Prosperity in Africa
hits the headlines
(First published in Africa
investor magazine, July 2004)
Diageo has been exporting
Guinness to Africa since 1827. Robert Watkinson asks
CEO Paul Walsh why the continent has been so good for
business, and why journalists have been so slow to keep
up.
Why is Diageo successful in African markets?
We have operated in Africa for many years and have
some outstanding local management. Diageo Africa is
now the third largest contributor to our business:
Across the continent, we brew in over 20 countries
and run distilleries in three. We have over 4,000 employees
- that accounts for over 20% of the Diageo workforce
worldwide. We've made investments because we see Africa
as such a great opportunity: there's no doubt that
Africa has consumers who are becoming more economically
empowered. Our executives know our markets well and,
because we have partially floated some of our businesses,
we also have access to knowledgeable non-executive
directors too.
There is often much talk of an 'African renaissance',
especially in connection with the AU and Nepad. As
far as business interests are concerned, is there any
indication that this renaissance is really happening?
Africa is progressively becoming a better environment
in which to do business. Corruption is not what it
was and some of the barriers to trade are not what
they were. Having said that, I think our attitude is
probably unusual. I can understand how someone thinking
of entering African markets for the first time might
be daunted or think that there are other quicker and
easier wins in the global commercial landscape. We've
been there so long this view doesn't affect us.
How have your investors and shareholders reacted to
the extent of your operations in Africa?
It would be an exaggeration to say it has been warmly
received. But it wouldn't be right to say shareholders
view our African operations with concern. It's right
in the middle. It's just accepted that this is part
of our global footprint. Many third-party market watchers
are concerned by Africa, but we can demonstrate a good
track record in generating profit growth and cash flow
from the continent. It is as natural for us to invest
in Africa as it is in the emerging markets of Brazil,
Russia, India and China.
What do you see as the role of a company like Diageo
in advancing African development?
It is now widely acknowledged that a thriving private
sector - through the entrepreneurs and employment it
creates - is a critical component in improving people's
lives in Africa. Major development initiatives single
out the private sector as a key factor in achieving
the widely embraced Millennium Development Goals (MDGs),
especially the target to halve poverty by 2015. The
development community, which has in the past been resistant
to collaboration with business, is now regularly pursuing
business as a viable and necessary partner.
We have to remember that the platform that we operate
from is business success. We always have to focus on
that. But for me, business success isn't just about
sales growth or profit growth, it's about something
more holistic - developing workforces, being a leading
employer and putting something back into local communities.
We believe we can become something of a role model
and thereby encourage other businesses to do the same.
Good business stretches out to communities. Take our
Water of Life projects in Nigeria, Uganda, Burkina
Faso and elsewhere, for example. It's hard to imagine
people are drinking our products when they don't have
access to clean water, so we try and do what we can
in that regard. We have recently introduced an HIV/AIDS
policy that provides free anti-retroviral drugs for
our employees in Africa. Since then a number of businesses
have called us about it and I am optimistic that they
will follow suit.
Do you need domestic shareholders to be sure of making
socially responsible investments in Africa?
I regard individuals and entities that can invest
directly in our businesses - those on the ground in
Africa - as a distinct advantage. It gives us greater
presence, greater awareness. It gives us access to
non-executive input which is very important as you
develop these markets.
It comes back to this notion of holistic performance.
The critical thing is to set your business up in Africa
as you would want to be proud of it anywhere around
the world. Our facilities and assets in our African
markets are increasingly operated to global standards.
If you walked into our plants in Africa, you would
see little difference from our plants in America or
Europe. The same applies to our people. We are committed
to ensuring that our African employees have the same
opportunities for personal development as anywhere
else in the organisation. A good number of our African
managers have moved into other parts of the Diageo
business; some of whom move back to Africa, some of
whom don't. We believe in and aim for a totally level
playing field regarding opportunity.
Why do people so often underestimate the importance
of your operations in Africa?
In our corporate reporting Africa has received as
much coverage as any of our other markets, but we find
Africa doesn't seem to get the coverage in the media
that other regions get. I think too many journals and
newspapers like to focus on the sensational aspects
of Africa, which in recent years means they have tended
to focus on the negative - the famine, the poverty,
the corruption and the wars. I think that overshadows
the business aspects of that continent.
In an attempt to address this imbalanced view of Africa
we have recently launched the Diageo Africa Business
Reporting Awards. These are targeted at international,
rather than African, media. We are trying to recognise
those who cover more positive business aspects, in
the hope of stimulating more interest, allaying concerns
and identifying opportunities for other investors.
But I don't think the reputational issues of Africa
will be solved by that one single act. That requires
a host of individual actions to be undertaken collectively.
Is the establishment of these awards symbolic of a
personal stand you're taking on Africa as CEO?
Yes. I have great belief in the continent. I think
it's unfortunate that people are not writing about
African markets in the same way as the other exciting,
emerging markets. Personally, I would like to do whatever
I can to help change that. Clearly, Diageo has an interest
in helping to promote and develop Africa's prosperity.
The more prosperous it is, the better our businesses
will do.
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