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2020 EDITION

SOUTH AFRICAN BUSINESS

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PROFILE

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PROFILE


MESSAGE PROFILE

South Africa continues to inspire new ways

T

he South Africa of today is definitely not the same country that emerged from a tumultuous history only 25 years ago in 1994. During 2019, the country’s sixth democratically elected administration took office, under the leadership of President Cyril Ramaphosa. As the country completes its first quarter century of democracy, the strategic objectives of the sixth administration were made clear during his first State of the Nation Address (SONA) of the new administration (20 June 2019). In this SONA, the President stated that, “As we enter this new administration, we will focus on seven priorities: • Economic transformation and job creation • Education, skills and health • Consolidating the social wage through reliable and quality basic services • Spatial integration, human settlements and local government • Social cohesion and safe communities • A capable, ethical and developmental state • A better Africa and world.” The South Africa of the sixth administration is a country with much to offer its citizens, and the world. Objectives set by the current SOUTH AFRICAN BUSINESS 2020

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administration can be achieved, if viewed against the background of the broader competitive and comparative advantages up its proverbial sleeve. South Africa is, for example, one of the most transparent state governance systems in the world. Ranking second out of 102 countries in the Open Budget Index, and also ranking as first out of 141 countries for Budget Transparency, in the World Economic Forum Global Competitiveness Index (WEF GCI). In terms of its financial systems it is evident that the country is a world leader in that it ranks 19th in the Finance pillar of the WEF GCI. But it does not stop there.


MESSAGE PROFILE

Beyond the business and economic realm, South Africa is also in the Good Country Index pegged as third out of 153 countries in its contribution to International Peace & Security, 18th for Science & Technology, and 31st for its contribution to World Order. This means that South Africa is not only an economic force on the African continent, but also a force for “good” through its contribution to international peace and security, particularly in the African continent. In a period of mounting uncertainties in the global environment, South Africa remains an innovative and inspiring nation. In this regard, the sixth administration is focused on enhancing the ease of doing business in South Africa. To this end the Department of Trade, Industry and Competition’s national Invest SA One Stop Shop for investors aims to provide would-be investors with the necessary support to enter the market. Several reforms are underway to deal with regulatory and administrative hurdles. The country’s Special Economic Zones, its incentives for investors, its quality of life (and climate), as well as an advantageous geographical position and infrastructure is an enabler for business in the broader African market environment. For evidence of the above one need to look no further than the World Bank Logistics Performance

Index where South Africa ranks 33rd out of 160 countries. This also illustrates the infrastructural and enabling regulatory environment the country creates. It is to this end important to note another inspiring aspect of the South Africa of today. According to the EY Africa Attractiveness Survey (2019), South Africa is the fifth-largest source of Foreign Direct Investment in the pan-African economy. This in itself says a lot not only about the maturity and capability of South African private and publically owned corporations to globalise operations, but even more about the enabling financial, infrastructural, human-resource and doing-business environment South Africa offers those interested in carving a niche in the African marketplace. During 2020, the African Continental Free Trade Area Agreement will be operationalised. South Africa, as signatory to this agreement, is a champion of African integration. The country’s National Development Plan (Vision 2030) has a whole chapter devoted to measures to enhance intra-African trade. A further illustration of the fact that South Africa is proverbially open for business is that since taking office, President Ramaphosa has been championing an annual South Africa Investment Conference. At the first conference in 2018, major local and international corporates pledged close to US$20-billion towards investment in South Africa. This conference will be a standing feature on the country’s annual calendar going forward. It is impossible to summarise all the unique features of the South African Nation Brand. But one thing that is certain is that the country’s geographic, linguistic, cultural, economic and religious diversity inspires creativity, and positions the country as a compelling trade partner and investment destination. During 2020 South Africa will chair the African Union. In the same year the African Continental Free Trade Area will come into effect. It has therefore never been a better time to engage with, and explore new opportunities not only in South Africa, but in the free trade area as a whole. With all of this said, it is also important to be reminded of the fact that while the country has many hidden gems, and surprising innovation capabilities, South Africa is a nation in transformation. The seven key priorities of the sixth administration are all geared to enable positive and constructive change and transformation in society, the economy, and the way South Africa interacts with the world. If you have never considered travelling to, or doing business in an inspiring and innovative South Africa – all we can say is: the time is now.

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SOUTH AFRICAN BUSINESS 2020


CONTENTS

CONTENTS South African Business 2020 Edition.

Introduction Foreword12 A unique guide to business and investment in South Africa.

Special features An economic overview of South Africa

14

Three small rural towns in a remote part of South Africa’s dry north-west are the sites of the very latest in technology, and could hold the key to boosting growth in the South African economy. Provinces of South Africa A snapshot of South Africa’s nine provinces.

20

The Blue Economy South Africa is alert to the growing opportunity offered by the maritime sector.

28

Trade into Africa Continental free trade will galvanise African economies.

30

Doubling tourist arrivals is a national priority Airports Company South Africa is on a massive spending drive

32

Mining for the future 38 South African miners are finding new uses for platinum and gearing up for the age of renewable energy.

SOUTH AFRICAN BUSINESS 2020

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CONTENTS

Economic sectors Agriculture 

58

South Africa is the world leader in mohair. Energy62 Policy decisions hold the key to stabilising power supply. Oil, gas and petrochemicals 

68

South African ports are gearing up to service the oil and gas industry. Water 

72

Cape Town has learned big lessons from a harsh drought. Engineering 

74

Training new engineers is a national priority. Construction and property

76

Green buildings are becoming more common. Manufacturing80 A new national drug tender is an opportunity for local manufacturers. Food and beverages 

82

PepsiCo has bought Pioneer Foods. Automotive84 Vehicle exports are boosting the South African economy. Transport and logistics

86

A private-public partnership is upgrading facilities at ports.

SOUTH AFRICAN BUSINESS 2020

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CONTENTS ICT88 Cloud services have come to South Africa. Banking and financial services

89

New stock exchanges are attracting investors. Development finance and SMME support

94

Supply chains can create and support small businesses.

References Sector contents

56

Overviews of the main economic sectors of South Africa. 23 (“Exxaro”) and Exxaro Resources Limited the South Africa Investment Conference invites Index96 media to the first-of-its-kind digital and About the cover connected mine in the country. Map of provinces’ sectoral strengths

Exxaro’s Belfast Implementation Project in Mpumalanga comes as a result of the company’s R20-billion investment pledged at the inaugural South Africa Investment Conference held in 2018. Exxaro’s Belfast coal mine is the first-ever digital and connected mine in South Africa.

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FOREWORD

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FOREWORD

CREDITS

South African Business

Publisher: Chris Whales

A unique guide to business and investment in South Africa.

Publishing director: Robert Arendse

W

elcome to the eighth edition of the South African Business journal. First published in 2011, the publication has established itself as the premier business and investment guide to South Africa, supported by an e-book edition at www.southafricanbusiness.co.za. Regular pages cover all the main economic sectors of the South African economy and give a snapshot of each of the country’s provincial economies. A special feature focusses on the huge potential for growth and job creation which the tourism industry holds. The possibilities presented by the age of renewable energy for the mining industry is the topic of another special feature and the CEO of Minerals Council South Africa responds to a set of questions on the state of mining in the country. South African Business is complemented by nine regional publications covering the business and investment environment in each of South Africa’s provinces. The e-book editions can be viewed online at www.globalafricanetwork.com. These unique titles are supported by a monthly business e-newsletter with a circulation of over 26 000. Chris Whales Publisher, Global Africa Network Media Email: chris@gan.co.za

DISTRIBUTION South African Business is distributed internationally on outgoing and incoming trade missions; to foreign offices in South Africa’s main trading partners; at top national and international events; through the offices of foreign representatives in South Africa; as well as nationally and regionally via chambers of commerce, tourism offices, trade and investment agencies, provincial government departments, municipalities, airport lounges and companies. Member of the Audit Bureau of Circulations COPYRIGHT | South African Business is an independent publication published by Global Africa Network Media (Pty) Ltd. Full copyright to the publication vests with Global Africa Network Media (Pty) Ltd. No part of the publication may be reproduced in any form without the written permission of Global Africa Network Media (Pty) Ltd. PHOTO CREDITS | Abengoa Solar, ACSA, African Pride/Marriott International, Amdec Group Cape Town International Convention Centre, Avon Peaking Power, Bidvest Tank Terminals, De Beers Group, Des Jacobs/Implats, Eberspächer South Africa, GroblerduPreez/ iStock by Getty Images, Kevin Wright/Vedanta Zinc International, Knight Piésold, Laeveld Agrochem, Minerals Council SA, Murray and

Join us!

Editor: John Young Online editor: Christoff Scholtz Art director: Brent Meder Design: Richard Smith Production: Lizel Olivier Ad sales: Gavin van der Merwe, Sam Oliver, Gabriel Venter, Vanessa Wallace, Jeremy Petersen, Shiko Diala and Sandile Koni. Managing director: Clive During Administration & accounts: Charlene Steynberg and Natalie Koopman Distribution & circulation Manager: Edward MacDonald Printing: FA Print

PUBLISHED BY Global Africa Network Media (Pty) Ltd Company Registration No: 2004/004982/07 Directors: Clive During, Chris Whales Physical address: 28 Main Road, Rondebosch 7700 Postal address: PO Box 292, Newlands 7701 Tel: +27 21 657 6200 | Fax: +27 21 674 6943 Email: info@gan.co.za | Website: www.gan.co.za

ISSN 2221-4194 Dickson Construction, North West Provincial Government, NRF/SARAO, Paramount Group, Thavani Mall, Thebe Tourism Group, THEGIFT777/ iStock by Getty Images, SA Tourism, Zimele. DISCLAIMER | While the publisher, Global Africa Network Media (Pty) Ltd, has used all reasonable efforts to ensure that the information contained in South African Business is accurate and up-to-date, the publishers make no representations as to the accuracy, quality, time-liness, or completeness of the information. Global Africa Network Media will not accept responsibility for any loss or damage suffered as a result of the use of or any reliance placed on such information.

Advertise your organisation in this journal to reach business and government. Contact sales@gan.co.za


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SPECIAL FEATURE

An economic overview of South Africa

Three small rural towns in a remote part of South Africa’s dry north-west are the sites of the very latest in technology, and could hold the key to boosting growth in the South African economy. By John Young

T

he Northern Cape towns of Carnarvon, Aggeneys and Keimoes are not the first places where analyses of economic growth in South Africa normally begin – but there is good reason to look carefully at what is going on in this dry and remote region. Carnarvon, just north of the N1, is best known for dorper sheep, low hills and wind pumps but this has changed since the Square Kilometre Array project chose the area for the erection of the very latest in radio telescope technology. A multi-national project of awesome potential, construction on the project will run to hundreds of millions of euros and is already sparking interest in technical subjects in schools of the Northern Cape and at South Africa’s newest university, Sol Plaatje University, in Kimberley. About 300km north-west, the tallest structure in South Africa (taller than the Ponti City tower in Johannesburg) has been erected near Keimoes between Upington and Kakamas. Keimoes is not entirely unfamiliar with fame: the area’s sultanas are world famous and Orange River Wine Cellars does important work on the banks of the Orange River, but the scale of the nearby solar thermal project is vast, and the technology is significant. Khi Solar One (pictured on this page) is a joint venture between Spanish form Abengoa Solar, the Industrial SOUTH AFRICAN BUSINESS 2020

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Development Corporation (IDC) and the Khi Community Trust. Concentrated solar power is a more expensive method of generating power from the sun than photovoltaic (PV) systems but the potential for storage is greater. While the Northern Cape is the national leader in solar power, the Eastern Cape has attracted more than half of the wind power projects in the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP). The effect of the introduction of renewable energy into the South African energy market has been noted at a macro level in several ways, but now it is


SPECIAL FEATURE showing at micro level as well. An announcement by infrastructure development group Raubex in October 2019 that it was experiencing strong growth because of contract work related to renewable energy was just one indicator of a massive shift that is starting to happen. For several years, South Africa’s construction and engineering companies have been stressed, with many commentators blaming a lack of infrastructure investment from central government and stateowned enterprises for this state of affairs. Renewable energy may well offer the route back to profitability. Aggeneys is a about 240km west of Keimoes, and close to Springbok. It’s always been a mining town and is the base for the Black Mountain project which produces copper, lead and zinc, with silver as a by-product. Vedanta Zinc International has launched a project nearby which will deliver 600 000 tons of zinc annually once phase three is complete. It is the biggest current mining project in South Africa, having attracted $400-million in investment  so far. There is a possibility of a new smelter and refinery being built to service this digitally advanced mine.

Agriculture and tourism Basing economic growth on a devaluing currency is not always the best long-term method of boosting economic growth, but high-value agricultural exports and increased numbers of high-

spending international tourists hold some promise for helping to get the South African economy back on a growth path. Horticulture in particular is seen as holding great potential not only for increased earnings, but for creating jobs. The same holds true for tourism. StatsSA reported that the tourism sector created 31 752 net new jobs in 2017 and Wandile Sihlobo of Agbiz has written about how every hectare of blueberries planted needs 2.64 workers. When assessing South Africa’s prospects and suggesting solutions, the country’s history of economic and social exclusion and current unemployment figures must be part of the equation. Another new area that holds great potential for the South African economy is the Oceans Economy. South Africa has 3 000km of coastline and the extent of the country’s territorial waters is greater than its land size. And yet the country does not have a merchant marine fleet and only scrapes the surface in terms of the percentage of repair and maintenance of boats and oil rigs which could potentially bring work to its ports. What is also called the Blue Economy has enormous potential for economic growth and concomitant job creation. National government wants to see the Oceans Economy contribute a R177-billion to gross domestic product by 2033. This is part of the National Development Plan (NDP). National strategy on the Oceans Economy is also aligned with Operation Phakisa, a plan that targets sectors that can best achieve quick returns in terms of growth and job creation. The four target areas within the maritime strategy are: aquaculture; offshore oil and gas; marine protection and governance; marine transport and manufacturing. Transnet National Ports Authority is spending heavily on upgrading the nation’s ports. One statistic illustrates the potential: South Africa does maintenance on only 5% of the 13 000 vessels that use its ports, and services 4-5% of the approximately 130 rigs that pass along the coast each year. Large quantities of oil are transported around the Cape Point every year: 32.2% of West Africa’s oil and 23.7% of oil emanating from the Middle East.

Traditional strengths Great mineral wealth has underpinned the South African economy ever since the first diamond was stumbled upon in 1867. Gold was found soon after and that industry effectively saw to it that South Africa became an industrialised nation. Now those gold mines are tapering off in production volumes, but coal, iron ore and platinum reserves are impressively large. The grains of the central regions of the country, together with the fruits and vegetables of Mpumalanga and Limpopo, the wines and grapes of the Western Cape and the sheep and mohair of the Eastern Cape, all contribute to a diverse and vibrant agricultural sector. There

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SOUTH AFRICAN BUSINESS 2020


SPECIAL FEATURE are many strong agricultural companies in the sector. KwaZulu-Natal is the country’s leading sugar area and has a strong suite in forestry and paper production. Automotive manufacturing and automotive components are doing well, with major investments by most of the major marques and increased exports a feature of the sector. The publication in 2018 of a new Integrated Resource Plan (IRP) is another symptom of the type of increased certainty that an economy needs in order to thrive. The IRP is a road map for South Africa’s electricity generation and the previous administration seemed determined to push for an expensive nuclear programme. The latest plan confirms that the already hugely successful drive for renewable energy will be continued and expanded. Apart from being greener and cheaper, the renewable energy programme has also attracted lots of foreign direct investment (FDI) and provided new employment opportunities.

