Health fears just one concern for Africa’s fast-food firms

January 6, 2016, 3:52pm

By Memory Mataranyika, Fin24 on Business Day Live
Photo: iStock

HARARE — Fast-food companies in Africa have raked in the money over the past three years, but are now facing fresh risks. These range from looming high prices and a potential shortage of meat to job losses in key markets such as Zimbabwe, as well as other constraints such as food imports and rising infrastructure costs.

Average regional sales growth for quick-serve businesses such as those running fast-food counters for KFC, Nando’s, Chicken Inn and pizza restaurants stands at about 20%, according to experts at Lynton Edwards Stockbrokers.

However, the industry is facing mounting concerns including health fears, with a study carried out by the World Action on Salt and Health group saying in December that KFC SA’s children burger had the highest amount of salt at 2.91g.

The study surveyed about 387 popular children’s meals and said this was only one of the health issues raised over fast-foods, which also include concerns over high fat content.

The industry is also set to suffer the results of dry weather conditions currently affecting sub-Saharan Africa. Low and late rainfall is set to affect livestock productivity, with prices for feed stocks that are likely to be in short supply set to rise.

"Infrastructure costs, food imports and meat shortages might lead to high prices at many quick-serve restaurants across Africa, and in the process affect customer count to restaurants as prices become higher than most people can afford," Lynton Edwards said in a report released on Tuesday.

Zimbabwe’s Simbisa Brands — which runs Chicken Inn, Steers, Nando’s and Pizza Inn quick-serve restaurants — has earmarked acquisitions in the sector, riding on a net cash position of $3.7m and sales growth of 9% in 2015.

Lynton Edwards, however, said Simbisa Brands "offers a diversified product mix … reducing product concentration risk and maintaining margins".

The forecast for disposable income growth this year is "conservative" amid continued uncertainty in Zimbabwe’s economy, while "political and labour environments will weigh further on consumer confidence".

Simbisa has raised its counters to 388 across 11 countries in sub-Saharan Africa. KFC and McDonald’s have also made strides in some key markets in the region, with KFC now expanding its presence in Zimbabwe.

Revenue in 2015 was $153m and has been projected to grow further this year. Innscor Africa Limited — which has a partnership with Tiger Brands in National Foods — has unbundled this business. It intends to list it separately on the Zimbabwe Stock Exchange to boost potential for access to cash lines, and to promote growth potential through acquisitions.