Local P&G plant seen as vote of certainty

FMCG SUPPLIER NEWS

IOL Business - Mar 18th, 10:11

International consumer goods manufacturer Procter & Gamble (P&G), which plans to build a state-of-the-art R1.6 billion manufacturing plant in Gauteng, is positioning itself to capture growth in Africa as the slowdown in developed markets continues. 

P&G already touches approximately 4.4 billion people around the world through its household care and personal hygiene brands, which include Pantene, Olay and Ambi-Pur.

Dimitri Panayotopoulos, the vice-chairman of P&G global business units, said the company intended to “get much bigger” in Africa, especially in southern Africa. The continent has an estimated population of 1 billion that is widely expected to double over the next 40 years.

Panayotopoulos said on Friday that South Africa’s economic, social and labour challenges had not dented the company’s confidence in the local economy.

“What happens in the next week or month is not really important. We are here for the long term. We don’t worry about the short-term ups and downs. South Africa is already about 25 percent of Africa in terms of GDP,” he said.

P&G’s Africa business had, in fact, grown tenfold over the past decade, he added.

It is to South Africa’s credit that it will host the Brics (Brazil, Russia, India, China, South Africa) summit this month, making the country and continent a force to be reckoned with.

P&G operates in 80 countries. It has a large business in north Africa and is also building a second hub in Lagos, Nigeria, which will be the third largest on the continent.

The new South African plant will be built next year and will be the largest facility in P&G’s Europe, Middle East and Africa region when production begins in 2016 or early 2017. It will serve the local market and export to southern and eastern Africa. The project will create 500 direct jobs and hundreds more through suppliers.

“We are going to bring innovation, new breakthrough products and the very latest innovations that are not available in South Africa,” Panayotopoulos said. “Even in a very tough economy, people have to wash their clothes.”

The firm is number 27 on the Forbes list of the world’s most innovative companies.

“Our global strategy is to maintain our strong momentum in developing markets. Africa in general and South Africa in particular – as the largest African economy – are thus of key importance to us. As in all developing markets, our business here in Africa will remain focused on leading brands that improve health, hygiene and household care, as well as substantial social investment programmes that uplift underprivileged families and communities.”

Trade and Industry Minister Rob Davies said the investment by P&G was “a further example of confidence by leading manufacturers in the future of South Africa”.

In 2009 the firm spent R500 million to set up a plant in Kempton Park that manufactures Pampers nappies.

Sarah-Jane Alexander, an equity analyst at Coronation Fund Managers, said the investment, which would create scale in terms of local manufacturing capability, showed the company’s long-term commitment to South Africa and the region. “As the rand weakens it will make our manufacturing base more attractive.”

An equity analyst in Cape Town, who spoke on condition of anonymity, said: “It’s a platform for the broader region. With a lot of South African retailers moving north of the border there’s a bigger opportunity [for P&G].

“This is an endorsement of the long-term outlook for the region. They’ve done their calculation and it makes sense for them. It will make the local market a bit more competitive but competition brings innovation,” he added.