Sectoral composition of GDP in 2017

Special Economic Zones (SEZs)

Mining and quarrying 8%

South African industrial planners have turned to Special Economic Zones (SEZs) as a model for manufacturing goods locally to replace imports. South Africa has several existing Industrial Development Zones (IDZ) and a Free Trade Port (FTP). The Coega IDZ (Nelson Mandela Bay Metropole) and the Dube TradePort at the King Shaka International Airport outside Durban are two well-known examples. Other licensed IDZs are at Saldanha Bay, East London and Richards Bay. A process has begun to have them all called SEZs. A new SEZ has been formally declared in the northern part of Limpopo, the Musina-Makhado SEZ. The Upington SEZ in the Northern Cape is eagerly awaiting its licence, as is the Tubatse SEZ in eastern Limpopo. Key goals behind the establishment of SEZs are to encourage industries to develop in clusters, leading to economies of scale, skills-sharing and easier access by suppliers. The creation of industrial infrastructure also serves to attract investment and promotes further development. Apart from attracting foreign direct investment and boosting employment, SEZs can also play a role in helping to add new sectors or subsectors to an economy. South Africa is targeting a variety of sectors in SEZs around the country, but there is a decided emphasis on beneficiation, mainly of minerals but also of agricultural products. There is a strong belief that South Africa can do much more with the product of its soils – whether that be using manganese to convert iron into steel or creating fruit juices out of apples and pears. SOUTH AFRICAN BUSINESS 2020

Special Economic Zones are created in terms of the Special Economic Zones Act of 2014 (Act 16 of 2014). The act defines an SEZ as “geographically designated areas of the country that are set aside for specifically targeted economic activities and supported through special arrangements and systems that are often different from those that apply to the rest of the country”. Lower corporate tax rates and duty-free imports are among the advantages that accrue to investors.

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Manufacturing 13.2% Electricity, gas and water 3.7% Construction 3.9% Trade, catering and accommodation 15% Transport, storage and communication 9.9% Finance, real estate and business services 20.2% Personal services 5.8% General government services 17.7% Agriculture, forestry and fishing 2.6%

SOURCE: IDC from StatsSA


SPECIAL FEATURE Investing in South Africa The South Africa Investment Conference 2019, held in Sandton, Johannesburg, from 5-7 November 2019, is the second such conference, held under the leadership of President Cyril Ramaphosa and represents a major plank in the big drive of his administration to encourage inward investment. At the first such conference, commitments to the value of more than $20-billion were made in the course of discussions about how best to create partnerships and grow the South African economy. South Africa provides active support for investors by providing a wide range of incentives, including a comprehensive suite of tax incentives for investment in Special Economic Zones (SEZs). Information on this page is taken from the executive summary of “The case for investing in South Africa. Accelerating economic growth by building partnerships”, published by the Department of Trade, Industry and Competition (the dtic).

• • • • •

FDI •

Key facts •

South Africa offers a unique combination of developed-world infrastructure and logistics networks, and a diversified emerging market (EM) economy offering low sectoral concentration risks. Its gross domestic product (GDP) of R4.65-trillion ($349.4-billion at the average $/R exchange rate for 2017) represents circa 16% of Africa’s GDP. The composition of South Africa’s GDP is similar to those of developed economies, diversified and positioned to generate sustainable long-term returns on invested capital.

Ranked number one in Africa with regard to Strength of Investor Protection (21st globally) and Protection of Minority Shareholders’ Interests (30th globally). Ranked 31st in the world in terms of Efficiency of Legal Framework in Settling Disputes.

17

The overall stock of foreign direct investment (FDI) in the economy represented 42.8% of GDP in 2016, up from 5.8% in 1994. Inward FDI has been traditionally dominated by European investors, particularly from the United Kingdom. Fast-growing presence of Asian investors in recent years, predominantly from China.

Raising capital •

• •

Investment environment

Progressive constitution. Independent judiciary provides respect for the rule of law. Actively addressing corruption. Meaningful contributor to global governance. South Africa has produced solid financial returns. The Johannesburg Securities Exchange All Share Index has outperformed other emerging market indices since the start of the new millennium.

Twelve initial public offerings (IPOs) in 2017 with total proceeds of $2.3-billion, compared to $261-million in 2013. A total of 44 IPOs over the period 2013 to 2017, collectively totalling $4.8-billion. Five of the top 10 IPOs by value in Africa in 2017 were raised in South Africa. A total of 251 further offerings (FOs) in 2017 (collectively valued at $37.6-billion), up from 35 FOs (totalling $4.6-billion) in 2013. South Africa accounted for seven of the top 10 further offerings in Africa in 2017. Websites: www.investsa.gov.za www.sainvestmentconference.co.za SOUTH AFRICAN BUSINESS 2020


SPECIAL FEATURE FACT FILE: REPUBLIC OF SOUTH AFRICA President: Cyril Ramaphosa (African National Congress) Capitals: Pretoria/Tshwane (administrative, seat of government), Cape Town (legislative), Bloemfontein (judicial). Time: GMT+2 Life expectancy: 65.1 (female); 59.7 (male) Population: 55.91-million (2016) Life expectancy: 65.1 (female); 59.7 (male) Size: 1 220 813km² Major languages: South Africa has 11 official languages, but the main language of government and business is English. Zulu, Xhosa and Afrikaans are widely spoken. Religion: There is no state religion. The majority of the population is Christian, but many other religions are followed such as Islam, Jewish and Hindu. Currency: rand (100 cents). R15.15 = $1 (October 2019) Resouces: Platinum, gold, iron ore, chromium, vanadium, manganese, alumino-silicates, coal, copper, diamonds, uranium, zirconium. Political system: South Africa is a republic with an executive president who is appointed by the political party that wins a majority in parliamentary elections. There are three tiers of government: national, provincial and municipal but the revenue raising capacity of the latter two spheres is limited. Allocations for health and education for example, are made by national government and then administrated by provinces. Eight of South Africa’s nine provinces are run by premiers from the African National Congress; the Western Cape Province is administered by the Democratic Alliance. The third level of government is local or municipality. In 2016 the DA came to power in three of South Africa’s biggest cities, supported by other parties such as the Congress of the People and the United Democratic Front. The Freedom Front said it would support these anti-ANC alliances on a vote-by-vote basis, but it would not sign up

SOUTH AFRICAN BUSINESS 2020

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to a coalition. The FF has subsequently stopped supporting the DA. Legal system: South Africa is a constitutional state with separation of powers between the legal and executive authorities. All laws must pass muster with the Constitutional Court which is the ultimate court of appeal on legislation. South Africa’s legal system is based on Roman Dutch law. GDP: R4.65-trillion ($349.4-billion at the average 2017 exchange rate). Exports: Precious and semi-precious stones, mineral products, base metals, vehicles, machinery, chemical products, vegetable products, fruits, foodstuffs and beverages, paper and pulp. Main export markets: China, USA, Japan, Germany, UK, India. Membership of BRICS will see focus on Brazil, Russia, India and China. Imports: Machinery, mineral products, vehicles, chemicals, original equipment, base metals, plastics and rubber, textiles, optical and medical, foodstuffs and beverages. Main import markets: China, Germany, USA, Japan, Saudi Arabia, Iran, UK, India, France, Nigeria. Infrastructure (information from dti): • 158 952km of paved roads (10th globally). South Africa is ranked 50th globally for quality of roads. • 20 986km of railways (13th globally for length of railways). • Eight sea ports including two of the world’s top container ports (Durban and Cape Town). • Two of the world’s largest dry bulk ports (Richards Bay and Saldanha Bay). • Installed generation capacity of 47.3KW, with significant excess capacity coming on stream. • Internet and personal computer penetration is the highest in the region, with 54% of individuals using the Internet. • 144 airports with paved runways. • Ranked 25th globally for Quality of Air Transport Infrastructure. ■


10 REASONS WHY YOU SHOULD INVEST IN SOUTH AFRICA

01.

HOT EMERGING MARKET Growing middle class, affluent consumer base, excellent returns on investment.

02.

MOST DIVERSIFIED ECONOMY IN AFRICA

South Africa (SA) has the most industrialised economy in Africa. It is the region’s principal manufacturing hub and a leading services destination.

LARGEST PRESENCE OF MULTINATIONALS ON THE AFRICAN CONTINENT SA is the location of choice of multinationals in Africa. Global corporates reap the benefits of doing business in SA, which has a supportive and growing ecosystem as a hub for innovation, technology and fintech.

04. 03.

FAVOURABLE ACCESS TO GLOBAL MARKETS

05.

The African Continental Free Trade Area will boost intra-African trade and create a market of over one billion people and a combined gross domestic product (GDP) of USD2.2-trillion that will unlock industrial development. SA has several trade agreements in place as an export platform into global markets.

SA has a progressive Constitution and an independent judiciary. The country has a mature and accessible legal system, providing certainty and respect for the rule of law. It is ranked number one in Africa for the protection of investments and minority investors.

06.

ABUNDANT NATURAL RESOURCES

SA is endowed with an abundance of natural resources. It is the leading producer of platinum-group metals (PGMs) globally. Numerous listed mining companies operate in SA, which also has world-renowned underground mining expertise.

08.

ADVANCED FINANCIAL SERVICES & BANKING SECTOR SA has a sophisticated banking sector with a major footprint in Africa. It is the continent’s financial hub, with the JSE being Africa’s largest stock exchange by market capitalisation.

PROGRESSIVE CONSTITUTION & INDEPENDENT JUDICIARY

07.

WORLD-CLASS INFRASTRUCTURE AND LOGISTICS

A massive governmental investment programme in infrastructure development has been under way for several years. SA has the largest air, ports and logistics networks in Africa, and is ranked number one in Africa in the World Bank’s Logistics Performance Index.

YOUNG, EAGER LABOUR FORCE SA has a number of world-class universities and colleges producing a skilled, talented and capable workforce. It boasts a diversified skills set, emerging talent, a large pool of prospective workers and government support for training and skills development.

Page | 2

09. 10.

EXCELLENT QUALITY OF LIFE

SA offers a favourable cost of living, with a diversified cultural, cuisine and sports offering all year round and a world-renowned hospitality sector.

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SOUTH AFRICAN BUSINESS 2020


SPECIAL FEATURE

Provinces of South Africa A snapshot of South Africa’s nine provinces.

Eastern Cape

Free State

Gauteng

Capital: Bhisho Main towns: Port Elizabeth, East London, Uitenhage, GraaffReinet, Mthatha, Grahamstown (Makhanda) Population: 6 916 200 (2015) Area: 168 966km² (13.8% of South Africa)

Capital: Bloemfontein Main towns: Welkom, Sasolburg, Parys, Kroonstad

Capital: Johannesburg Main towns: Tshwane (including Pretoria), Ekurhuleni, Vanderbijlpark, Roodepoort

Population: 2 817 900 (2015) Area: 129 825km² (10.6% of South Africa)

Population: 13 200 300 (2015) Area: 18 178km² (1.5% of South Africa)

Premier: Lubabalo Oscar Mabuyane (ANC)

Premier: Sefora Hixsonia Ntombela (ANC)

Premier: David Makhura (ANC)

Key sectors: Automotive, agriculture, agri-processing, forestry, finance, retail, tourism, renewable energy. Infrastructure: Coega Industrial Development Zone, East London Industrial Development Zone, ports of East London, Port Elizabeth and Ngqura, airports at Port Elizabeth and East London.

Key sectors: Financial and banking, manufacturing, trade, creative industries, media.

Notable tourism assets: Addo Elephant National Park, Mountain Zebra National Park, Wild Coast, Jeffreys Bay, National Arts Festival.

Key sectors: Agriculture, agri-processing, chemical manufacturing, mining, transport and logistics. Infrastructure: Maluti-A-Phofung Special Economic Zone, Bram Fischer International Airport, University of the Free State, Central University of Technology, N8 Corridor. Notable tourism assets: Vaal River, Gariep Dam, Golden Gate Highlands National Park, Cherry Festival, Mangaung African Cultural Festival (Macufe).

Provincial government website: www.ecprov.gov.za Eastern Cape Development Corporation: www.ecdc.co.za

Provincial government website: www.freestateonline.fs.gov.za Free State Development Corporation: www.fdc.co.za

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Infrastructure: OR Tambo International Airport, Gautrain, major universities and research institutions, large convention centres, FNB Stadium (Soccer City). Notable tourism assets: Cradle of Humankind, Apartheid Museum, Constitution Hill, Magaliesberg, Soweto tours, Dinokeng. Provincial government website: www.gauteng.gov.za Gauteng Growth and Development Agency: www.ggda.co.za


SPECIAL FEATURE

KwaZulu-Natal

Limpopo

Mpumalanga

Capital: Pietermaritzburg Main towns: Durban, Newcastle, Ballito, Port Shepstone, Empangeni, Ulundi Population: 10 919 100 (2015) Area: 125 755km² (7.7% of South Africa)

Capital: Polokwane Main towns: Musina, Ba-Phalabora, Bela-Bela, Steelpoort, Tzaneen, Thohoyandou Population: 5 726 800 (2015) Area: 125 755km² (10.2% of South Africa)

Capital: Mbombela Main towns: Emalahleni, Middelburg, Sabie, Lydenburg

Premier: Sihle Zikalala (ANC)

Premier: Chupu Stanley Mathabatha (ANC)

Premier: Refilwe Mtshweni-Tsipane (ANC)

Key sectors: Chemicals, dissolving pulp manufacture, sugar, forestry, automotive, textiles and footwear, mining, oil and gas, logistics. Infrastructure: King Shaka International Airport, Dube TradePort, Richards Bay Industrial Development Zone, ports of Richards Bay and Durban, Albert Luthuli International Convention Centre Complex. Notable tourism assets: HluhluweiMfolozi Park, the Drakensberg mountains, iSimangilso Wetlands Park, Durban beaches, South Coast, Zulu cultural heritage, historical battlefields.

Key sectors: Mining, agriculture, tourism, logistics.

Key sectors: Agriculture, forestry, mining, steel manufacturing, petrochemicals, pulp and paper, power generation, tourism. Infrastructure: Nkomazi Special Economic Zone, Mbombela International Fresh Produce Market, Maputo Development Corridor, Kruger Mpumalanga International Airport. Notable tourism assets: Kruger National Park, Blyde River Canyon, Barberton Makhonjwa Mountains (a UNESCO World Heritage Site).

