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Craft brewers and distillers to focus on innovation and collaboration to help re-boot the industry

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Hard-hit craft brewers and distillers brace themselves for a rocky business restart

South Africa’s liquor industry, particularly craft distillers and brewers, have been hard hit by the protracted lockdown and ban on the sale of alcohol, with fears that many may not be able to survive.

Expecting to take years to recover, the sector hopes that it may survive by collaborating and innovating. This emerged during an online panel discussion hosted this week by Messe Muenchen South Africa, the organisers of the food & drink technology (fdt) Africa trade fair, which will be held in July 2021.

Moderated by Clive Belcher, Chairperson of the Institute of Brewing & Distilling (IBD) Africa sector and MD of Global Beverage Solutions, the panel included Craft Beer Association South Africa (CBASA) Chairperson Wendy Pienaar, Brew Master and founder of Brewsters Craft Apiwe Nxusani-Mawela, Southern African Craft Distilling Institute (SACDI) Secretary Pro Tem. Hendré Barnard, and “The Brewmistress” Brew Writer Lucy Corne.

Panellists noted that the sudden lockdown had left brewers with beer still in tanks, had dried up key contracts and cash flow, and had negatively impacted supply chains, meaning that most would be unable to pick up production immediately on the lifting of a ban on alcohol sales.

Nxusani-Mawela said: “Brewing beer is a process – it takes three weeks, so restarting won’t happen overnight. In addition, cash flow is a problem, so buying raw materials and packaging will be a tight squeeze – if we can source these at all. It won’t be easy.”

Pienaar added: “There are also operational issues to consider – like getting staff safely to work, and making the brewery safe for customers and staff. Even if the ban is lifted, it won’t be the end of the challenges we will face.”

In addition to challenges brewers and distillers would face in obtaining yeast, hops, botanicals and bottles, Barnard noted that producers would likely find that neutral spirits would be diverted for making sanitiser. “If producers are able to access alcohol, they might be able to get production up and running in around a week after the ban is lifted, but distillers and brewers will take a lot longer.”

Also Read: Sustainable Tourism Development In Africa: Interview With Thomas Müller, CEO, rainmaker

Survival strategies

Noting that craft brewers and distillers had been achieving slow growth even before the ban, the panelists said there would be tough times ahead for the entire sector.

However, craft brewers and distillers could potentially survive by innovating and collaborating.

Barnard said the first market likely to open after than ban was online sales, “Craft brewers and distillers who haven’t done so yet need to get an online sales portal live in the next week, or they could miss that opportunity.

He also noted that the market would become more price sensitive, and that brewers and distillers would have to prepare for this: “We need to face the very real possibility that the market is going to change – we are in a recession, and the first thing that suffers will be luxury goods. This is not going to be a return to normal business, and we need to prepare ourselves. Some things will become more expensive to produce – certain raw materials and bottles will be more expensive. So, if you are spending R50 -60 on packaging, you need to consider rebranding, using cheaper packaging, and passing the savings on to consumers.”

Pienaar said collaboration could help the industry survive: “We need to think about buying as a consortium, working together, becoming more creative in using what is available. We also need to do market research to make sure that we are producing what the market wants and will move quickly.”

Corne echoed this view, saying craft brewers and distillers could look at offering lockdown specials, and could put on hold bottling and canning and instead look at selling beer in 2 litre refillable ‘growlers’ to cut costs. “It’s going to be difficult, financially the industry is going to be really struggling, but customers will also be struggling financially, so the industry needs to look at products the market can afford.”

Now is the time for brewers and distillers to work on industry collaborations, market awareness and innovative new ways to go to market, the panelists said. They should also be preparing to reopen production by sourcing the safety equipment and personal protective equipment their factories and staff would need once the ban on alcohol production was lifted.

“Food & drink technology Africa has always been a hub of local and international industry collaboration and innovation, and as the world adapts in this new environment, we are committed to working with stakeholders to help them overcome the emerging challenges,” says Dain Richardson, Senior Exhibition Manager of food & drink technology Africa.

Challenges, solutions and emerging trends in the craft brewing and distilling sector will come under the spotlight at food & drink technology (fdt) Africa, the biennial trade fair for the pan-African food & drink sector next year. The fourth edition of this exhibition will be held from July 13 to 15, 2021, at the world class Gallagher Convention Centre.

