Emele Onu and Oluwayemisi Adesanya
PIONEER Foods, a South African food and beverage producer, plans acquisitions in at least five more African countries after taking a majority holding in Nigerian competitor Food Concepts
“We’re talking to entrepreneurs for opportunities to expand our investments on the continent” within the next five years, Thushen Govender, the company’s head of international business, said in Lagos, Nigeria’s commercial hub, on Tuesday. “Our focus is on larger economies with a higher population – for example, Angola, Kenya, Ethiopia, Tanzania and Ghana.”
Pioneer Foods completed the $7 million (R86m) purchase of a 50.1 percent stake in Food Concepts, an operator of quick-service restaurants and bakeries in Ghana and Nigeria. The acquisition would enable the Paarl-based producer of baked goods, cereals and beverages to expand beyond South Africa, Govender said. Pioneer Foods regarded Nigerian economic growth and its large, young population as a boost for the consumer market, he said.
“Our approach to investing in Africa is long term, even if over the short term there may be concerns,” Govender said.
“In the case of Nigeria, the exchange rate and growth level could be of concern because of the dependence of the economy on oil, though because of the younger population we see a lot of opportunities.”
The currency has weakened about 18 percent against the dollar over the past six months, the worst performer among 24 African currencies tracked by Bloomberg. That is partly due to a 50 percent fall last year in the price of oil, which makes up almost all of Nigeria’s exports. The country’s economic growth might slow to 4.75 percent this year from 6.3 percent in 2014, the International Monetary Fund said on March 5.
Pioneer would develop a strategy in coming months to develop the Nigerian business, Govender said. “In the future, we expect it to be significant contributor to the group business.”
The South African firm would focus on buying into existing businesses in Africa, Govender said.
The stock has gained 21 percent this year, valuing the company at R40 billion. Pioneer Foods closed 1.09 percent down on the JSE to end at R172.11 yesterday. – Bloomberg