Provincial government website: www.kznonline.gov.za Trade and Investment KwaZuluNatal: www.tikzn.co.za

Infrastructure: Musina-Makhado Special Economic Zone, N1 highway and rail network, new Medupi power station.

Notable tourism assets: Kruger National Park, Mapungubwe Heritage Site, Makapans Valley, Marula Festival, Waterberg Biosphere. Provincial government website: www.limpopo.gov.za Limpopo Economic Development Agency: www.lieda.gov.za

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Population: 4 283 900 (2015) Area: 76 495km² (6.3% of South Africa)

Provincial government website: www.mpumalanga.gov.za Mpumalanga Economic Growth Agency: www.mega.gov.za

SOUTH AFRICAN BUSINESS 2020


SPECIAL FEATURE

Northern Cape

North West

Western Cape

Capital: Kimberley Main towns: Douglas, Upington, De Aar, Port Nolloth, Colesberg

Capital: Mahikeng Main towns: Klerksdorp, Rustenburg, Brits, Potchefstroom

Population: 1 185 600 (2015) Area: 372 889km² (30.5% of South Africa)

Population: 3 707 000 (2015) Area: 104 882km² (8.6% of South Africa)

Capital: Cape Town Main towns: Stellenbosch, George, Plettenberg Bay, Beaufort West, Oudtshoorn, Worcester, Malmesbury Population: 6 200 100 (2015) Area: 129 462km² (10.6% of South Africa)

Premier: Dr Zamani Saul (ANC)

Premier: Professor Tebogo Job Mokgoro (ANC)

Premier: Alan Winde (DA)

Key sectors: Agriculture, mining, renewable energy, astronomy.

Key sectors: Mining, agriculture, agri-processing, automotive components.

Infrastructure: Upington Special Economic Zone, Sol Plaatje University, Vaalharts Irrigation Scheme.

Infrastructure: Hartbeespoort Dam, Pelindaba nuclear research unit, North West University, Bakwena Platinum Highway.

Notable tourism assets: Six national parks including the Kgalagadi Transfrontier Park, Orange River, spring flower displays, diamond routes.

Notable tourism assets: Sun City, Mmbatho Palms Hotel Casino Convention Resort, Pilanesberg National Park, 18 luxury lodges in Madikwe Game Reserve.

Provincial government website: www.northern-cape.gov.za Department of Economic Development and Tourism: www.northern-cape.gov.za/dedat

Key sectors: Agriculture, agriprocessing, wine and grapes, financial services, manufacturing, tourism, oil and gas, boatbuilding. Infrastructure: Ports of Cape Town, Saldanha and Mossel Bay, Mossgas oil-to-gas refinery, Cape Town International Airport, Cape Town International Convention Centre, Koeberg nuclear power station. Notable tourism assets: Table Mountain, Garden Route National Park, Karoo National Park, West Coast National Park, Kirstenbosch Botanical Gardens, Cape Point, V&A Waterfront, Plettenberg Bay, Route 62, Zeitz Museum of Contemporary Art.

Provincial government website: www.nwpg.gov.za North West Development Corporation: www.nwdc.co.za

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Provincial government website: www.westerncape.gov.za Wesgro: www.wesgro.co.za


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Sectoral strengths of South African provinces SECTORAL STRENGTHS OF SOUTH AFRICA’S PROVINCES

A wide variety of investments are available.

Gauteng: • Financial and business services • Information and communications technology • Transport and logistics • Basic iron and steel, steel products • Fabricated metal products • Motor vehicles, parts and accessories • Appliances • Machinery and equipment • Chemical products, pharmaceuticals • Agro-processing

North West: • Mining • Agriculture and agro-processing • Tourism • Metal products • Machinery and equipment • Renewable energy (solar)

Limpopo: • Mining • Fertilisers • Tourism • Agriculture • Agro-processing • Energy, including renewables (solar)

KwaZulu-Natal: • Transport and logistics • Tourism • Motor vehicles, parts and accessories • Petrochemicals • Aluminium • Clothing and textiles • Machinery and equipment • Agriculture and agroprocessing • Forestry, pulp and paper, wood and wood products

Northern Cape: Mining Agriculture and agro-processing Fisheries and aquaculture Renewable energy (solar, wind) Jewellery manufacturing

• • • • •

Western Cape: • Tourism • Financial and business services • Transport and logistics • ICT • Agriculture and agro-processing • Fisheries and aquaculture • Petrochemicals • Basic iron and steel • Clothing and textiles • Renewable energy (solar, wind)

Mpumalanga: • Mining • Tourism • Forestry, paper and paper products, wood and wood products • Agriculture and agroprocessing • Metal products

Eastern Cape: Motor vehicles, parts and accessories • Forestry, wood and wood products • Clothing and textiles • Pharmaceuticals • Leather and leather products • Tourism • Renewable energy (wind)

Free State: • Agriculture and agro-processing • Mining • Petrochemicals • Machinery and equipment • Tourism

Source: Industrial Development Corporation (IDC); The Case for Investing in South Africa, Executive Summary Source: Industrial Development Corporation (IDC) (South African Investment Conference, 2018). Page | 40

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A truly smart city, Durban, KZN, South Africa seamlessly combines an innovative business environment with an exciting, contemporary lifestyle. Connecting continents, here you will find Africa’s busiest port, the top ranking conferencing city and the home to the continent’s very first Aerotropolis. Boasting world-class infrastructure, manufacturing and industrial concentration that is constantly evolving, isn’t it time to join this progressive society rich in investment opportunities?

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…We can help you make it happen, now.

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Tel: +27 31 311 4227 Email: invest@durban.gov.za web: invest.durban

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Dube TradePort and King Shaka International Airport - 60year Master Plan - driving growth of aerotropolis, or airport city

The city of Durban (eThekwini Municipality) is South Africa’s second most important economic region

Extensive first-world road, rail, sea and air

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Rated in top 5 ‘Quality of Living’ cities in Africa and Middle East by Mercer Consulting in 2015

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Introducing you to Limpopo An industrial powerhouse with an abundance of agriculture, mineral and tourism resources.

L Dr Matata Mokoele, CEO

SOUTH AFRICAN BUSINESS 2020

impopo is the natural resource treasure chest of South Africa, if not the whole of Southern Africa. It boasts some of the greatest reserves of agriculture, mineral and tourism resources, many of which remain hugely under-exploited. The province is also linked to the Maputo Development Corridor through Phalaborwa Spatial Development Initiative, a network of road and rail corridors connecting to the major sea ports that open up Limpopo and surrounding regions for trade and investment. This is complemented by the presence of airports in major centres of the province including Ellisras, Makhado, Musina, Phalaborwa, Mokopane, Thabazimbi, Tzaneen, Thohoyandou and Bela-Bela as well as the Gateway International Airport in Polokwane. In terms of agriculture, Limpopo could be described as the garden of South Africa, or the whole continent, given its rich fruit and vegetable production. The province produces 75% of the country’s

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mangoes, 65% of its papayas, 36% of its tea, 25% of its citrus, bananas and litchis, 60% of its avocados, two-thirds of its tomatoes, and 285 000 tons of potatoes. Other products include coffee, nuts, guavas, sisal, cotton and tobacco, and timber with more than 170 plantations. Apart from all these, there is cotton, sunflower, maize, wheat cultivation as well as grapes. Most of the higher-lying areas are devoted to cattle and game ranching, earning a reputation for quality biltong, a popular South African delicacy of salted, dried meat. Limpopo is also endowed with an abundance of mineral resources, positioning mining as the critical sector of the provincial economy, contributing 22% of the GGP. The platinum group include platinum itself, chromium, nickel, cobalt, vanadium, tin, limestone and uranium clay. Other reserves include antinomy, phosphates, fluorspar, gold, diamonds, copper, emeralds, scheelites, magnetite, vermiculite, silicon, mica, black granite, corundum, feldspar and salt. As if all this is not enough, there are financial incentives through a package put down by the National Government. A wide range of incentives to investors include a tax holiday for up to six years. As a result of this potential, the Provincial Government has established LEDA (the Limpopo Economic Development Agency). It offers a wide range of services to entrepreneurs and investors interested in setting up business in Limpopo. It specialises in helping to attract inward investment and assists companies to find the best opportunities for acquisitions or greenfield investments in Limpopo. This includes setting up joint ventures with local partners, cross-holdings of equity between an overseas and local partner, or collaborative agreements in fields such as research and development, transfer of technology, or sales and distribution.

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LEDA is ready to receive investors‌ About the Limpopo Economic Development Agency The mission of the Limpopo Economic Development Agenc y (LEDA) is to provide an integrated platform for the full implementation of economic development a c t i v i t i e s l e a d i n g to a cce l e r a te d industrialisation in Limpopo, through a focus on stimulating and diversifying the industrial base. Its primary task is to drive policy implementation through high-impact, catalytic-growth projects, which will result in inclusive economic development and accelerate and sustain the growth of the provincial economy, so as to create productive and sustainable employment. The role of the Agenc y is to provide business intelligence, and research and development towards innovative solutions; conceptualise economic programmes and drivers; identif y and package development opportunities and leverage partnerships; support local economic development capabilities; customise support for priority economic sectors and subsectors; coordinate and manage the implementation of strategic infrastructure and economic interventions; and facilitate trade and investment. For more information: www.lieda.co.za

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SPECIAL FEATURE

The Blue Economy South Africa is alert to the growing opportunity offered by the maritime sector.

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ercetions are changing quickly. A new university campus, a new institute, new training programmes at several venues across the country, investment in ports and equipment – the Oceans Economy is no longer just a concept talked about at conferences, it is a reality that is starting to have an impact on South Africa. South Africa has 3 000km of coastline and the extent of the country’s territorial waters is greater than its land size. And yet the country does not have a merchant marine fleet and only scrapes the surface in terms of the percentage of repair and maintenance of boats and oil rigs which could potentially bring work to its ports. What is also called the Blue Economy has enormous potential for economic growth and concomitant job creation. National government wants to see the Oceans Economy contribute a R177-billion to gross domestic product by 2033. This is part of the National Development Plan (NDP). National strategy on the Oceans Economy is also aligned with Operation Phakisa, a plan that targets sectors that can best achieve SOUTH AFRICAN BUSINESS 2020

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quick returns in terms of growth and job creation. The four target areas within the maritime strategy are: aquaculture; offshore oil and gas; marine protection and governance; marine transport and manufacturing. Transnet National Ports Authority is spending heavily on upgrading the nation’s ports. One statistic illustrates the potential: South Africa does maintenance on only 5% of the 13 000 vessels that uses its ports and services 4-5% of the approximately 130 rigs that pass along the coast each year. Large quantities of oil are


SPECIAL FEATURE

transported around the Cape of Good Hope every year: 32.2% of West Africa’s oil and 23.7% of oil emanating from the Middle East. South African companies are alert to this potential. More than 7 000 direct jobs were created in the Western Cape ship and rig repair sector in 2015. Port Elizabeth has positioned itself at the centre of the academic side of the Oceans Economy. Nelson Mandela University launched the Ocean Sciences Campus in 2017 and the South African International Maritime Institute (SAIMI) has chosen the city as its base as it sets about supporting the sector through research and training. SAIMI runs the National Cadet Programme which is paid for by the National Skills Fund. The curriculum for these institutions ranges from the law of the sea, shipping and transport, to aquaculture, boat-building, oil and gas exploration, repair and maintenance and environmental management. The university has four marine sector chairs funded by the South African Research Chair Initiative (SARChI) and the National Research Foundation (NRF).

Special Economic Zones South Africa has a number of licensed Special Economic Zones (SEZs), some of which are called Industrial Development Zones (IDZs). The best established of these are the coastal IDZs at Saldanha, Coega (Port Elizabeth), East London and Richards Bay. These areas are central to the Oceans Economy strategy because of their strategic positions and the favourable environment created for investment by specific legislation related to SEZ tariffs, tax deductions and grants. The first illustration of national commitment to the strategy came late in 2016 with the allocation by the Department of Energy of two Liquefied Natural Gas (LNG) plant options, one each to the IDZs of Richards Bay and Coega. The Saldanha Bay Industrial Development Zone is central to a plan to grow the oil and gas sectors although it was not allocated a possible LNG plant. Large industrial operations already exist at Saldanha and the Port of Saldanha Bay is the portal for the export of South Africa’s iron ore. The SBIDZ is set to become a hub for a range of maritime repair activities and oil rig maintenance and repair. The ports of Ngqura and East London are well positioned to act as container transit points and the skills set of the Eastern Cape’s workforce, particularly in the automotive and automotive parts sector, could be attractive to repairers and manufacturers in marine subsectors. Both Eastern Cape IDZs have aquaculture sections. The East London IDZ already has investors such as Pure Ocean Aquaculture and Ocean Wise.

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Durban’s annual throughput of containers is about one-million, more than 60% of the country’s total. As part of Operation Phakisa, the Port of Durban is upgrading its dry dock and buying new cranes to speed up operations. There is also an ambitious plan to dig out the old airport south of the city, connect the big hole to the sea and make it a harbour; this would allow Toyota to roll their new vehicles directly from the factory floor to the hold of a ship. The Port of Durban is already home to a variety of maritime companies. EBH-SA has been in the business marine engineering and repairing ships since it began as Elgin Brown and Hamer in 1878. To improve their competitiveness, three South African shipbuilders (SAS, Damen Shipyards Cape Town and Nautic Africa) have agreed to pool their resources on contracts. Cooperation pacts like this one might be a good template for the nation’s ports and the rig/boat repair and servicing sector. With the Angolan and Mozambique oil and gas industries growing bigger every day, it is unlikely that one port could cope with demand anyway. The Port of Richards Bay has added a new berth on average every second year. It has deepwater infrastructure and the huge Richards Bay Coal Terminal, the country’s primary site of export for coal. The Richards Bay IDZ intends becoming an energy hub. SOUTH AFRICAN BUSINESS 2020


SPECIAL FEATURE

Trade into Africa Continental free trade will galvanise African economies.

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he signing of the Kigali Declaration in 2018 marks a significant shift in expectations for intra-African trade. Regarded as the first step towards the establishment of a Continental Free Trade Area (AfCTA), the commitment shown by African political leaders shows that the issue is receiving priority status. The continent’s population of 1.2-billion represents a huge and potentially lucrative market, with the 55 members states of the African Union having a combined gross domestic product (GDP) of $2.5-trillion. However, many African countries have stronger trading ties with countries on other continents that they do with their neighbours. The reasons for this are long-standing and complex and will require investment in logistics and infrastructure to overcome. But political will is a major component in the equation and the Kigali Declaration shows an intention to make trading among Africans easier. SOUTH AFRICAN BUSINESS 2020

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An AfCFTA Business Forum has been established to allow for private sector engagement with the formulators of policy. This should allow for realistic and workable trade agreements. The United Nations Economic Commission for Africa (ECA) has suggested that by the year 2022, the AfCFTA could lead to an increase in intraAfrican trade by as much as 52%. Fully 30% of South Africa’s exports are to other countries in Africa, but a massive 83% of this volume is into Southern Africa.


