Impact of multi-billion move from sugar to corn syrup
Socio-economic impact assessment of a new production plant, and impact on BEE transformation
Market analysis and positioning
Area of Expertise:
Public policy response and advocacy strategy
Genesis was appointed to evaluate the economic pros and cons of a multi-billion-rand mega-transaction in the FMCG sector.
Two of the world’s top fast-moving consumer goods brands use a lot of sugar and maize in their products. The companies wanted to change the supply chain to improve the price and security of supply, and to boost BEE procurement credentials.
They decided to replace existing suppliers of sugar and maize by building a new multi-billion-rand production plant, and switch from using sugar to corn syrup produced from maize.
The transaction was also part of one of the biggest BEE deals in FMCG and would source one third of maize from emerging farmers.
Local sugar producers would stand to lose significant demand for sugar, and this was likely be contested.
Genesis was appointed to undertake an independent, balanced assessment of the economic costs and benefits of the new plant project, measured in a net contribution to GDP and employment.
Genesis was also asked to evaluate whether the deal would be good for transformation of the economy and what impact it would have on food security.
The impact assessment team was led by the Shared Value, Public Policy and Impact Practice working with Genesis’s Infrastructure and PPP Advisory.
Our work found that the project would create a net positive growth of the economy (estimated gain to GDP of R25 billion) and greater employment (18,667 net jobs added).
Genesis concluded that food security would not be significantly affected by a switch to maize from sugar, and that the new processing plant and the project would be a net positive for transformation.
Genesis had to produce an independent report in the face of client pressure that pointed out to the client that there would also be harm to the economy, especially in the sugar industry.
The Genesis analysis was first used by the companies to decide whether the project should go ahead. Then the companies used the Genesis analysis to present the pros and cons of the project to the policymakers to secure government and regulator support for the transaction.
Sign up for Genesis News