Heineken in Africa: The Aid is Lagging Behind The Trade
An article by Oliver van Beeman, investigating Dutch aid and trade policy with Heineken reveals the global beer giant received millions of euros in subsidies for agricultural projects in Africa. The government of the Netherlands praises this as an example of a successful aid and trade policy. They provide the second largest beer-maker in the world with a lot of good publicity and tax benefits, but now it appears that the objectives are far from being achieved.
Investors cheer, ordinary people suffer
Investors and analysts reacted enthusiastically to Heineken’s annual figures last month: revenue and volume have grown and profitability is high. Hidden deeper in the annual report, on page 132, there is less good news: a program that should make African breweries use more local raw materials is “off track”, which in this case is a euphemism for “failed”. The self-set target by Heineken of 60% local production in 2020, will by no means be achieved. The current percentage is 37%, a decrease of 11% compared to eight years ago. At the time, in 2011 when the company reported on the progress for the first time, the percentage was 48%.
The PR-machine is humming
This disappointing result has not prevented Heineken from becoming fully involved in agricultural projects. Spokesman John-Paul Schuirink acknowledges these projects can be used for good PR. Influential Dutch media, such as Nieuwsuur, De Telegraaf, de Volkskrant, Financial Times and Forbes, have taken over these stories almost uncritically in recent years. The image has emerged that Heineken contributes to poverty alleviation and the development of African agriculture.
Politicians and other dignitaries have also frequently praised Heineken for this alleged success story. Prime minister Mark Rutte even did that in 2015 during the United Nations General Assembly in New York. Rutte is not the only fan. Queen Máxima and former Minister for Foreign Trade and Development Cooperation Lilianne Ploumen also publicly complimented Heineken on African agricultural activities. In 2013, Lilianne Ploumen personally laid the foundation stone for a new Heineken brewery in Ethiopia.
The Dutch government is so enthusiastic about Heineken’s ambition that it supported it between 2009 and 2019 with €7 million in tax money. In addition, there is a considerable contribution in kind, in the form of efforts by officials and diplomats at the Ministry of Foreign Affairs, who help set up the projects. The ministry does not consider the costs of this, which are likely to run into the millions, as additional support to Heineken, because promoting the interests of the Dutch business community is one of the tasks of the Ministry of Foreign Affairs. In addition to the Netherlands, the United States, Germany and a UN fund have also contributed to the projects. The total public support amounts to more than €10 million.
“You don’t refuse a grant”
With that money, a total of six public-private partnerships were set up, in which the brewer cooperates with development organizations such as ICCO, Eucord and Agriterra. The first project already started in 2006, four years before Heineken expressed its ambition. Two of them are still running. These should result in so-called win-win-win situations: Heineken has cheaper grain at its disposal, the productivity of agriculture in host countries is increasing and the Dutch government has an effective development policy.
Heineken’s agricultural program in Africa grew into an important pillar of Ploumen’s policy that links development aid to subsidies for Dutch companies: aid and trade. The current minister, Sigrid Kaag, continues that policy.
Heineken Admitted That It Would Have Carried Out The Projects Without Government Support
In doing so, the Ministry of Foreign Affairs is not convinced that Heineken does not comply with the principle of additionality: according to its own rules, the government may only subsidize a company if it does not have the means to do so. Heineken, which had a turnover of almost €27 billion last year and made nearly €2.5 billion net profit on it, has admitted in a television program (Zembla) that the company would have carried out the projects without government support. But according to the brewer, they are more efficient thanks to cooperation with the government and NGOs.
Heineken uses the agricultural program in negotiations with African governments to negotiate a tax reduction. This was demonstrated, for example, in Mozambique, where Heineken opened a brewery in March and is also setting up an agricultural project, again with the support of the Ministry of Foreign Affairs. Partly by referring to the earlier projects, the brewer won a hefty discount on the excise duty for three years. Also in Burundi, where Heineken works closely with a dictatorial regime, the brewer benefits from an 80% excise tax reduction on beer that is mainly produced with local raw materials.
Child Labor, Famine? ‘We Do Not Know’
Heineken mentions three causes for the failure of the projects in the annual report. High growth rates in Ethiopia and South Africa have led to more imports of barley malt. Bad weather conditions in North Africa destroyed part of the harvest. The local production chains that Heineken has been trying to create since 2006 are still in their infancy, as a result of which the yield is still insufficient. According to figures from 2016, the company only achieved more than 60% local production in Egypt and Burundi, but that percentage was (considerably) lower in all other African countries.
It should also be noted that Heineken uses a broad conception of “local production”: the brewer counts all crops from Africa. This includes barley from Egypt, which disappears into the brewing kettle 5000 kilometers further in Rwanda or rises from the Congo, which first travels about 1000 kilometers over a river before it reaches the brewery in the capital Kinshasa. “Continental production” is a more adequate term.
Vague Claims of “Other Causes” for Heineken’s Failure
It is remarkable that minister Sigrid Kaag points to other causes for the disappointing results. In a written response, the minister announced that, in her opinion, the projects were successful. The farmers would choose to sell their production to other parties and not to Heineken, which increased their income. The Ministry of Foreign Affairs itself provides no evidence for this claim. The Ministry does, however, refer to Eucord, one of the NGOs with which Heineken and Foreign Affairs cooperate. Eucord forwards an “implementation status” report from 2017 of one of the projects that are still ongoing, showing that most goals have been achieved. The document does not specify how and by whom the check was performed. Nor is it clear whether this evaluation is representative of the other projects.
Moreover, there are many uncertainties about other possible consequences of the agricultural program. During an interview by Olivier van Beemen at the end of 2017, program leader Paul Stanger acknowledged that eleven years after the start of the first project, Heineken did not yet know the impact of agricultural activities on food scarcity or child labor. These are factors that you would expect to analyse before starting of a project and investigate to the maximum capacity.
Is Heineken’s additional demand for local crops competitive with food supplies? How many children are employed in the Heineken production chain? And what are the consequences of the use of fertilizer on the mostly virgin African fields?
We don’t know,” program leader Paul Stanger replied several times.