SPECIAL FEATURE This means that the potential for South Africa to grow its exports into other parts of Africa is enormous, if the infrastructural obstacles can be overcome. The Southern African Development Community (SADC) is a 16-member inter-governmental organisation with its headquarters in Gaborone, Botswana. Other members include South Africa, Lesotho, Malawi, Namibia, Tanzania, Comoros and Mozambique. SADC is one of several regional organisations on the continent and there have been moves in the past for cooperation between these bodies. For example, a tripartite summit was held between the leaders of the Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC) and SADC. The AfCFTA may supercede these agreements as it applies to all of Africa. SADC’s theme of “Promoting Infrastructure Development and Youth Empowerment for Sustainable Development”. This was an extension of the body’s focus on industrialisation, while also putting the focus on infrastructure development, youth empowerment and sustainable development. The 38th summit of SADC held in Namibia in 2018 approved the creation of the SADC University of Transformation, in the form of a virtual university. This is further intended to support industrialisation through subjects such as technology transfer, innovation, digital and knowledge economy, entrepreneurship, commercialisation and enterprise development. SADC has a Revised Regional Indicative Strategic Development Plan (RISDP) 2015-2020, which deals with industrialisation, regional infrastructure, agriculture and strategy. Corridor development is an important part of growing intra-African trade. Within the corridors of development, red tape and infrastructure are other key elements. South African retailer Shoprite spends about R20 000 per week in permits, and long waits at border posts are routine. But the Chirundu one-stop border post in Zambia has reduced transit times by a third. Passenger transport delays have been reduced from three hours to 30 minutes and freight is now cleared in one day instead of three. A number of corridor projects are in the pipeline or have already been implemented. The Maputo Development Corridor has successfully linked the thriving industrial and business centre of Gauteng Province in South Africa with the Mozambican port city of Maputo. The idea of corridors has been adopted by the Infrastructure Consortium for Africa (ICA), and several corridors have been conceptualised since that decision, for example the Northern Corridor of Central and East Africa. A corridor strategy relies on infrastructure, with inter-related plans being developed involving the upgrading and standardisation of facilities at ports, railway lines, customs posts and energy projects. South African rail, ports and pipeline operator Transnet is already very active in African countries north of the South African border and is intending to offer its services more widely.

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The Sustainable Development Investment Partnership (SDIP) comprises 30 institutions which aim to see 16 African infrastructure projects (valued at more than $20-billion) carried out. The founders of the SDIP were the World Economic Forum (WEF) and the Organisation for Economic Co-operation and Development (OECD) and other members now include the Bill and Melinda Gates Foundation, the Senegal Strategic Investment Fund (FONSIS), US Agency for International Development (USAID), the Industrial Development Corporation of South Africa (IDC) and the Development Bank of South Africa (DBSA). The Export Credit Insurance Corporation of South Africa (ECIC) exists to help trade and investment across borders. ECIC can provide insurance for bank loans that are taken by investors and South Africans can get insurance for investments and for small and medium enterprises there is a product available (performance bonds to anyone exporting capital goods and services. The South African Department of Trade, Industry and Competition plays a key role in terms of promoting trade between South Africa and the rest of Africa, but also supports regional bodies such as SADC and promotes the kind of integration contained in the plans of the New Partnership for Africa’s Development (NEPAD) and the African Union’s Agenda 2063. The dtic’s Africa Export Council (AEC) was inaugurated in 2016 with the goal of promoting South African products and services in Africa. SOUTH AFRICAN BUSINESS 2020


FOCUS FEATURE SPECIAL

Doubling tourist arrivals is a national priority Airports Company South Africa is on a massive spending drive.

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ore than twice as many foreign tourists will visit South Africa in 2030 than is currently the case. President Cyril Ramaphosa has publicly announced that a target of 21-million foreign tourists per year is attainable. What might seem like a lofty goal is given credence by the success of a remarkable Western Cape project to increase the number of seats on routes to and from Cape Town called Cape Town Air Access. It has been spectacularly successful. Direct flights to the city have increased the number of seats available by more than 700Â 000 since the programme was launched in 2015. Cape Town Air Access is a partnership between Wesgro, the City of Cape Town, the Western Cape Government, Airports Company South Africa, Cape Town Tourism and South African Tourism. SOUTH AFRICAN BUSINESS 2020

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The announcement of a new direct flight between New York and Cape Town in July 2019 by United Airlines is significant as it gives direct access to the lucrative United States market. The estimated impact on direct tourism spend is in the region of R283-million (Grant Thornton). South African Tourism believes that revenue from the US could continue to grow at 16%, leading to income for South Africa of


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MELROSE ARCH

The 118-room African Pride Melrose Arch Hotel forms part of a popular mixed-use complex in Johannesburg’s suburbs and recently became part of the Autograph Collection Hotels group.

TRAIN ON A BRIDGE

A hotel on a train on a bridge in a game reserve. This is not the plot of a children’s story, rather it is the Kruger Shalati Development, Thebe Tourism Group’s latest accommodation offering in the Kruger National Park.

R8.6-billion. By way of comparison, spending from the UK currently accounts for R11-billion. Cape Town International Airport has regularly been breaking its own records for passengers, having topped 10-million passengers for the first time in 2016. Airports Company South Africa (ACSA) will spend R150-million every month for the next five years to build a new runway and in creating domestic and international terminals. Similar programmes have been underway at South Africa’s biggest airport, OR Tambo International Airport (ORTIA) for some time, and are continuing. This Johannesburg hub and the airport management at Durban and Port Elizabeth are all exploring ways of introducing some version of the successful Air Access programme at their venues. Success will improve the chances of reaching President Ramaphosa’s ambitious goals. Another way of raising the numbers of visitors is to improve South Africa’s visa and document regime. A decision to demand unabridged birth certificates of travelling children proved damaging but steps have been taken to amend this decision. The Department of Home Affairs has committed to introducing e-visas. Some testing has been done and it is expected to be rolled out in 2020. Another initiative is a private-public data and booking platform to help businesses in the tourism sector to track trends and allow people to connect. The Department of Tourism, Thebe Tourism and Amadeus IT are partners in Jurni. There are 711 745 people employed in the tourism industry, with road transport (29%), food and beverages (20%) and accommodation (19%) absorbing the largest numbers. The sector contributes 9% to South Africa’s gross domestic product (GDP). The R900-million expansion of the Cape Town International Convention Centre (CTICC2) has given the city’s biggest venue additional volume and flexibility. Johannesburg and Durban are the other two South African cities with large MICE sectors, but towns linked to research universities (like Potchefstroom and Stellenbosch) and game and nature reserves are also popular destinations for conferences. Sun City in the North West has a wide range of venues.

News THE YACHT CLUB

The Yacht Club was launched in Cape Town in 2019. With 170 flats, offices and an AC Hotel by Marriott, the R1.5-billion development by the Amdec Group is near the Cape Town International Convention Centre.

Club Med has bought land on the North Coast of KwaZulu-Natal, and according to the Sunday Times, will open a 350-room, 50-villa resort in 2022. A three-billion-year-old micro-fossil found in the Makhonjwa Mountains in Mpumalanga is thought to be the oldest sign of life on the planet. The Makhonjwa Mountains were declared a World Heritage Site by UNESCO in 2018. Culture and heritage accounts for 40% of world tourism and is one of the fastest-growing subsectors. In Durban, a joint venture between MSA Cruises SA and Africa

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SOUTH AFRICAN BUSINESS 2020


SPECIAL FEATURE Armada Consortium will spend R175-million on the financing‚ construction‚ maintenance and operation of a cruise terminal for a 25-year concession period. The Port of Cape Town has launched its dedicated cruise-ship terminal, and the area between the terminal and the Cape Town International Convention Centre is being developed as a multi-use precinct called The Yacht Club. A significant move in the South African hotel sector is the decision by Marriott International to develop Marriott-branded hotels in the country. On the eastern edge of Cape Town’s Foreshore, an ambitious plan envisages two new hotels, flats, retail space and offices rising out of ground currently occupied by three car dealerships and a roadworthy station on Christiaan Barnard Street. The Harbour Arch concept is based on Johannesburg’s Melrose Arch, with seven tower blocks to be constructed on 200 000m², roughly half the footprint of the V&A Waterfront. In 2018 Autograph Collection Hotels, another Marriott International brand, acquired five African Pride Hotels in South Africa. These range from properties in Cape Town and Johannesburg to a lodge in the small town of Irene and a mountain getaway in the Magaliesburg mountains. Buying into Protea Hotels has given Marriott access not only to the South African market, but to many other African countries. The company now operates 61 hotels in South Africa across six brands, with a total of 8 000 rooms. Neal Jones is Marriott International’s Chief Sales and Marketing Officer, Middle East and Africa. He says the company has another five hotels under development which will add more than 1 000 more rooms. Still more brands are due to be rolled out: Residence Inn by Marriott and Marriott Executive Apartments. Jones describes South Africa as “one of our key markets and strategic to our growth”. Says Jones, “With our diverse brands we pretty much have a brand for every type of traveller.” Marriott is embracing new technology. “They key is to balance hi-tech with hi-touch,” comments Jones. “So technology becomes an enabler for our guests to experience a more personalised experience and to do this seamlessly.” Through the Marriott Bonvoy app, guests can check in and make requests. Tsogo Sun Holdings split its casino and hotel operations in 2019 in order to unlock value in the two sectors. With a market cap of R25billion, Tsogo is the country’s biggest hotel group. It has 36 hotels and three casinos in Gauteng. The hotels range across several brands covering four market segments. SunSquare, Southern Sun Hotels, Southern Sun Resorts, Garden Court and StayEasy are among the group’s brands. SOUTH AFRICAN BUSINESS 2020

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In the Cape Town CBD 500 new rooms have been added to the city’s stock, courtesy of two Tsogo Sun hotels, plus a smaller hotel in the De Waterkant (Capital Mirage). Tsogo Sun already operates several hotels in greater Cape Town, including three full-service hotels in the city centre, the Cullinan, Southern Sun Waterfront and Southern Sun Cape Sun. The other seven hotels cover five brands in the Tsogo Sun stable. Peermont Hotels, Casinos and Resorts has added the Emerald Resort & Casino to its portfolio of properties. Peermont purchased the Vanderbijlpark property from US company Caesars Entertainment Corporation, which brings to 11 the number of casino resorts it runs on the subcontinent. Located on the Vaal River, Emerald Resort has a water park, a game park, a spa and several restaurants. Peermont’s suite of four hotels in the Emperors Palace complex next to OR Tambo International Airport, also houses a large casino where players have access to 1 724 slot machines and 67 tables. The Kruger National Park is one of South Africa’s great tourism assets and the Thebe Tourism Group has come up with a unique new way to enjoy the reserve. It has refurbished a train as a hotel and parked it on a bridge on the Sabie River, famous for its buffalo and hippo. The Kruger Shalati Development is one of three developments in Mpumalanga being undertaken by Thebe. The other two are the Blyde Canyon Community Project and proposed developments for Lisbon Estate which is adjacent to Kruger Park. The Lisbon development (not far from Skukuza Camp) is projected to comprise two hotels, retail, hospitality and dining facilities and staff housing associated with the Lisbon Estate.


INTERVIEW PROFILE

Maritz Electrical Large area and sports lighting specialists.

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rom commercial electrical applications to high-end floodlights and sports stadiums and spotlights using state-of-the-art products, Maritz Electrical delivers end-to-end electrical solutions tailored to clients’ needs. Delivering service excellence and exceptional quality are key differentiators for Maritz Electrical and what clients have come to expect. Maritz Electrical is an empowerment company established by Kurt Maritz in January 2000. Maritz Electrical is BBBEE compliant (Level 1 contributor). It is ISO 9001 certified and fully compliant with the Occupational Health and Safety Act with a full-time, trained safety representative. Maritz Electrical occupies a newly renovated 3 000-square-metre factory and office facility in Athlone. The company employs full-time, licensed installation and master electricians. Artisans working at Maritz have completed the ORHVS. Maritz Electrical places great emphasis on its relationship with clients, private or commercial, and prides itself on the ability to respond to any contracting requirements in an efficient and cost-effective way. Maritz Electrical works closely with its customers, ensuring that projects are completed on time and on budget, using the highest-quality products available. Maritz Electrical aims to contribute positively to the South African economy, provide excellent workmanship and be a leader in quality service provision.

Other projects include the electrification of large housing projects for municipalities, rural security lighting, lighting for passenger areas and runway lighting at airports, Cape Town’s Grand Parade and security lighting for waste-water treatment plants.

Key areas of expertise • Public lighting, high masts and sports lighting • Commercial installations and maintenance • Industrial installations and maintenance • Domestic installations and maintenance • Reticulation • Substations

Professional memberships BBBEE Level 1. ISO 9001 certified. Electrical Contractors Association. Master Builder Association Member. Member of South African Institute of Lighting (SAIL). ■

Flagship projects In 2017, St George’s Park became the world’s first International Cricket Council-compliant, LED-lit stadium and the first such stadium to be fitted with theatrics. Maritz Electrical was part of the R40million revamp of Coetzenburg Athletics Stadium in Stellenbosch and installed new LED lighting at the hockey field of Western Province Cricket Club in 2019. The lights comply with the latest FIH standard. SOUTH AFRICAN BUSINESS 2020

CONTACT INFO Physical address: 11 Noll Avenue, Athlone, Cape Town, 7764 Tel: +27 21 703 0867 Email: tenders@maritzelectrical.co.za Website: www.maritzelectrical.co.za

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INTERVIEW PROFILE FOCUS

Leading the field in energyefficient lighting

World first for Maritz Electrical.

L

ED lighting is a game-changer and Maritz Electrical is leading the way in its introduction at South African sporting venues. LED refers to “Light-Emitting Diode”, a device that is both brighter and more energy efficient when electrical current is passed through it than a conventional light bulb. In a short space of time, Maritz Electrical has achieved three significant landmarks in the LED sports field lighting landscape: • the world’s first International Cricket Council compliant LED-lit stadium with theatrics, St George’s Park, Port Elizabeth, 2017 • installation of new LED lights at internationally recognised athletics stadium, Coetzenburg, Stellenbosch, 2018 • first South African club hockey field to install LED lighting to the standard of the FIH (the inter national hockey body), Western Province Cricket Club, 2019. The installation at the WPCC hockey field is a Musco lighting system, similar to the system used at international stadiums such as Twickenham Rugby Stadium, Arsenal’s Emirates Stadium and at baseball and football fields in the US, where Musco is based. The R27-million St George’s Park project was completed on time and on budget, despite installing lights on top of the Duckpond Pavilion at night in high

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winds. The Musco solution is good at controlling spill and glare and typically comes with a 10-year warranty. The response has been enthusiastic, helping Maritz Electrical on its goal to becoming the “goto” company for stadium lighting installations. For company MD Kurt Maritz, the television experts provided the really important feedback. “We cared about SuperSport the most and they have been raving. If there are light and dark spots on the field the cameraman must remember to change the aperture. They said that the lighting was excellent.”

