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PSG's strategic sale

Stellenbosch-based investment group PSG has accelerated its push further into Africa - paradoxically by disposing of a large part of its investment in Botswana-based fast-moving consumer goods distributor CA Enterprises.
PSG, which paid R300m for CA earlier this year, has apparently sold around 30% of its holding to Kenya-based soft commodities specialist Export Trading Group (ETG). It seems baffling for PSG to let go of such a large chunk of CA so soon after making the investment. But PSG, which will retain effective control of CA, is clearly looking to expand aggressively by using ETG's sprawling trading base.

ETG, which trades grain, soya, coffee, tea, rice, sugar, nuts and spices, has extensive warehousing and logistics capabilities throughout Africa, including in Mozambique, Malawi and Tanzania. But perhaps more importantly, it has trading links overseas, including in India and China.

In March PSG CEO Piet Mouton told the FM that CA, which generates turnover of around R1,5bn, would look at expanding its services outside Botswana.

Mouton said he believed CA could be easily expanded into neighbouring countries. "It's a business we understand well and a business model we think we can replicate in Angola, the DRC, Kenya and Tanzania."

Utilising existing trade links established by ETG would allow CA to take a meaningful chunk of its product basket - including brands from Distell, Unilever, Fatti's & Moni's, Tiger Brands, Adcock Ingram and Heineken - into new markets.

ETG also has a strong agribusiness component, which might hold some interest for PSG agribusiness subsidiary Zeder Zeder recently clinched its first African deal by acquiring a stake in a corporate farm in Zambia. Zeder also suggested it would expand its seed business, Agricol, further into Africa.

Perhaps successful co-operation across African trading and agricultural platforms could pave the way for PSG to take an equity stake in ETG.

Source: Financial Mail


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