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Mohamed Sekkina Digs Dip Into Quick Commerce at Consoleya

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Mohamed Sekkina, General Manager of leading quick commerce platform, talabat mart, hosted the latest “Business Meetup” session organized by Consoleya on “Understanding and Seizing Quick Commerce.” The event took place on Tuesday 26th of July at 6 pm.

“Our biggest pride is not only rooted in introducing quick commerce to the region, but that we are still innovating as the market leader. Leveraging the world-class tech of Delivery Hero and localizing it to fit our local market needs is what enables us to achieve such remarkable results and continue offering an ultra-convenient experience,” said Sekkina during the session.

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Having grown talabat mart’s footprint by 200% and increased profitability by 50% during the last six months, Sekkina shared his hands-on experience and deep knowledge of the market with over 70 attendees from the startup and tech ecosystem.

Mohamed Sekkina took the attendees on talabat mart’s inspiring journey and detailed how the leading platform is able to deliver thousands of orders per day through technology and customer-obsession. Stressing on the importance of being efficient, hyperlocal and adaptive as key to the journey of scaling up and reaching profitability.

The session also touched upon the operational reality of running a quick commerce platform, such as setting-up dark stores on an average of three weeks, innovating to earn consumers’ trust and steadily shifting mindsets in favor of online shopping.

He explored the factors that prepared quick commerce to skyrocket and drew parallels between traditional retail and quick commerce – highlighting that the business model brings businesses closer to customers in unprecedented ways. Which in turn, positions dark stores as sustainable on the business and environment front.  

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Shelter Afrique records US$1.04M in net profit for 2021

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Shelter Afrique Ag. Managing Director Kingsley Muwowo(left) and Shelter Afrique Company Secretary Mrs. Juliette Kavuruganda present a gift to the Vice President of the Republic of Zimbabwe General (Rtd.) Dr. Incumbent Chiwenga after he officially opened Shelter Afrique 41st AGM currently underway in Victoria Fall, Zimbabwe (Image supplied).

Pan African housing development financier Shelter Afrique has posted an operating profit of US$ 1.04 million up from operating loss of US$ 0.58 million the Company recorded in 2020, backed by impairment recoveries and effective cost control measures.

The Company contained its operating expenses at US$ 8.04 million in 2021 down from US$ 8.44 million in 2020, representing a 10% decline. It also reined in its operating expenses which dropped from US$ 8.35 million in 2020 to US$ 7.71 million in 2021. The Company’s gross income, however, declined slightly to US$12.09 in 2021, down from US$13.94 recorded in 2020.

Addressing Shareholders at the 41st Annual General Meeting held in Victoria Falls, Zimbabwe, Shelter Afrique Chairman Mr. Ephraim Bichetero said the transformational initiatives undertaken by the Company and its business’ resilience enabled the Company to weather the COVID storm.

“This profit continues to build on Shelter Afrique’s commitment to returning to full Financial Sustainability, one of the Company’s 3 Strategic Goals, along with Enhancing Shareholder Value & Development Impact and Organisational Sustainability. I wish to commend the board, management and staff for their continued efforts towards achieving the desired results ahead of time,” Mr. Bichetero said.

The AGM which kicked off on July 25 under the theme: Climate Change and the Built Environment, in reference to the Glasgow Conference of Parties (COP26), will close on July 30.

Financial Viability

In the 2019-2023 Strategic Plan, the Company projected a return to financial viability by 2020 and overall financial sustainability and profitability by 2023, a feat that it achieved two years ahead of schedule.

“Our 2021 financial performance, despite the macroeconomic and socio-political environment, is an indication that the turnaround plan recommended by the board and approved by shareholders continues to be the north-star on our course to returning to financial stability and viability. As management, we are encouraged by this and look forward to the challenge of the coming years,” said Shelter Afrique Group Ag. Managing Director and Kingsley Muwowo.

During the year under review total assets declined by 5 per cent from US$ 176.68 million in 2020 to US$ 167.31 Million in 2021, attributed to the 100 per cent reduction in settlement of the total debt following the repayment of US$ 34.71 Million.

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Liquidity decreased by 33% per cent from US$ 47.41 million in 2020 to US$ 31.59 million in 2021, attributed to significant debt servicing payments on the CFA Bond and DRA debt amounting to US$ 35.87 million. However, the liquidity ratio still remained strong, closing at 19 per cent, which is 4 percent points above the minimum threshold of 15 per cent. Shareholder Funds increased by 19 percent from US$135.74Million in 2020 to US$ 161.60 Million in 2021 due to the new capital subscriptions of US$24.85 million and the profit of US$ 1.04 Million for the year. This increase brings the total paid-up capital by 15 per cent, from US$ 157.29 million in 2020 to US$ 182.14 million in 2021.