Large-area lighting Stadium lighting falls within the broader category of large-area lighting. The global move to LED lighting has been a positive thing for Maritz Electrical. In South Africa, however, Kurt notes that there is difference between the indoor and outdoor scenarios. For indoors, “everybody is going that route” but that return on investment (ROI) is somewhat different in the outdoor setting. Maritz Electrical is active in large areas such as Cape Town’s Grand Parade, rural mast lighting in Buffalo City, airport runway lighting and security lighting for city municipal facilities. The company operates in the commercial, industrial and public sectors and offers a wide range of services. ■ SOUTH AFRICAN BUSINESS 2020


SPECIAL FEATURE

Mining for the future South African miners are finding new uses for platinum and gearing up for the age of renewable energy.

New national strategies are being developed for platinum. Implats’ Marula Mine in Limpopo produced 85 100 ounces of platinum in concentrate in FY2018.

T

he head office of the Minerals Council South Africa is powered by 40 ounces of platinum and natural gas. A fuel cell at the Johannesburg site of the national mine owners’ association is South Africa and Africa’s first base load installation. Finding new uses for platinum is one of the new priorities exercising the minds of the leaders of the South African mining industry as it moves to adapt to a world which is moving away from fossil fuels. While there is broad agreement that the world needs to steer away from minerals that pollute the environment, the supply of minerals used in electric car manufacture (such as nickel and cobalt) is also finite. Speaking at the 2019 Investing in African Mining Indaba, Ford’s head of Energy Storage Strategy and Research, Ted J Miller, said that the motor industry was “uncomfortable driving these commodities”. He noted that Ford has already reduced cobalt production by two-thirds, but the challenge is scale. In 2012 Anglo Platinum launched an underground locomotive powered by a fuel cell. Platinum coating greatly enhances the hydrogen absorption capacity of fuel cells. In 2016 Impala Platinum Refinery unveiled a fuel cell forklift and a hydrogen refuelling station in Springs. The editor of the Mining Weekly publication, Martin Creamer, has published a series of articles and editorials extolling the virtues of what he calls the “best of two new carbon-reducing technology worlds”. Creamer notes that South Africa’s abundant supplies of platinum group metals (PGMs) and manganese ore can make the country a SOUTH AFRICAN BUSINESS 2020

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leader in battery electric vehicles (BEV) and fuel cell electric vehicles (FCEV). He further points to the work being done by Hydrogen South Africa (HySA) at three universities and the Council for Scientific and Industrial Research (CSIR). South Africa’s good supplies of sunshine and wind make it ideally suited to generate hydrogen and if the country could capture 25% of the world market, it would be worth $600-million (Mining Weekly)

Coal Several large players in the South African market have sold or intend selling their coal assets. These include South32, Anglo American and BHP Billiton. Seriti Resources has purchased the


SPECIALINTERVIEW FEATURE

Women are succeeding in mining Thabile Makgala, Executive: Mining at Impala Platinum, reflects on the role of women in this challenging sector. Did you encounter obstacles on your mining career path?

Thabile Makgala

I encountered numerous obstacles while navigating my mining career path. As the first female mining engineering graduate at Goldfields Kloof and Driefontein division (now Sibanye Gold), I soon realised that the industry had not adequately prepared itself to accept women in mining. The industry was not ready. The response to women’s needs (infrastructure, personal protective clothing and policies) was slow and very little was in place to address women’s issues. Regardless of impeccable qualifications, solid work ethic and the achievement of production targets, my abilities would continue to be questioned and tested. Is the environment more conducive to women progressing?

It is encouraging to witness so many women succeed in an industry that has largely been developed for and by our male counterparts. Although there have been positive steps taken to make the current environment more conducive for women, more deliberate and proactive action is still required. What should be prioritised to empower women?

BIOGRAPHY Thabile is the Executive: Mining at Implats, and chairperson of Women in Mining South Africa (WiMSA). In 2018, she was selected as one of the “Top 100 Global Inspirational Women in Mining” by Women in Mining UK. Thabile has a Master’s degree in business administration from the University of Stellenbosch Business School and a Bachelor of Science degree in Mining Engineering (Cum laude) from the University of the Witwatersrand.

Women and men should hold equal representation in the workplace, and mining companies should prioritise and advocate for diversity, inclusion, parity and greater recognition of female leadership within their organisations. Is mining a transformed industry, or is it transforming?

The mining industry is transforming, and legislation has been instrumental in driving this transformation. I sincerely hope that 10 years from now the fundamental elements such as empowering, caring, showing respect, connecting and growing our female talent would have been achieved. I hope that the conversation about women, parity and inclusion would have advanced, and that the industry would have made a concerted effort to transform, without the need for legislation. What innovation will be beneficial to the mining industry?

Data and the analytics will prove to be the competitive advantage for mines of the future. Converting conventional mining practices to lower-risk mechanisation and automation is key for the sustainability of the South African mining industry.

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SOUTH AFRICAN BUSINESS 2020


SPECIAL FEATURE New Vaal Colliery and three Mpumalanga mines from Anglo American for R2.3-billion. South Africa’s largest coal producer is Exxaro, a South African company. Typically, coal mines were linked to power stations as is the case in Limpopo Province where Exxaro operates its Grootegeluk mine. This site is next to the Lephalale power station and the giant new Medupi power station. But uncertainty about how national utility Eskom wants to proceed with its coal purchases has made miners look increasingly to export markets. Limpopo’s Waterberg coal field still has billions of tons of coal in the ground. The country’s other big coal province is Mpumalanga (where Sasol has just finished commissioning a third new mine) but it is also found in the northern part of the Free State.

Zinc When phase three is reached, the biggest new mining project in South Africa will deliver 600 000 tons of zinc for Vedanta Zinc International. Located at Aggeneys in the Northern Cape near the border with Namibia, the Gamsberg zinc project has so far attracted $400-million in investment from the company and started trucking product to the Port of Saldanha in 2018. Phase one of the open-pit operation will deliver an annual load of 250 000 tons of zinc. If it proceeds to phase three, it will likely go underground. The Northern Cape Province is planning for a deep harbour at Boegoebaai. Part of the strategy involves the creation of a commodities corridor linking the Upington Special Economic Zone (SEZ) with the port. Australian miner Orion is putting considerable resources into investigating the possible revival of the Prieska Zinc-Copper Project.

Diamonds An ongoing project by De Beers to convert its Musina mine from an open-pit mine to a vertical-shaft mine will extend the life of mine of this northern Limpopo project to 2045. Venetia Mine is by far the most important part of De Beers’ South African operation, accounting for 3.1-million of the 5.4-million carats recovered by the company from its six operations. A R1.6-billion processing plant is being built at Cullinan in Gauteng by Petra Diamonds, with a throughput capacity of 6 Mtpa. The mine’s orebody  contains a diamond resource of 194 Mcts which is why Petra is expanding with a goal of annual production of 2.2Mcts by 2019. In the Northern Cape, Ekapa Mining has paid R300-million to buy out Petra Diamonds from a JV. SOUTH AFRICAN BUSINESS 2020

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Iron ore and manganese In 2019 Sitatunga Resources purchased the East Manganese project on the Hotazel-Kalahari ore belt from Southern Ambition. Menar Holdings, which controls a majority share in Sitatunga, is mostly invested in coal. Afrimat, a listed construction materials supplier and industrial minerals group, has added openpit mining to its portfolio with the R322-million acquisition of the Diro mine, which had been in business rescue. The Diro mine has proven run-of-mine reserves of 10-million tons. The overwhelming majority of the world’s manganese comes from the Postmasburg and Kalahari regions of the Northern Cape. Assmang has two manganese mines in the province: Nchwaning and Gloria. The Northern Cape produces more than 84% of South Africa’s iron ore. The province has two major iron belts, from Postmasburg to Hotazel, and running through Sishen and Kathu. Sishen is the most important iron-ore mine in South Africa, where operations include extraction and four beneficiation plants. Kumba Iron Ore has the huge Sishen facility at Kathu and Kolomela. Assmang, a joint venture comprising African Rainbow Minerals and Assore, mines at Khumani. The company will spend R2.7-billion on upgrading its Gloria mine. South32 is active in the Nor thern Cape: Hotazel Manganese Mines is made up of two mines, Wessels (under-


FOCUS FEATURE SPECIAL

The tailings thickener at Vedanta’s huge Gamsberg zinc project in the Northern Cape. Image: Kevin Wright/Vedanta Zinc International.

businesses hold a 9% stake in the Marula mine. The company has also made Impala Refinery Services (IRS) a division, where it used to be a subsidiary. IRS smelts and refines concentrate and matte and recycles auto catalysts. Anglo Platinum’s (Amplats) Mogalakwena Mine produced a record 1 170 000 PGM ounces in 2018, an improvement of 7%. The sale in 2018 of Glencore’s stake in the Mototolo PGM mine and chrome plant marked the end of that company’s foray into platinum. Northam bought the Tumela block from Amplats and invested heavily in a smelter expansion project at its Zondereinde mine.

Gold ground) and Mamatwan (open cut), and the Metalloys manganese smelter. Hotazel is also the site of a relatively new manganese mine, Tshipi é Borwa. Tshipi e Ntle Manganese Mining (Tshipi) is a joint venture between Pallinghurst Co-Investors (led by Brian Gilbertson) and a black empowerment company representing several groups called Ntsimbintle Mining.

Platinum Sibanye Gold came into existence as a result of the unbundling of Gold Fields. but it has been rebranded as Sibanye-Stillwater because of the purchase of a platinum and palladium mine in the US of that name. The company is now the world’s leading main producer of primary platinum and the second largest producer of palladium. It has gold mines in the Free State and Gauteng. Impala Platinum (Implats) has an interest in two big operations on the eastern limb of the Bushveld Igneous Complex. Marula is in Limpopo and it produced 85 100 ounces of platinum in concentrate in FY2018. In Mpumalanga, Implats is in a joint venture with African Rainbow Minerals (ARM) at the Two Rivers mine. Implats has created Tubatse Platinum, a vehicle in which local SOUTH AFRICAN BUSINESS 2020

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AngloGold Ashanti has sold most of its Vaal River Complex mines to Harmony Gold Mining for $300-million. These assets will increase Harmony’s underground resource base in South Africa by nearly 40%. The other buyer was Heaven-Sent, a Chinese company which controls the Tau Lekoa mine through Village Main Reef, bought the Kopanang mine. Another Chinese company, Taung Gold, runs the Jeanette mine near Welkom. Gold mines in the Free State also supply a substantial portion of the country’s silver produced, and large concentrations of uranium occurring in the goldbearing conglomerates of the goldfields are extracted as a by-product.


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Global African Network Full Page ad copy August 2019.indd 1

2019/09/02 13:15:26


SPECIAL FEATURE INTERVIEW

Developing partnerships and strategies to grow the mining industry The CEO of Minerals Council SA, Roger Baxter, explains why confidence in the South African mining sector is growing again.

Roger Baxter, CEO

BIOGRAPHY Roger joined the Minerals Council SA (then Chamber of Mines of South Africa) in 1992 and was appointed CEO in 2015. With a BCom (Hons), he has 27 years of high-level advocacy and strategy experience in the business and mining sectors. He was involved in the first mineral policy discussions with the ANC in 1992 and has participated in (and often led) discussions on all aspects of mining, economic, investment, transformation and tax policy with government. SOUTH AFRICAN BUSINESS 2020

How would you describe the state of mining in South Africa at the moment? It went through a particularly difficult time in the several years until 2017, both because of the poor state of the commodity markets internationally and the corruption and other governance issues in South Africa. Today there is improved confidence because of improvements on both scores. However, there is more work to be done. Specifically: • The better Mining Charter published in September 2018 still contains a few issues of concern. • The withdrawal of the MPRDA Amendment Bill is positive. But a set of new amendments is required to fix a few issues. These include section 11 procedures (regarding the transfer of rights) and turnaround times for new mining and prospecting right applications. • The carbon tax is potentially a highly negative factor, which will not improve the country’s already adequate decline in carbon emissions but will have an impact on investment and jobs. Is there more certainty about the Mining Charter and legislation than there was a year ago? There is more certainty. And the Minerals Council and its members are comfortable with the bulk of its contents. However, there are three key unresolved issues that are the subject of continuing engagement with the Minister and his department. The Minerals Council has also initiated legal action in this regard should it not be possible to resolve them. The main issue regarding is non-recognition of continuing consequences of previous transactions in respect of the renewal or transfer of mining rights (the so-called “once empowered, always empowered” principle). What are the consequences for mining of the drive towards renewable energy? The Minerals Council and the industry are very conscious and sup-

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SPECIALINTERVIEW FEATURE portive of the need to address the issue of climate electric vehicle market share growth. The partnerchange. In South Africa, the issue is particularly ship needs to develop: a platinum reserve asset stratrelevant, given the country’s high proportion of egy; a national platinum fuel cell strategy; market coal-fired power generation in the energy mix. development in jewellery; and a national strategy to Our research indicates that that will change over drive investment demand for platinum. time to a cleaner, less carbon-intensive one both naturally and as a result of targeted and deliberate What is driving the large investments in the efforts. The older, less efficient power stations will Northern Cape? see their lives come to an end, as the newer, cleaner The Northern Cape has large economic reserves in Medupi and Kusile take up a greater share of the industrial metals, most notably zinc and copper, that load, as will renewable energy sources. Many of the we believe can be a foundation for that underdeolder deep-level gold and platinum mines, which veloped region’s broader economic development are more energy-intensive, are gradually reaching the ends of their lives. As a consequence, mining’s What other minerals are showing promise? aggregate energy consumption and carbon emis- Other PGMs, notably rhodium and palladium, are sions are declining. We advocate a just transition to a performing particularly well. As stated, coal still has lower carbon energy economy. We believe that this potential and iron ore is performing well. transition will take time. One serious challenge are the significant hurdles What are the priorities of Minerals Council SA? faced by mining companies that attempt to put in Our main broad strategic goals are to: place alternative power projects. There is a huge • Create an enabling policy, legislative, regulatory amount of red tape in the way of bringing renewable and operating environment for a successful energy cogeneration projects online. mining industry   • Support members in implementing a positive Is a strategy being developed for coal miners contribution model for South Africa and its in a post-coal future? people Coal miners are developing a variety of strategies. • Demonstrate progress by the industry on transHowever, these are largely based on a recognition formation, social and environmental imperatives. that in the transition to a lower carbon intensive economy, we cannot destroy what we have as a Website: www.mineralscouncilsa.org.za country – an established coal sector with 33-billion tons of coal resources. In 2018 the sector employed almost 90 000 people (representing about 19% of total employment in the mining sector), with an estimated 180 000 further people employed as a result of coal mining activities. The coal sector is a significant contributor to the South African economy. Please outline your strategy with regard to platinum’s future.

