Construction on the new plant will begin during the course of this year and it will produce 130‚000 tons of malted barley a year once it is completed in 2015.
This will allow SAB to reduce the amount of malted barley it imports and to further its programme of developing the local agricultural sector by supporting small black farmers. Malted barley is a vital component in the brewing of beer.
New SAB managing director Mauricio Leyva said the construction of the new plant was an important development for the company.
"The new maltings plant will have significant cost saving and growth benefits for SAB. It makes good financial sense to undertake this investment. It will allow us to reduce our exposure to volatile international markets and replace a significant share of our imported malt and barley with local barley."
SAB currently sources about 65% of its barley locally and‚ once the new maltings plant is up and running‚ this will increase to between 90% and 95%.
"We have been looking at ways to locally source more of our agricultural raw materials‚ including barley‚ for some time‚ building on the work we have been doing with our barley breeding programme and with local farmers to develop competitive local barley varieties. Additional barley trials have been undertaken in the North West and more recently with emerging farmers in Limpopo."
Leyva said: "We will partner with leading suppliers to ensure an innovative and cost-efficient design using cutting-edge technology. We will also strive to ensure we maximise local industry involvement in the construction of the new plant in order to help develop the communities in which we operate."
SAB executive chairman Norman Adami said the new plant was a win-win scenario and showed SAB's clear commitment to working for South African society. "It will allow us to drive up local sourcing of barley which will‚ in turn‚ help the empowerment of small farmers in some of the most poverty stricken regions of the country," he said.
The maltings plant will be built next to the existing Alrode brewery‚ with the land having already been secured and geotechnical analysis currently under way. Once the land ownership transfer has taken place‚ which is expected during the middle of this year, construction work will begin.
SAB currently has two malting plants‚ one at Caledon in the Western Cape which malts about 180‚000 tons of barley a year and an existing plant at Alrode which malts about 40‚000 tons. The existing Alrode plant is about 40 years old and coming towards the end of its economic life. It will be decommissioned once the new plant is fully operational.
SAB's annual spend on raw agricultural materials in South Africa is about R2bn. Each year‚ SAB buys more than 1.8m tons of barley‚ GMO-free maize‚ hops‚ apples and grapes. A consistent supply of raw materials is vital for the company‚ which supplies millions of people each year with their preferred drink‚ be it beer or soft drinks.
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