“We are grateful to our shareholders for their unwavering support through the continued capitalisation of the Company, with US$ 24 million received in 2021 against a target of US$ 17 million. The receipt of these funds was achieved amidst severe fiscal constraints, and we are conscious of this,” Mr. Muwowo said.

Mr. Muwowo added that the Company would continue to review various capital raising options, including new equity capital and debt options through the issuance of local currency bonds to develop and deepen Africa’s capital markets.

“We recently completed a debut ₦46 billion (US$110.7 million) Series 1 Fixed Rate Senior Unsecured Bond Issuance in Nigeria’s capital market under its ₦200 billion (US$481.3 million) bond issuance programme for housing and urban development in Nigeria.  We plan similar bond issuance in East African markets including Kenya, Uganda, Tanzania and Rwanda,” Mr. Muwowo said.

New Managing Director

Meanwhile, Shelter Afrique shareholders have approved the appointment of Thierno-Habib Hann as the company’s new Managing Director. Mr. Hann will replace Mr. Andrew Chimphondah who left the company in February. Mr. Hann has extensive international experience in housing finance, capital markets and structured finance, set-up and management of investment funds with banking and multilateral institutions.  Currently, he is the Asia-Pacific Lead for housing finance & capital markets at the International Finance Corporation (IFC), based in Bangkok and previously in charge of Africa and the Middle East, based in Nairobi.

“The process was very competitive, and Mr. Hann was selected based on merit and competence. He is expected to strengthen governance, be an embodiment of our values and drive the investment strategy of the Company focused on delivering large-scale affordable housing,” Mr. Bichetero said.

Mr. Hann will join the organization once he completes his current contract with the International Finance Corporation. In the interim Mr. Muwowo will continue to serve as Acting Managing Director.

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Fitch revises ARC Limited’s Outlook to Positive; affirms IFS Rating at ‘BBB+’

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Fitch Ratings has revised African Risk Capacity (ARC) Limited’s Outlook to Positive from Stable and has also affirmed its Insurer Financial Strength (IFS) rating at ‘BBB+’ and Long-Term Issuer Default Rating (IDR) at ‘BBB’.

Announcing the news, the credit rating agency commented that this Outlook revision reflects ARC Limited’s “strong progress in meeting its development objectives, which if sustained, could support a stronger company profile assessment within the next two years”.

It added: “In Fitch’s view, the improvement in ARC’s premium base, risk pool and claim pay-outs enhances the company’s geographic diversification, franchise and operating scale. In addition, the improved reach of the company’s development activities is likely to further increase its importance to sponsors.”

Says Lesley Ndlovu, ARC Limited CEO: “We are delighted with this revision of our Outlook to Positive which reflects the work we have done to raise our company profile and improve portfolio diversification.

“We are confident that the support from our sponsors will only grow as we expand ARC Limited’s impact on the African continent in terms of our development activities and the number of parametric insurance pay-outs we have been making in 2022 to respond to cyclones and droughts.”

In addition to its strong growth in gross written premiums (GWP) in 2021, ARC Limited’s support from and oversight by the German development bank KfW through the Federal Ministry for Economic Cooperation and Development (BMZ) and the UK Foreign, Commonwealth & Development Office (FCDO) were cited as reasons for the revision.  

ARC Limited’s key strength, adds Fitch, is its capital position. “We regard the returnable capital provided by KfW/BMZ and the FCDO of USD70 million at end-2021 as fully loss-absorbing, and consequently treat it as equity capital when assessing capitalisation and leverage. On this basis, ARC scored ‘Extremely Strong’ on Fitch’s Prism Factor-Based Capital Model based on end-2021 figures, unchanged from 2020. Fitch expects that further capital support could be made available as ARC continues to achieve its development goals.

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ARC’s regulatory capitalisation is strong, with a Bermuda enhanced capital requirement ratio of 796% at end-2021 (2020: 1,628%),” it said.

“While our product portfolio is concentrated, dominated mainly by drought insurance, we are actively diversifying this. To that end, we introduced tropical cyclone cover in 2020 and are also expanding our offering to cover outbreak and epidemic, and flooding risks. In addition, we are expanding our insurance offering to non-sovereign entities and working to increase the number of African countries covered in our risk pool. Which we believe will help to elevate our standing in future Fitch ratings,” Ndlovu concludes.

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