Zimbabwe: Construction of brewery on hold due to currency restrictions

Delta Corporation, the leading beverage manufacture in Zimbabwe in which AB InBev holds a 40 percent stake, has temporarily stopped the construction of its new brewery due to currency restrictions in the country. The plant in Rusape, 175 km south-east of Zambia capital Harare, is designed for the production of Chibuku, a commercial sorghum beer.

“The brewery will be constructed in phases, starting with civil works that do not require foreign currency,” said Alex Makamure, corporate affairs manager at Delta Corporation. “The major phase is on hold due to shortage of foreign currency,” he explained. “The plant is imported from Germany and Republic of South Africa and has lead time eight months to shipment. Full commissioning takes therefore 10 to 12 months from date of orders.”

AB InBev and Delta already struggle since long with the unsatisfactory financial situation in the landlocked country in Southern Africa. About a decade ago Zimbabwe scrapped its own currency to end hyperinflation. As a substitute the central bank adopted a basket of currencies and issued bond notes and an electronic currency known as RTGS$. However, the new system has caused foreign currency shortages which hinder investments in the country and makes import of machines and raw materials difficult (inside.beer, 5.2.2019). In January, Delta advised its wholesale and retail customers that it will now be selling its products in US Dollars.

After AB InBev purchased SAB Miller in 2016 (inside.beer, 28.9.2016), the company restructured its beer business in traditional African beer (TAP), which is considered a cheap alternative to clear lager beer. TAP is a “non-clear beer made from sorghum or malt with an alcoholic strength of usually less than 5 per cent per volume” according to a definition by The South African Revenue Service, the nation’s tax collecting authority.

In recent years AB InBev transferred its TAP business to Delta Corporation, Zimbabwean biggest company by market value in which AB InBev holds a 40 percent stake. Delta has a diverse portfolio of local and international brands in lager beer, TAB, Coca-Cola franchised sparkling and alternative non-alcoholic beverages and interests in supermarket and furniture retailing, tourism, hotels and various agro-industrial operations.

In October 2017, National Breweries, the leading producer of TAP in Zambia, another landlocked country in sub-Saharan Africa, was sold by Heinrich’s Syndicate, a subsidiary of AB InBev, to Delta while AB InBev continued to own Zambian Breweries, Zambia’s monopolist in the clear beer market (inside.beer, 14.10.2017).

In July 2018, Nile Breweries, AB InBev’s subsidiary in Uganda, had been forced to close their Chibuku production. The company claimed that it was promised a tax holiday when the plant was set up, but in fact it had to pay a 30% excise duty (inside.beer, 11.7.2018).

In December 2018, Delta entered into an agreement with Diageo for the purchase of United National Breweries, where Diageo bundeled its TAP business in South Africa(inside.beer, 20.12.2018). The transaction marked Diageo’s second step out of the beer market in South Africa. In 2015, Diageo and Heineken dissolved their joint ventures in South Africa and Namibia and Diageo sold its 42.25% stake in DHN Drinks and its 25% stake in the Sedibeng brewery in Gauteng, South Africa to the Dutch brewer.

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