SA’s being placed on a global financial watchdog’s greylist is having ripple effects on the country’s largest food company, Tiger Brands, resulting in payment delays for exports, says CEO Noel Doyle.
Local companies have faced increased monitoring for issues such as suspicious cross-border transactions and proliferation financing after the Financial Action Task Force (FATF) in February announced that SA has been added to its greylist of countries placed under scrutiny to implement standards to prevent money laundering and terrorism financing.
Doyle said that while customers in territories such as Liberia and Nigeria are making dollar payments to the Johannesburg-based group on time, payments are taking a lot longer to reflect on Tiger’s books.
This is a direct and unexpected consequence of the greylisting checks and balances because it exports in dollars.
“I didn’t think about it too much to be quite frank but we’ve got export businesses and payments made from a greylisted country to a greylisted country [taking] a lot longer,” Doyle told Business Day.
He was speaking to Business Day at the launch of the group’s R15m Sensorium a 850m2 facility that features an analytical laboratory, a functional pantry, development kitchen and a sensory room.
“It’s a timing difference but it’s another complication in the export chain, particularly if you are exporting to another greylisted country. We never had those problems before ... so it feels like everything is getting complicated at the moment.”
SA and Nigeria last month joined South Sudan, Uganda, Senegal and Mozambique among other African states on the list. It means local companies and citizens are likely to face increased compliance scrutiny when transacting across borders. The FATF also suspended Russia’s membership.
The R33.9bn JSE-listed firm exports its products across the Southern African region and drives growth across 25 countries with five priority markets in Cameroon, Mozambique, Zambia, Zimbabwe and Nigeria.
They are actually eating less and they are down-trading so it’s really tough.
— CEO Noel Doyle.
The added complexity brought by the greylisting comes as Tiger Brands tries to grapple with the surging costs of raw materials and to reconcile that with its strategic objective of supplying affordable foodstuff to cash-strapped consumers.
In Tiger’s core market, where transport and food are big components, consumers have to make choices and people are subsequently eating less, according to Doyle.
“They are actually eating less and they are down-trading so it’s really tough,” he said. So “it’s not just a question of let’s slap a price increase through because you are constantly walking on this tightrope of volume versus price and you having to constantly reassess”.
Meanwhile, the future of its fruit canning factory in the Cape winelands, whose operations were given a lifeline and extended until May, hangs in the balance as no conclusion has yet been reached, said Doyle.
Much like the rest of SA, the owner of Koo, Oros and Jungle Oats has been hit by compounding power outages.Mitigation is costing it R250,000 per stage every day.
“Every stage of load-shedding is R250,000 so stage 6 is R1.5m and we run most of our businesses six days a week. You can do the maths,” said the CEO, adding that it is a cost Tiger will not able to recover through price increases, because consumers are already in distress.
After announcing in August that it is embarking on a multimillion-rand investment in solar and renewable power at its manufacturing sites, in February the group became the first to publicly state it is making plans for stage 8 load-shedding after some energy experts called for the country to brace for higher stages of load-shedding this winter.
“We are going to have to work very hard on getting that value equation right. Margins are going to continue to be under pressure and we are going to have to keep looking under everything for every cent,” said the CEO.
Tiger Brands shares closed 0.13% higher at R188 on Friday.
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