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may need to be properly conducted around these numbers. It has also not adjusted the discount
factor of 10% cost of capital for the increased risks of doing business in (West) Africa.

If we include value of the embedded real option to expand across Africa of US$16.9 billion
(Appendix 6.2), we get an overall positive NPV of US$22.9 billion. We have valued this option

using the Black Scholes Option Pricing (BSOP) Model which makes a number of assumptions
such as perfect markets, constant interest rates and lognormal distribution of asset prices. It also

assumes that volatility can be assessed and stays constant throughout the life of the project, and
that the underlying asset can be traded. Neither of these assumptions would necessarily apply to
real options in Nigeria. Therefore the Board needs to treat the value obtained as indicative rather

than definitive.

Feasibility: The major concern is that, although this looks like a very good alternative to penetrate the

African market, direct entry does not make the best use of AB InBev’s core strength –that of entering
into new markets through M/A activities.

5. ETHICAL ISSUES AND RECOMMENDATIONS

5.1 Potentially unethical payments in Nigeria
The harmful effects of alcohol are well documented and we seem to be making payments in Nigeria
(Africa) that will almost automatically be deemed unethical in the West due to conflict of interest

concerns. Paying US$20million to sponsor research on the harmful effects of alcohol and specifically
–our products, will most likely put us in a position to influence the results of that research to our
advantage and to the detriment of the public. Although it is a perfectly legitimate practice to collaborate

with the industry to self-regulate, if the intention of the US$5million is to forestall legitimate regulation
in a bid to allow us the means exploit the public, by promoting ‘drunkenness’, it would be unethical
(integrity). Most of the US$100 million (60%) has gone towards payment for the design and erection
of marketing billboards to support campaigns in youth and millennial markets: the major focus of our

effort will be to target young people at schools, and universities. It is unethical (lack of due care) in this
industry to market alcohol within close proximity to youth areas such as schools due to potential
substance/alcohol abuse problems that is already rife amongst the youth in Africa. The stated aim of

the ‘Smart Drinking Goals’ seems to be noble, but we have paid a further US$5million to secure what
is considered to be its main aim: that of increasing the total consumption of alcohol in order to boost
our revenues rather than drinking smartly (self-interest).

Recommendation: A thorough investigation is needed to establish if the main aims of the above
payments, whilst marketing-relevant, are not intended to ‘put profits ahead of people’ by encouraging

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