Develop strong and focused partnerships between key stakeholders and role-players, including all relevant government departments. There is a need to identify the opportunities for short-term interventions aligned with long-term strategic goals, including market development in all platinum and PGM demand segments and a specific focus on fuel cell

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Minerals Council SA is putting its money where its mouth is with regard to alternative energy sources. The 100kW natural gas baseload fuel cell that powers the council’s offices in downtown Johannesburg is the only fuel cell of its kind in Africa. The fuel cell was made by Fuji Electric. SOUTH AFRICAN BUSINESS 2020


SPECIAL FEATURE FOCUS

Exxaro Resources Limitedcommunities (“Exxaro”) and Exxaro: powering the South Africa Investment Conference invites with topurpose media the first-of-its-kind digital and Exxaro connected is powering forward with R20-billion self-financed community power mine in worth theofcountry. projects, but there’s more at play for the company than just providing power and infrastructure to the people.

J

ohan Meyer is a man on a mission, as his department has been their role not just in building the bankrolled with R20-billion of finance from the Exxaro board mine, but rather they saw the to roll out vital power utility projects and ancillary structures picture of how they were working for communities in Mpumalanga andwith Limpopo. towards the goals of South Africa Exxaro, in collaboration the SA Investment Meyer is Exxaro’s Executive Head of Projects and Technology, as a nation.  and he’s driving the company’s vision of making a difference in each “I am passionate about making Conference, invite media to experience community, rather than just building and moving on to the next sure that people understand their Belfast Implementation Project, project. Theirthe mission is to create infrastructure that benefits the purpose because then they know community in the long term, and that starts with empowering and the contribution they can make,” which comes as a result of Exxaro’s R20-billion protecting each individual.   adds Meyer. “One of the first things  “On the Belfast Mine project, for example, we had 4.7-million man people need to find in their work investment pledged at the inaugural SA Investment hours during construction… but nobody got hurt! Not one injury on is purpose, why are we doing this, that site since we started the project and until in we 2018. delivered it, so it so it was important to encourage Conference can be done!” says Meyer. them to think about how their This impressive safety record was achieved because Meyer and work would make a contribution his team had ensured that everyone working on the site understood to a better South Africa.” 

Exxaro’s Belfast coal mine is the first ever digital and SOUTH AFRICAN BUSINESS 46 with a digital twin. connected mine2020 in South Africa The innovative mine has propelled Exxaro to the


28 October 2019.

closer to the time.

FOCUS

With the Matla Power Station, Meyer stressed that the work being done to extract the coal would help to power the area until 2040. “When people think about their work in those terms it really helps to establish for themselves their purpose for being part of a project,” said Meyer. “My role as the executive overseeing the whole project is to make sure that they understand the purpose of each of the projects because if you involve people – and if they understand – then they know how to contribute.” The Ex xaro board has made substantial investments in terms of empowering local communities, with R20-billion being made available from a strategic point of view to implement various projects across the group. Around R10billion was made available for Grootegeluk in the Waterberg region, along with R10-billion being directed towards areas in Mpumalanga. In Mpumalanga, the R3.3-billion Belfast Mine project (pictured) was given the green light in November 2017 and the team delivered the project on 12 September 2019… a staggering six months ahead of schedule. “It’s great to see that in Africa we can still deliver projects under budget and ahead of time,” said Meyer. “We have received the announcement

that the Matla expansion project was approved by Eskom, which is incredibly exciting news.” The Matla expansion project is designed to bring the coal into the power station from below on conveyor belt, and the R3.5-billion project is already in execution. Completed in 2018 was the joint R1.9billion project with Mafube in Mpumalanga, while across in Limpopo the Grootegeluk Plant 6 (GG6) expansion project near Lephalale was granted R4.8-billion in funds. Also in development are the Semisoft Coking Coal Load Out Station (SSCC LOS) and the D8 Load Out Station (D8 LOS), which were commissioned in order to join the dots between producing the product and getting it to the harbour. Also in the Waterberg is the R3-billion Tabametsi Project, although that has yet to kick off because of all the dynamics regarding the new IRP. “Hands are needed to build stuff, so in the R20-billion expansion project we have utilised 7 000 people and in that way we are partnering with those who have the right skills to build a building like this or a rapid load-out station or an underground mine. You have to partner with the right skills,” adds Meyer. Exxaro has an internal rule that they need to employ 70% of local communities on each build, but there’s another essential rule on these projects – the need to pay back the money. “Our purpose is not to spend all R20-billion in the budget, and most of the projects have been completed under budget. This is important because the lower the capital investment, the less you have to pay back in the long run, so it is strategically important that we don’t spend all of our budget,” says Meyer. “Spend what you need to create the value required – it’s a simple business equation that you need to run with. Our CEO Mxolisi Mgojo knows exactly what he wants and needs in order to drive the strategy of the business, and I know what my role is in the broader strategic environment in supporting the CEO. My mandate is to deliver the project on time and on schedule and, hopefully, to give back some money,” added Meyer.   At the heart of all these projects are thousands of South Africans who have contributed to creating these vital links in the energy chain, and it’s these people that make the real difference. “Empowering communities is real in our space as 7 000 people have helped us in building these projects. Partnerships and bringing people on board – and building ‘stuff’ – is what excites me,” adds Meyer .

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SOUTH AFRICAN BUSINESS 2020


INTERVIEW

Geological and structural investigations in the southern Karoo

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@CGS_RSA I

I


PROFILE

Bonds with China boost jobs in Phalaborwa Palabora Mining Company (PMC) operates a smelter and refinery complex in Limpopo.

P

alabora Copper (Pty) Limited is an incorporated operative subsidiar y of Palabora Mining Company (PMC), a copper mine that also operates as a smelter and refinery complex in BaPhalaborwa Municipality, Limpopo Province in South Africa. The mine is 80% owned by a Chinese Consortium comprising HBIS, Tewoo, General Nice and CADFund through Smart Union Resources South Africa. The rest of the equity is jointly owned by the South African government through the Industrial Development Corporation (IDC), a black empowerment consortium, PMC employees and communities. Since its incorporation in 1956, Palabora Copper (PC) has been South Africa’s sole producer of refined copper, and the mine produces other by-products such as magnetite, vermiculite, sulphuric acid, anode slimes and nickel sulphate.

employees (direct and indirect) while the second scenario would have led to the loss of jobs for more than 700 off-stream employees at the smelter. Soon after the sale transaction, the new owners fostered partnerships between PC and Chinese companies in areas such as economic development, trade, skills and technology transfers to achieve ground-breaking and substantive results in extending the life-of-mine, refurbishing the smelter and building a floatation plant. To this end, the Chinese Consortium approved R10.4-billion to extend the life-of-mine to beyond 2033, R878-million to refurbish the smelter to ensure that PC continues to produce copper rod, and R199-million to construct the floatation plant to improve copper recoveries, operational efficiencies and to reduce operational costs.

Chinese investment

Looking into the future

The Chinese Consortium acquired PC in 2013 when PC was facing two possible scenarios: (a) culmination of the life-of-mine and (b) no overhauling of the smelter which was outdated and facing shutdown. The first scenario would have resulted in the loss of employment for more than 3 500

Palabora Copper is undertaking a life-of-mine extension project known as the Lift II. The project aims to extend the life of the business up to 2033. The project includes the magnetite reclamation and beneficiation study aimed at creating additional revenue from the legacy stockpile. The company committed about R700-million to the pre-feasibility study and approximately R10-billion is expected to be spent throughout the development of the project.

SOUTH AFRICAN BUSINESS 2020

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PROFILE

The employer of choice Since its inception, Palabora Copper has been at the forefront of employment practices in the local mining industry. Palabora, which employs an average of 3 700 employees (Lift I and II) aims to remain industry competitive through its favourable conditions of employment. This is reflected in the utmost importance with which the safety and health of employees is regarded in order to remain efficient and profitable as a business. The company has written and developed its code of ethics to follow strategic imperatives

which include: providing a safe and healthy work environment for all employees and contractor employees and practising sound environmental management to ensure the sustainable biodiversity of the natural environment within which it operates. Palabora Copper acknowledges and respects its stakeholders’ interest and concerns, striving to be a leading corporate citizen within the mining industry and supplying a high standard of quality products and services, reliably and responsibly, at national and global level. Palabora Copper is certified as a Top Employer. For more information: www.palabora.com

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SOUTH AFRICAN BUSINESS 2020


FOCUS

Women of PMC Experience, skill and drive underpin two success stories.

A

Matsela Ntsepe: Process Engineering Manager

number of highly motivated women are making stellar careers for themselves in mining at PMC and providing inspiration for scores of other women in the sector.

Matsela Ntsepe: Process Engineering Manager Matsela Dolphinah Ntsepe is a chemical engineer with more than 17 years of experience in diamond, coal and copper mining. Matsela is Palabora Copper’s (PC) Process Engineering Manager for the Smelter Retrofit Project, a position she earned through hard work and ascending through the ranks. Matsela started her career as a Metallurgical Trainee and rose through various levels including System Engineer, Refinery Technical Metallurgist, Refinery Technical Superintendent, Concentrator and Magnetite Technical Superintendent and Refinery Operations Manager. Matsela or “Tsela” serves as the current Chairperson of the Women in Mining (WiM) PC branch and is an Ex-Officio Executive Member in the Limpopo region. In addition, Tsela is a member of PC Transformation Committee and a Trustee of PC Essop. Matsela holds a National Diploma and B-Tech in Chemical Engineering from Witwatersrand Technikon and a Management Development and Financial Management Programmes from the University of South Africa. As the member of the PC Transformation Committee, Tsela influences and facilitates the direction of PC’s future strategic transformation agenda. Tsela is a finalist for the Limpopo Mine and Safety Council’s Women Achievers Award and the Standard Bank Women in Science Award.

Manyabela Mailula: Manager for Training, Development and Contractor Management

for Training, Development and Contractor Management. She holds a National Diploma in Metallurgical Engineering from Vaal University of Technology, a BTech in Metallurgical Engineering (Tshwane University of Technology), Honours in Management of Technology (University of Pretoria), a Higher Certificate in Education, Training and Development (University of Johannesburg) and a Work Place Assessor Certificate from the Drum Beat Academy. Manyabela started her career as a Metallurgical Trainee at ASA Metals (Dilokong Chrome Mine). She joined PMC/ Palabora Copper (PC) as a Smelter Training Officer and ascended to the position of Operational Readiness Manager. Manyabela’s current responsibilities include the development of PC’s training and development strategies, policies and standards. Manyabela is the Chairperson of Limpopo Region’s Women in Mining. She is Chairperson of Employment Equity Skills Development and serves as the member of the board of Phalaborwa’s Technical and Vocational Education and Training (TVET) College. Manyabela is a finalist for the Limpopo Mine and Safety Council’s Women Achievers Award and Standard Bank Young Achiever of the Year Award. The latter award is for women who have achieved a lot before the age of 40.

Manyabela Mailula: Manager for Training, Development and Contractor Management At only 35 years of age, Manyabela Mailula has more than 13 years’ experience in technical research and mining in countries such as Turkey, Georgia, USA and South Africa. Manyabela is Palabora Mining Company (PMC) Manager SOUTH AFRICAN BUSINESS 2020

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FOCUS

Driving sustainability Palabora Mining Company preserves the natural environment in which it operates.

P

alabora Mining Company’s code of ethics includes consideration given to the healthy work environment of employees but also to ensuring that sound environmental management is pursued so that the biodiversity of the natural environment in which PMC operates can be sustained for many years to come. These are among the company’s strategic imperatives. Mining activities are inherently energy intensive, so PMC launched an Energy Management Programme in 2012 to curb the half-a-billionrand energy bill which was continually growing. PMC collaborated with a consulting company, resulting in the employment of 12 energy specialists and project managers who would, in conjunction with mining personnel, identify, implement and sustain energy cost-saving projects. As a result, 117 initiatives were identified. Following stringent technical and financial adjudication processes, 31 projects were implemented, using the Productivity Approach The company has saved R232-million through avoided energy costs. Palabora Mining Company’s Energy Management Programme has not only created a sustainable model but has also emphasised the company’s standpoint regarding its environmental responsibility. PMC is now an energy efficiency leader in the mining sector.

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Going green: The company is a certified ISO 14001 business, that subscribes to world-leading practices. Located directly adjacent to the world-renowned eco-tourism attraction, the Kruger National Park, Palabora Copper coordinates several onsite wildlife management and cultural heritage programmes as part of its ongoing sustainability drive. Over the past years, Palabora Copper has retained a record of being one of the safest mines in South Africa and Africa. This is particularly due to stringent SHEQ regulations and procedures in place, and the effective management of contractors on site. SOUTH AFRICAN BUSINESS 2020


The Export Credit Insurance Corporation of South Africa

T

he Export Credit Insurance Corporation of South Africa (ECIC) was established, in July 2001, with a mandate to fulfil a market gap through the provision of medium to long-term export credit and investment guar ante e s . T h e co mp any underwrites bank loans through provision of political and commercial risk insurance cover, on behalf of the South African government. Acting as a catalyst for private investment, the ECIC steps in where commercial lenders are either unwilling to or unable to accept long-term risks. Along with its major shareholder – the Department of Trade and Industry – the ECIC makes use of market research tools and specialised business development units to create new insurance products that support government’s export and investment promotion objectives. The ECIC has recently developed new products including lines of credit, lease and return of plant equipment. The revised performance bond insurance product which was launched in 2016 is another example. It also continues to be a catalyst for increased lending capacity by financial institutions by entering agreements with other export credit agencies (ECAs). To this end, it has adopted a comprehensive plan of action aimed at actualising cooperation programmes

PROFILE

for mutual benefit in conjunction with, among others, BRICS ECAs, Afreximbank and African Trade Insurance. In this way, it creates a framework for both re- and co-insurance. The ECIC is also able to price African risk more competitively, given its experience in underwriting African projects. The company has been involved in flagship projects such as Nacala Corridor in Malawi and Mozambique, Cenpower in Ghana, and Mozal Aluminium Smelter in Mozambique to name just a few. The ECIC addresses obstacles through facilitation and by aiding in the release of funding required for infrastructure, which is of particular importance to multinational organisations seeking a presence in Africa. The ECIC is committed to sustainable business through innovative solutions, operational and service excellence, business development and strategic partnerships. In enabling frontier markets to industrialise and diversify the economies, the ECIC is effectively contributing to a positive socio-economic impact.

Vision To be a world-class export credit agency in facilitating South African export trade and investment globally. Mission To provide export credit and investment insurance solutions in support of South African capital goods and services by applying best-practice risk management principles.

CONTACT DETAILS Postal address: Block C7 & C8, Eco Origins Office Park, 349 Witch Hazel Avenue, Highveld Ext 79, Centurion 0157 Tel: +27 12 471 3800 Email: info@ecic.co.za | Website: www.ecic.co.za ECIC is a registered financial service provider and is regulated by the FSCA and Prudential Authority (FSP No: 30656).

