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SABMiller PLC (SAB.JO) is hitting back at brewing rivals that have staked out ground in its stronghold in South Africa with plans to build a $34 million brewery in neighboring Namibia, home of Namibia Breweries Ltd. (NBS.WH).

The U.K.-headquartered company, which was founded in 1895 in the then-recently established gold mining town of Johannesburg, said Friday it expects to begin work on a 220,000 hectoliter brewery on land about 70 kilometers north of Windhoek in the second half of the year.

The brewery will produce the Castle and Castle Lite brands, and include a returnable bottle packaging line and warehousing facilities, it said. Returnable bottles are a major feature in the South African beer market.

Namibia Breweries last month officially opened the Sedibeng brewery south of Johannesburg with larger European partners Heineken NV (HEIA.AE) and Diageo PLC (DEO), brewing its Windhoek lager alongside Heineken, Amstel and Smirnoff Storm and Spin blended drinks. The three have been gaining market share at the premium end of South Africa's beer market, eroding SABMiller's still dominant hold.

"We have been importing beer into Namibia for over 20 years and such a significant investment symbolizes our current optimism in the country," said Cobus Bruwer, SABMiller's country representative.

He said SABMiller currently has an estimated 22% local market share in the southern African country with brands such as Castle, Carling Black Label and Peroni Nastro Azzuro.

The new brewery will be owned by a venture in which SABMiller will own a 60% stake and local partners the remainder as part of a black empowerment initiative. The company said as part of black economic empowerment there will be 20% ownership by Onyewu Investments and 20% by three charitable trusts working on behalf of communities in the Omaheke, Karas and Northern regions of Namibia.

SABMiller earlier this week reported a 1% dip in lager volumes in South Africa in the year through March despite growth in the final quarter, but a 6% rise in volumes for the rest of the continent on an organic basis. That compares with level volumes across the company's global operations.

-By Robb M. Stewart, Dow Jones Newswires; +27 11 783 7848; robb.stewart@dowjones.com