Delta’s SA investment: All froth, no beer

Zimbabwe’s brewery giant, Delta Corporation, will have to wait a little bit longer before it can enjoy the fruits of its investment in South Africa.

In April 2020 Delta acquired 100 percent of the issued shares in United National Breweries (SA), a manufacturer of traditional African sorghum beer in South Africa, for a consideration of $923 million in historic cost (ZAR636 million).

The acquisition is expected to increase the group’s regional footprint in the sorghum beer sector which, apart from operations in Zimbabwe, also includes National Breweries in Zambia.

The new investment is also meant to provide a new source of foreign currency earnings for Delta.

However, the beverages company has not fully enjoyed the expected benefits of the South African investment.

United National Breweries was largely closed for the better part of last year as the South African authorities implemented very strict prohibitions on the sale and consumption of alcohol under the Covid-19 lockdown measures.

When the restrictions were eased, alcohol sales were only permitted four days a week excluding weekends.

This arrangement was however short-lived as South Africa has once again banned the sale of alcohol for a third time in response to a resurgence in Covid-19 cases.

The move to ban the sale of alcohol, it was argued, is partly designed to ease the burden on hospitals from vehicle accidents and drinking-related violence, while discouraging large social gatherings that can accelerate the spread of the virus.

Delta’s major shareholder, Anheuser-Busch InBev NV’s (AB InBev’s) however challenged the country’s ban on alcohol sales in court, saying the measure to contain the coronavirus is unconstitutional.

AB InBev revealed that the first two alcohol bans, which together lasted more than three months, led to 165 000 job cuts.

Through its subsidiary South African Breweries, AB Inbev announced that it was going to suspend commitments to retain workers and investments, agreed as part of its merger with Anheuser-Busch InBev, due to the country’s decision to ban alcohol sales to curb the coronavirus.

Delta is likely facing similar challenges.

When contacted for comment, a Delta official said the company was already in the process of preparing a trading update in which it will, among other issues, articulate the trading conditions in South Africa.-chronicle.cl.zw