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PROFILE SUCCESSFULLY SUCCESSFULLY GROWING GROWING OUR OUR PORTFOLIO PORTFOLIO IN IN FRONTIER FRONTIER MARKETS MARKETS

economic growth can be achieved. As Export Credit Insurance Corporation of South Africa (ECIC) we are committed to supporting our South African

who export andare invest in capital beyond our borders. economic growth can be achieved. As Export Credit Insurance Corporationbusinesses of South Africa (ECIC) we committed to projects supporting our South African

If youʼre planning on exporting to or investing in capital projects our contact ECIC for assistance businessesbeyond who export andborders, invest in capital projects beyond our borders. If youʼre planning on exporting to or investing in capital projects beyond our borders, contact ECIC for assistance +27 12 471 3800 | info@ecic.co.za | www.ecic.co.za ECIC is a registered Financial Services Provider, regulated +27 by the Prudential Authority |(FSP No: 30656). 12FSCA 471 and 3800 | info@ecic.co.za www.ecic.co.za ECIC is a registered Financial Services Provider, regulated by the FSCA and Prudential Authority (FSP No: 30656).

A $1 Billion funding facility available for the South African-Africa Trade and A $1 Billion funding facility available for thePromotion South African-Africa and Investment ProgrammeTrade (SATIPP) Investment Promotion Programme (SATIPP)

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opportunities on the continentSouth and grow thebusiness country’sexport trade capacity, activities help with them otherAFRICAN Africaninvestment countries. SOUTH BUSINESS Programme (SATIPP), a $1 billion funding facility aimed at boosting African access opportunities on the continent and grow theTo country’s activities with other countries. accesstrade SATIPP please visitAfrican - ECIC.CO.ZA

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2020


KEY SECTORS Overviews of the main economic sectors in South Africa. Agriculture 58 Energy 62 Oil, gas and petrochemicals

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Water 72 Engineering 74 Construction and property

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Manufacturing 80 Food and beverages

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Automotive 84 Transport and logistics

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ICT 88 Banking and financial services

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Development finance and SMME support

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The railway line shown crossing the Olifants River carries more than 40-million tons of iron ore annually from Sishen in the Northern Cape to the Port of Saldanha 861km away. Trains on the line have broken world records for heaviest and longest trains. Image: GroblerduPreez/iStock by Getty Images.


PROFILE OVERVIEW INTERVIEW

Agriculture South Africa is the world leader in mohair.

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hile agriculture’s contribution to national GDP is variously given in the range of 2.0%-2.5%, the upstream and downstream links to agriculture through sectors such as processing and logistics mean that the real contribution is more like 15%. More than one commentator has raised the idea that South Africa should be ramping up production of foods where the country is already a world leader in production: macadamia (number one), citrus (number two) and others such as avocados and pecan nuts. Hilary Joffe wrote in Business Times that existing turnover for superfoods (avocadoes, cherries, dates, blueberries, macadamias, pecans and almonds) is at R24-billion but this could triple with the correct support. A good example of an existing special strength that belongs to South African agriculture is mohair, the fibre that comes from Angora goats. The Eastern Cape is the centre of the global mohair sector. South Africa produces about 55% of the world’s mohair. Companies such as SAMIL have divisions covering farming, combing, trading, spinning and dyeing. The Angora Genetics Laboratory (ANGELA) was established in 2013 to improve yields. Wandile Sihlobo of Agbiz believes that South Africa should focus on horticulture, partly because it is labour intensive. He gives an example of blueberries, which need 2.64 workers for every hectare planted. There are signs that his advice is being followed: gross value rose from R15.8-million in 2008 to R1.25-billion in 2018 with the total area planted expanding four times. More than 70% of the blueberry crop is exported. AgriSA states that the amount of agricultural land in South Africa in 2016 stood at 93.5-million hectares. This represents 76.3% of South Africa’s total land mass of 122.5-million hectares and about 3% less than in 1994. Following on a research project done by Agri Development Solutions (jointly funded by AgriSA and the magazine Landbouweekblad), Agri SA predicted that 80-million South Africans would be fed by commercial farmers in the year 2035. They also gave these figures for the sector: • 34 000 full-time farmers • 40 000 tax-paying farmers • 100 000 emerging farmers • 670 000 semi-skilled and unskilled workers. Agricultural firm Laeveld Agrochem has made the link between the need for high-quality soil and better returns if countries in Africa are going to produce larger quantities of produce and livestock. As a result, a subsidiary has been created to make soil health products. Called Agri Technovation, SOUTH AFRICAN BUSINESS 2020

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SECTOR INSIGHT Superfoods could boost agricultural exports.

the company formulates and manufactures specialised products that aim to meet crop-specific nutrient, stimulant and energy requirements. In the context of new products such as these, the need for highly skilled people in the sector becomes obvious. The kinds of innovation and technology that are needed to improve agriculture need well-trained specialists. The South African government has produced a list of critical skills in the agricultural sector. Each of these occupations (such as agricultural scientist) has additional areas of specialisation (for example, soil or pasture scientist) so the extended list is a long one. General occupations include technician, produce inspector, engineer technologist, mobile plant operator and veterinarian. Some specialities include seed research technicians, abattoir veterinarians and agri-chemical spray operators. Black farmers are receiving loans from the Land Bank in an attempt to help transform the sector. The


OVERVIEW PROFILE Land Bank is also looking to create ways Land use in South Africa in which black entrepreneurs can invest in agricultural assets through some form of trust. Extensive pastures The Bureau for Food and Agricultural Intensive pastures 32.8% Policy reports that the fastest -growing cat51.6% egory of new farmers is emerging farmers Extensive field crop who are taking a “market-led, sustainable Intensive field crop approach”. This group is the result of a new 13.7% Orchards model of cooperation between black and 1.5% white farmers, support from industry organisations and new approaches to financing. all land where rainfall is good Professors Johann Kirsten and Ferdi The drought in 2015 and 2016 had is suitable for activities such as Meyer argue that a detailed analysis dairy farming. of what land is available and best severe consequences in Southern Africa. • Extensive (dryland) field crops: suited to various uses should be StatsSA noted the following price increases 13.7% of all land is suitable for undertaken as part of land policy in that period: vegetables (12.7%), bread crops such as sunflower seed in South Africa. They explain the and soybean. different kinds of land shown in this and cereals (16%) while nearly 400 000ha • Intensive (irrigated) field crops: chart as follows: less was planted in the country in 2017 than 1.5% of land suits all horticul • Extensive pastures/natural it was in 2014. Wine grape production was ture and some field crops. veld (more than half of all • Orchards: 0.4% of SA’s agricul agricultural land): this land down 2% in 2019 but this followed a 14% tural land, which is expensive to has marginal agricultural dip the year before. maintain but the returns potential and farmers need Exports of South African produce con are good. They require a high a lot of land to carry stock (10ha degree of skill, are labour- for small livestock, 40ha per tinue to grow. Sihlobo noted that 2018 intensive and must be responsive larger animals such as cattle). exports were the highest in 17 years, to the export market. The Karoo and large parts of reaching $10-billion. Africa was the big the Northern Cape fall into this SOURCE: Bureau for Economic Research at category. gest market, accounting for 39% of the toStellenbosch University, Bureau for Food and Agricultural Policy. • Intensive pastures: 32.8% of tal. South Africa’s biggest citrus shipment company, Sundays River Citrus Company, regularly ships 500 000 cartons per week. Beef increased KwaZulu-Natal and Mpumalanga produce from 8 292 tons in 2001 to 31 888 tons. The largest areas sugar, but volumes are down. The Free State of growth were Muslim countries. Province supplies significant proportions of the South Africa imports 80% of its fertiliser and 98% of nation’s sorghum, sunflower, potatoes, groundits agri-chemicals. nuts, dry beans, and almost all of its cherries. A total of 70% of South Africa’s grain production is South Africa is famous for its fruit, of which maize, which covers 60% of the cropping area of the 35% is citrus, 23% subtropical and nuts, 26% country. The South Africa feed industry has an annual pome fruit, 11% stone fruit and 9% table grapes. turnover of about R50-billion with most of the raw Export volumes, particularly in tropical fruits material being soya and maize. such as mangoes and avocados, have been growing rapidly. Most of South Africa’s citrus ONLINE RESOURCES and subtropical fruit comes from the eastern part of Limpopo. There are about 3 500 wine Agricultural Research Council: www.arc.agric.za producers in South Africa, with the large majorFresh Produce Exporters’ Forum: www.fpef.co.za ity located in the Western Cape. Grain SA: www.grainsa.co.za Livestock farming is the largest agricultural National Department of Agriculture, Forestry and subsector in South Africa and the Eastern Cape Fisheries: www.daff.gov.za is the largest livestock province. South Africa SA Table Grape Industry: www.satgi.co.za has a beef herd of 14-million. Extensive pastures

Intensive pastures

Extensive field crops

Intensive field crop

Orchards

0.4%

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PROFILE INTERVIEW

Traceability is a key differentiator for major mohair producer Michael Brosnahan, the CEO of SAMIL, explains why he is positive about the future of the mohair industry. What is the state of the mohair sector in South Africa at the moment?

Michael Brosnahan, CEO

Despite all the challenges, we are extremely positive about the future. Mohair farmers are a hardy breed of individuals used to facing and overcoming adversity, including the recent drought. There are indications that the situation is improving. The South African mohair production for the last two seasons was 2.40-million kg in 2017, and 2.24-million kg in 2018. The prediction is that production will be in the region of 2.35-million kg this year. However, nature is a fickle entity. What are the main countries to which Samil exports?

Italy and China are our two largest markets in terms of semi-processed tops. We redirect between 15-20% (and this figure is increasing) of tops produced at SAMIL Combing to SAMIL Spinning for conversion into magnificent yarns which are mainly sold on the international stage. What are the advantages of having multiple divisions?

SAMIL has a team of professionals with long years of experience in both the mohair and textile industries. As traceability becomes more and more important to the final consumer, SAMIL has a distinct point of difference – we are involved from goat farming through all conversion processes to the finished yarn.

BIOGRAPHY Michael emigrated from the UK to KwaZulu-Natal in South Africa in 1981 in order to take up the position of Quality Assurance Manager with the Frame Group. A chartered member of the Textile Institute in South Africa, he has managed several large textile companies since then. Mooi River Textiles was awarded Cotton Spinner of the Year for three consecutive years under his leadership. He was appointed CEO of SAMIL Natural Fibres in Port Elizabeth in 2016. SOUTH AFRICAN BUSINESS 2020

What headwinds has mohair experienced?

Mohair has faced some serious challenges in recent years, the first of which was PETA’s exposé on the South African mohair industry in May 2018. Though a negative attack, the positive spin-off is that it has helped the industry to fast-track the implementation of the Mohair Sustainability requirements. The industry has engaged with the Textile Exchange in drawing up a Responsible Mohair Standard. This is to satisfy consumers that mohair is a sustainable and ethically produced product. Secondly, the Lesotho farmers’ conflict with their government over restrictive mohair export conditions. They have recently won a High Court battle to have these restrictive conditions repealed but there is still uncertainty as to when normal supply will resume. What other plans do you have?

We are also investing in our combing and spinning operations to ensure we are equipped to deliver quality products timeously to our clients.

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Sharing Africa’s beauty with the world SAMIL produces and processes mohair, the noble fibre.

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outh African Mohair Industries Limited (SAMIL) is the link between mohair producers, processors and consumers. Our vision is to be an innovative South African company specialising in the production and processing of natural fibres, as well as speciality spun yarns. Mohair, the fleece of the Angora goat, is: • the noble fibre, known as the diamond fibre • lustrous, resilient and offers exceptional colour reflection • one of the world’s most beautiful sustainable natural fibres • a symbol of luxury and exclusivity. African Expressions Our local brand African Expressions was born of the desire to share Africa’s natural beauty with the rest of the world. Through our unique range of yarns, we express the essence of that which makes Africa magical. Our network of local farmers, who farm in optimal Angora goat conditions, breed stock which bear excellent fibres. This ensures that our yarns are naturally soft to the touch, easy to knit and luxuriously versatile. SAMIL divisions Farming: SAMIL Farming, was established with the primary objective of stabilising and possibly increasing mohair supply to the processors. Combing: SAMIL Natural Fibres Combing is in Berlin, outside East London in the Eastern Cape. As mohair processing has decreased in other parts of the world, SAMIL Combing has become one of the world’s leading processors. Unlike many processing plants

SAMIL Combing focusses on and is committed to processing only mohair. Trading: Through a strong support base of affiliated companies, partners and agents, SAMIL has established strong connections throughout the world for the purchase and sale of raw materials and finished goods. South Africa processes in excess of 80% of the world’s mohair production. The advantage of having both topmaking and spinning operations in South Africa, as well as access to raw material produced within the company, is that SAMIL is able to offer lots guaranteed from origin, a rare luxury in today’s business environment. Spinning and dyeing: SAMIL Spinning is a global manufacturer of outstanding quality mohair yarns, producing a wide and exclusive range of mohair and mohair blended fancy and fine-spun yarns in both fine-count and coarser varieties. We are internationally renowned for our superior product range and cater for the hand knitting, machine knitting, weaving, hosiery and decor markets. Although we specialise in pure mohair, we also blend mohair with a range of other natural and man-made fibres. Yarns can be custom dyed to any shade at SAMIL’s state of the art dye house. Genetic research: The latest venture under the SAMIL umbrella is the research project called ANGELA which aims to enhance Angora goats and the mohair industry, from increasing kidding rates to the improvement of the different hair qualities. The project will make available its results to all in the mohair farming community. Contact details Tel: +27 41 486 2430 Email: yarns@samil.co.za Website: www.samil.co.za


FOCUS OVERVIEW

Energy Policy decisions hold the key to stabilising power supply.

The open-cycle gas turbine plant at Shakaskraal in KwaZulu-Natal.

