A globally integrated economy that boasts a dynamic fast-moving consumer goods market, South Africais an atypical sub-Saharan African market. It is this integration that is largely behind a forecast 2.2% GDPcontraction in 2009. Despite the downturn, the country’s beer industry has been the centre of attentionthis quarter with big names like SABMiller and Heineken coming under the spotlight as discussed inBMI’s recently published South Africa Food & Drink Report for Q409.Earlier in Q309, SABMiller announced it would sell 10% of its South African subsidiary, South AfricanBreweries (SAB), to black investors to conform to South Africa’s Black Empowerment Initiative (BEI),which sets industry targets for equity ownership and is specifically aimed at affording greater control ofAfrica’s largest economy into the hands of the black majority. Valued at ZAR6bn (US$775), the dealwould see the brewer issue new shares to its employees as well as black-owned retailers of its beer andsoft drinks products (over 60% of SAB’s beer is currently sold in unlicensed bars). With a market share inexcess of 90%, SAB is ideally placed to capitalise on BMI’s forecast that to 2013 alcoholic drinks valuesales will increase by 33.5% and reach ZAR74.2bn. With the FIFA Football World Cup set to be hostedby the country in 2010, demand for beer is set to spike considerably as domestic consumers bump upconsumption and around 500,000 foreign visitors are expected to flock in for the month-long tournament.SABMiller’s landmark announcement followed Heineken’s saying that it was locked in negotiations toconstruct a barley-malting plant next to its brewery, set to open in H209. Heineken is entering SouthAfrica in a 75:25 joint venture with UK-based alcoholics drinks major Diageo. BMI reported that from astrategic point of view, Heineken’s long-term prospects in South Africa were enhanced significantly byits possession to the brewing rights of the Amstel brand.The lager was brewed under license by SABMiller until 2007 and claimed around 9% of the formal beermarket. Heineken’s Africa and Middle East business accounted for close to 12% of its revenue in FY08 -a proportion BMI believes the brewer should look to grow, particularly as sales volumes are pulled downin its core Western, Central and Eastern European markets. While divestment and cost-cutting are at thetop of its agenda in a number of its European markets, growth opportunities are plentiful in Africa, which,somewhat ironically, is expected to be among the best performing beer regions in 2009.BMI believes that the World Cup and Heinken’s entry should kick back South Africa’s beer industryback into life following moderate stagnation over the past few years. The lack of a challenge provided toSABMiller has allowed the giant to focus its efforts internationally. We note that per capita beerconsumption in South Africa has hovered around the 55-60 litre mark for some time now.