obviously key to Nampak and its Bevcan division.

Interestingly enough, and very much tying in with this, the firm has embarked on its biggest marketing campaign to date - a nationwide campaign called ‘Every-can-counts‘ (www.everycancounts.co.za) that aims to raise R10 million from the sale of cans in aid of education in South Africa.

“We are encouraging South Africans to make a difference by choosing their favourite beverage in a can,” explains Smuts.

For every can sold by Bevcan it will donate 3c towards education in South Africa.

“We are contributing to education and transformation, doing what we can for the good of the youth of our country.”

The promotion runs from 18 April until the 18 July 2011 and its message is being promoted across a wide range of media such as SABC 1,2 and 3 as well as ETV. Radio ads will be aired on Highveld 94.7, Cape Talk, Umhlobo Wene, Ukhozi, Thobela,

But, once the R10 million (or more) has been raised, the work won’t stop and Nampak and Bevcan will be supporting further initiatives.

A BRIGHT FUTURE
These are exciting times for Nampak, Bevcan and us ordinary South Africans – on all fronts, it seems.

Angolans too have reason to cheer.

“It is all very promising indeed,” says Smuts. “I am excited; we are excited by the future. We also need to consider all potential threats to the business and we need to also look at our costs and make sure we are competitive.

“We produce about 2.6 billion cans in South Africa. The local market is actually fairly small and it has been categorised over the last 10 years or so by a massive drop in beer and cider volumes, where a lot of those volumes have gone to returnable glass in a bigger formats like 750ml bottles. However, we are starting to see this cycle changing and in the last year we have seen significant growth in our beer volumes.

“On the soft drinks side, the big thing we’ve had over the last two years has been a shift from cans to PET bottles. Interestingly, we have done market research here that shows us that from the consumer point of view there is actually a preference for soft drinks out of cans. Our research shows consumers believe that soft drinks taste better out of a can; it is colder, fresher and fizzier.”

He says the company is certainly looking at expanding its footprint in Africa.

“Opportunity is all around,” concludes Smuts.