Uganda: SABMiller built a partnership with African farmers

The brewing giant SABMiller is increasing its investment in Uganda by $7.5m (£3.8m) following the success of its alliance with thousands of micro-farmers who previously survived by subsistence farming, The Independent published March 2.

SABMiller acquired a 40 per cent stake in Nile Breweries in 1997, but bought out the Ugandan Asian family that ran it four years later.

Faced with the fact that 60 per cent of Ugandans live on less than $1 a day and that many communities unable to afford branded beers made their own unrefined alcohol, SABMiller had to find an effective way to "rekindle growth" in a stagnating market.

It took the step of trying to persuade farmers who lived on sorghum, a grass crop grown across Africa, often using manual implements and ox ploughs, to step up production and sell the crop to SABMiller to use in a newly created drink, Eagle Lager. The Ugandan government came on board and with help from the governmental organisation the Serere Animal Agricultural Research Institute (Saari), SABMiller persuaded around 350 initially sceptical farmers that the project would be profitable.

Ian MacIntosh, who was in charge of operations for the brewer in Uganda, said an initial harvest of 240 tons of the crop resulted in a pay day of $41,000 which was distributed among the farmers. The following season, the applications' book was oversubscribed by 600 per cent, and 8,000 farmers now participate across Uganda.

Mr MacIntosh, visiting the UK to speak at the International Business Leaders Forum in London yesterday, said the initiative had meant some farmers had been able buy a bicycle or send their children to school for the first time.

"What is important is that this was not charity or money through philanthropy but driven by business partners' needs," he said. "Rather than creating a culture of dependency, this has created legitimate business partners who make a contribution."

Eagle Lager has certainly been successful commercially. It is Nile Breweries' top brand with 30 per cent of market share in Uganda. The model has been repeated in Zimbabwe and Zambia, which has meant that Eagle has grown to be the second largest pan-African brand.

Eagle is sold for around 35p in Uganda, a 30 per cent discount to other mainstream lagers. This is possible due to the excise tax breaks given by the Uganda government to SABMiller because the company is using predominantly local raw materials and is contributing to Uganda's economic development. The new investment will allow the brewery to cope with increased demand.

Mr MacIntosh is currently technical director in Zambia where SABMiller has been working with a combination of subsistence and commercial farmers for three years. Zambia and Zimbabwe already had a strong network of commercial farmers, unlike Uganda, where its once flourishing cotton farms had been wiped out under the dictator Idi Amin. However, SABMiller's goal is to reduce the number of commercial farmers. It works with 2,500 previously subsistence farmers in Zambia and 1,200 in Zimbabwe.

The company is also hoping to produce Eagle Lager in Tanzania. Meanwhile, in Rajasthan, in India, the company is researching ways in which it can use barley produced by independent farmers in a similar way.

Zahid Torres-Rahman, director at the ethical consultancy Inspiris, which specialises in poverty alleviation, said Eagle Lager demonstrates "that business can have a large, positive impact on poverty reduction by doing good business. This sort of responsible business model is far more impactful, sustainable and scalable than pure philanthropy could ever be," he said.

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