One of South Africa’s requirements for allowing multinationals operate in the country is allowing black employees and investors to have equity in the companies operating in the country. This way, the businesses are more likely to qualify for tenders from the government.
American drinks giant Coca-Cola is doubling down to increase black ownership in its South African unit. It has disclosed its intentions to increase the stake amount local employees and investors can have in the company.
As such, Coca-Cola Beverages South Africa (CCBSA) will let go of 20 percent of its shares, as it looks to meet the merger conditions laid out by the competition authorities.
With this deal, almost 8,000 employees will increase their current holding of about 5 percent in the company to 15 percent, approximately.
The bottling company—under the auspices of Coca-Cola Africa—reached an agreement with SABMiller Plc, both of whom agreed that the bottling operations of their non-alcoholic beverages in Southern and Eastern Africa should be merged.
That deal led to creation of Coca-Cola Africa as a parent company of the firm’s operations in the continent.
SABMiller is a British multinational brewing and beverage company headquartered in Woking, England. But for the Anheuser-Busch InBev-acquired business, becoming one with the South African unit of Coca-Cola means both parties need to increase black ownership empowerment.
According to Bloomberg, the deal is speculated among industry insiders to be worth USD 669 Mn.
In South Africa’s defense, such requirements are meant to reverse the multiple decades of economic imbalance that relegated blacks under the well-documented apartheid regime.
But besides offering stakes, CCBSA will contribute about USD 5.39 Mn every year for the next 3 years. The funds will go into the government’s localization efforts.
Interestingly, the parent firm, Coca-Cola Beverages Africa, is domiciled in Port Elizabeth—a coastal town in SA—from where it serves 12 nations, including Ghana, Kenya and Ethiopia.
Basing out in Africa’s most industrialized economy, its operations in the country accounts for about 40 percent in sales for the Atlanta-headquartered firm’s entire drinks sold in the continent.
South Africa’s push for black inclusion has gained momentum in recent years. It’s the reason the government mandated Netflix and other streaming platforms to have 30 percent local content for the country’s consumers.
In 2018, the government unpacked its plans to raise black ownership at permit-holding mining companies to 30 percent from 26 percent within 5 years.
Featured Image: pitchipoy