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he decision in May 2019 that power projects generating less than 10MW do not have to get licences from national government has given hope to independent power producers and city governments across South Africa that a new era in energy policy has begun. These smaller projects can go ahead (up to a total of 500MW) outside of the country’s Integrated Resource Plan but the next step – allowing companies to sell any excess power they generate to the grid – will be a real game-changer. South Africa’s vaunted Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) attracted about R200-billion in committed investments in just five years but it was limited to large projects. An example of the potential that lies within companies is Tongaat Hulett. This company’s sugar mills are producing between 12MW and 14MW of power. The company believes that the national sugar industry could generate between 700MW and 900MW. The same could be said for Sappi’s wood and fibre mill and all of the country’s breweries. Most mining companies are now investigating (or have started) generating power for their own use. Discussions about feed-in tariffs will have to be finalised before the huge energy-generating potential of these sectors can be fulfilled. If SOUTH AFRICAN BUSINESS 2020

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SECTOR INSIGHT Small-scale independent generation could be a game-changer.

national utility Eskom is broken into separate business units then the likelihood of the tariff discussions taking place will greatly increase. In his first medium-term budget policy statement in late 2018, new Finance Minister Tito Mboweni, expressed an opinion on the unbundling of Eskom. Mboweni said, “Restructuring of the electricity sector is underway. This must include a long-term plan to restructure Eskom and deal with its debt obligations.” Eskom runs electricity genera-


FOCUS

HASSLE F R E E P R E PA I D MANAGEMENT South Africa’s Most Trusted Prepaid Utilities Solution

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SOUTH AFRICAN BUSINESS 2020


OVERVIEW tion, transmission and distribution and it is a monopoly. Mboweni’s statement opens up the possibility that a long-stalled plan to divide up these functions could happen. In 2013, a parliamentary bill called the Independent System and Market Operator (ISMO) was passed but allowed to lapse in the same year. Figures released by the South African Wind Energy Association (SAWEA) showed shareholding for local communities reached an estimated net income of R29.2-billion over the lifespan of the projects. Some 14 000 new jobs are expected to be created, mostly in rural areas, and more than R30-billion has already been spent on Black Economic Empowerment (BEE) in the construction phase. In 2018, then Energy Minister Jeff Rabebe restarted the REIPPPP when he signed off on projects totalling R56-billion that will add 2 300MW to the national grid. There had been a long delay as Eskom argued against accepting more power purchase agreements. Most of South Africa’s electricity comes from coal and Eskom is building two huge coal-fired power stations. Most commentators on the Integrated Resource Plan (IRP) 2018 have praised its basis in science and the fact that it has adopted the “least-cost” method of analysing options. With renewable energy costs having been dramatically reduced, the IRP concludes that wind, gas and solar power (photovoltaic) will be the three methods to be allocated the most new projects up to the year 2030. SOUTH AFRICAN BUSINESS 2020

The other form of solar power (concentrated solar power, CSP) is very effective and some projects have been successfully commissioned, but it is relatively expensive. A majority of wind projects have been allocated to the Eastern Cape, but approximately 60% of the projects so far allocated in the programme have been in the Northern Cape, the nation’s sunniest province. Projects such as Kathu Solar Park (100MW), a concentrated solar power (CSP) project, and the Roggeveld Wind Farm (147MW) are indicative of the large scale of most of the energy generation that is being rolled out. Abengoa’s three plants in the Northern Cape use CSP which reflects the sun’s rays during the day into a molten salt storage system. The energy is then slowly released during the night. The 205m tower that collects the rays at the Khi Solar One site is one of the tallest structures in South Africa. Despite the emphasis on renewables in the IRP, South Africa’s energy mix is still weighted towards coal. The IRP has attracted criticism for enabling an expansion of the coal industry. Koeberg nuclear power station is due to be decommissioned soon after 2045.

Gas While the main sources of renewable energy being pursued are solar and wind power, an open-cycle gas turbine plant at Shakaskraal in the iLembe District Municipality (pictured) points the way to another method being encouraged by energy planners. This 670MW gas turbine plant can be converted to gas-fired technology. Its project company, Avon Peaking Power, is jointly owned by a community trust, Mitsui (Japan), Legend Power Solutions (South Africa) and ENGIE of France, which is the largest shareholder. Gas in various forms is very much in the spotlight. South Africa’s neighbour Mozambique has large offshore deposits and a sub-committee of the Southern African Development Community (SADC) has been tasked with working out a master plan for the region. A study prepared by the Energy Centre of the Centre for Scientific and Industrial Research (CSIR) reports that wind and solar power (supported by natural gas, biogas and hydro-electric power) could be up to the task of providing “baseload” power. The Department of Energy is targeting the procurement of 3 126MW and intends spending R64-billion on port, pipeline, generation and transmission infrastructure at three key ports.

ONLINE RESOURCES IPP projects: www.ipp-projects.co.za National Energy Regulator of South Africa: www.nersa.org.za South African Renewable Energy Council: www.sarec.org.za South African Wind Energy Association: www.sawea.org.za

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OVERVIEW

The economic power of renewable energy Dr Tobias Bischof-Niemz, CEO of ENERTRAG South Africa, aims to bring local value-add into the business of solar and wind power. Why has ENERTRAG entered the South African market?

Dr Tobias Bischof-Niemz, CEO

We believe in the power of economics. The economics for solar and wind technologies in South Africa are so superior compared to the conventional ways of producing energy, that we have absolutely no doubt that there is a bright future ahead for the South African renewables market. Our company always has a long-term vision based on strong fundamentals. What are your priorities?

One is a focus on the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) – large-scale, utility, wind and solar photovoltaic power. The other focus is “new segments”, hybrid projects which combine solar and wind, where we optimise all the customers’ options with a mix of technologies. We are looking at hydrogen production from wind and solar as well. Are there opportunities in hydrogen fuel cells for electric vehicles?

Absolutely. The economics for the individual truck or bus owner are such that hydrogen fuel cells, purely on the fuel side, are already very close to Before joining ENERTRAG parity with diesel. in September 2017, Tobias successfully established and What are your key differentiators? led the Energy Centre at the Our socio-economic approach is key. Wherever we go we want to Council for Scientific and be as local as possible. We maximise local value-add in developing, Industrial Research (CSIR). implementing and operating our projects. For us and for our 15 employees, Tobias served as a member ENERTRAG South Africa is a proudly South African company. of the inaugural South African On the technical side what’s different is that we are not a “produce Ministerial Advisory Council and forget” wind turbine operator, we are a power plant operator and on Energy (MACE). He we take full system responsibility. Our power plants are based on solar was recently appointed as and wind as the primary energy source; those are components. The Professor in Practice by the actual power plant combines them and spans across an entire region. University of Johannesburg. He is author of the book “South Does the regulatory environment encourage investment? Africa’s Energy Transition” that Over the last five years there were no investments. We need an updated outlines a roadmap for a low- Integrated Resource Plan (IRP). The draft IRP 2018 is a positive move in the cost, decarbonised and job- right direction, but it is not promulgated yet. In the smaller megawatts rich future for South Africa’s category, we need the regulations to embrace that. All studies show that the future of South African electricity lies in solar and wind. energy sector.

BIOGRAPHY

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SOUTH AFRICAN BUSINESS 2020


PROFILE

ENERTRAG One energy ahead

Darling Wind Farm, 5.2MW total installed capacity.

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NERTRAG is a German, family-owned energy company that specialises in sustainability and generates electricity exclusively from renewable sources – mainly from wind energy. We rank among the leading wind power producers in Europe with more than 762 installed wind turbines and 2.5-billion kilowatt-hours generated annually. We combine all the competencies necessary for the successful operation, generation and supply of renewable energy. From planning, permitting, development and financing to the construction and the operation up to feeding into our own power grid with the associated transformer substations and connection to the interconnected European power system, we are one of the few companies worldwide that operate every necessary link in the production chain with sustainable energy. ENERTRAG has comprehensive knowledge and experience along the entire value chain of renewable energy projects. Since its establishment, ENERTRAG has been focusing on accelerated technological development with great determination to increase the efficiency of renewable energies. We know that a secure, sustainable and inexpensive energy supply is only possible through wind p ower, photovoltaics and hydrogen. All other solutions are either too SOUTH AFRICAN BUSINESS 2020

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expensive, not sustainable, too uncertain or simply not available at sufficient scale. We are putting this insight into practice. Furthermore, we store energy in the most durable and simplest of all energy sources: hydrogen. We strive to supply all energy sectors in a balanced manner, from electricity to transport fuels through to heat. Therefore, we are active wherever it is necessary to make wind and solar power compatible and to gain sufficient support for making it the basis of our energy system. The ENERTRAG success story

As an independent energy company we produce electricity, hydrogen and heat exclusively from renewable sources and deliver secure, affordable energy for all aspects of life.


Renewables leader • •

>10% market share in German wind auctions in 2017 – tariffs as low as 3.8€ct/kWh Long-term experience as developer, EPC, operator and service provider for renewables, including 20+ MW of gas-engine-driven biogas plants

Renewable power plant operator • • • •

Approximately 5GW renewables in 24/7 remote monitoring/control (thereof 830MW own assets) Technology-neutral system optimiser and renewable power plant operator 1 000km of medium- and high-voltage grid and substations designed, built, owned/operated ENERTRAG headquarters, including its 24/7 control centre, runs on 100% renewables.

Solutions for mines and large industries • • •

High availability and reliability of renewable power plant and grid solutions Reliable, long-term partner for large industrial customers Optimal choice of components and design from a system perspective to minimise the cost of energy delivered

in four countries. The headquarters in Dauerthal is supported by six more offices in Germany. ENERTRAG is also present in France, Poland and South Africa. ENERTRAG South Africa

ENERTRAG entered the South African renewable energy market in 2016 and has established itself as an important player in the renewable energy industry with a pipeline of more than 2GW of wind and solar projects under development, plus green hydrogen projects to provide innovative transport solutions. A 100% subsidiary of ENERTRAG AG, ENERTRAG South Africa is committed to delivering reliable electricity supply, and inclusive and innovative renewable energy development to South Africa and beyond. ENERTRAG South Africa highlights •

The brand ENERTRAG • • •

Pioneer of the Energy Transition: first wind turbine in operation since 1992 Reliable, pragmatic shaper and implementer of the Energy Transition Experienced in leveraging grant funding opportunities for innovation projects.

Locations

A total of more than 600 employees work along the entire value chain of renewables at ENERTRAG

Proud owner and operator of the Darling Wind Farm, South Africa’s first wind energy facility. Our highly skilled, proudly South African team is motivated to develop projects that maximise benefits for our local economy, leverage and capitalise South Africa’s advantage in renewable resources on the global stage. More than 2GW renewables projects pipeline under development. Innovative green hydrogen solutions for the transport sector under development.

ONLINE RESOURCES Physical address: Unit 101 B Heritage House, 20 Dreyer Street, Claremont, Cape Town, 7708 Tel: +27 21 207 2180/5 Email: info@enertrag.co.za Website: www.enertrag.co.za

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SOUTH AFRICAN BUSINESS 2020


OVERVIEW

Oil, gas and petrochemicals South African ports are gearing up to service the oil and gas industry.

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atural gas lies offshore to the west of South Africa in the Atlantic Ocean (Ibhubesi) and off the southern coast in the Indian Ocean (Bredasdorp Basin). Both fields have great potential: Block 2A of the Ibhubesi gas field north-west of Saldanha is estimated to have reserves of 850-billion cubic feet of gas and the Bredasdorp Basin one-trillion cubic feet but getting to the gas has been difficult. In addition, massive new fields are being exploited off the coast of Mozambique, opening up opportunities in the region that never existed before. Anadarko Petroleum, a US company, decided in 2019 to go ahead with a $20-billion project to build a liquid natural gas (LNG) plant in Mozambique. The projected spinoffs for the South African economy are estimated to top R7-billion. Part of the projected benefit for South Africa will be through the access to the project that will come with the expected involvement of the Export Credit Insurance Corporation of SA (ECIC). ECIC intends underwriting Standard Bank’s financing of this and other projects and part of the conditions of such financing deals is market access for South African firms. A new addition to South Africa’s pipeline network is a pipe to get natural gas from Mozambique to Gauteng. SacOil’s R90-billion project aims to deliver gas to Johannesburg and the nearby towns in 2020. Large quantities of oil are transported around Cape Point every year: 32.2% of West Africa’s oil and 23.7% of oil emanating from the SOUTH AFRICAN BUSINESS 2020

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SECTOR INSIGHT Coastal Special Economic Zones are investing in gas plants. Middle East. Irrespective of market volatility, the long-term prospects for shipping and oil and gas are strong enough for national government to pursue Operation Phakisa (which includes a strong maritime economy element) and for Transnet National Ports Authority to spend heavily on upgrading the nation’s ports. In the Western Cape thousands of direct jobs have been created in the ship and rig repair sector of the oil and gas business and the Saldanha Bay Industrial Development Zone is being


OVERVIEW FOCUS

expanded with the oil and gas sectors as priorities. The same is true of Richards Bay in KwaZuluNatal and the Coega Industrial Development Zone. The Port of Saldanha has a new open-access liquefied petroleum gas (LPG) plant run by Sunrise Energy. In 2016, the Department of Trade, Industry and Competition (d t i c) e s t a b l is h e d a G a s Industrialisation Unit (GIU). The first two sites identified by the DoE for liquefied natural gas (LNG) plants are Richards Bay (2 000MW) and the Coega Industrial Development Zone (1  000MW) in the Eastern Cape. This has the potential to turn the Richards Bay Industrial Development Zone (RBIDZ) and its Eastern Cape counterpart into energy hubs. The fact that Mozambique has significant offshore deposits is a factor in this ambition. The Coega IDZ is also home to the country first gas-fired plant to be run by a private consortium, the Dedisa power plant. A new gas turbine open-cycle power plant near Durban has been commissioned by Avon Peaking Power.

Supply news A number of South African facilities are being expanded and new ones are being built to accommodate more fuel and gas storage. National usage of LPG currently amounts to 400 000 tons per year, but this is set to increase dramatically, partly as a

result of this increased storage capacity. Some examples are: • Bidvest Tank Terminals is building a mounded LPG storage facility that will have the biggest tanks in the world. Each of the four 60m long tanks weighs 5 650 tons and they have a combined capacity of 22 600 tons. The expected supply from the new facility will be  200 000 tons per annum. The LPG will be supplied by Petredec. • Novo Energy have built a R130-million natural gas compression plant in the Highveld Industrial Park in Mpumalanga. The park is well connected by rail and road to all the major industrial nodes. The facility will operate around the clock and has access to Sasol’s natural gas pipeline. • Sasol and BP have increased the storage capacity of the Alrode fuel depot south-east of Johannesburg seven-fold, from 9-million litres to 64-million litres. • Air Products recently invested R100-million in its existing carbon dioxide plants in Newcastle (KwaZulu-Natal) and at the Natref refinery at Sasolburg.

Assets The South African oil industry generates annual sales of about R365billion and includes global giants such as Engen, BP, Shell, Total and Caltex. Sasol is a major player in the oil sector and the only company in the petrochemicals sector. Most of the oil that feeds the country’s four crude-oil refineries is imported. The refineries are in Cape Town, Sasolburg and Durban (two). In addition to South Africa’s crude-oil refineries, natural-gas conversion plant, coal-to-fuel and gas-to-liquid crude-oil refineries, Sasol produces fuel from coal at its Secunda facility and PetroSA has the country’s only gas-to-liquid (GTL) facility at Mossel Bay. Getting fuel to Gauteng is the key mission of the new multi-purpose pipeline (NMPP) which started delivering fluids in 2012. The NMPP terminals allow for greater flexibility in supply. Refined products such as jet fuel, sulphur diesel and both kinds of octane petrol are carried.

ONLINE RESOURCES National Energy Regulator of South Africa: www.nersa.org.za Petroleum Agency SA: www.petroleumagencysa.com South African National Energy Association: www.sanea.org.za South African Petroleum Industry Association: www.sapia.co.za

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OVERVIEW

Water Cape Town has learned big lessons from a harsh drought.

Pipes before installation in the Western Aqueduct project, the massive scheme to bring water to Durban from the Midmar and Spring Grove dams in KwaZulu-Natal. Image: Knight Piésold.

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n 2030 South African demand for water will be 17% greater than supply. That is the verdict of the 2030 Water Resources Group. The Water Resources Group, an international consortium of private companies, agencies and development banks has established a South African chapter, the Strategic Water Partners Network. The Western Cape, which bore the brunt of a fierce drought for several years, in fact fares well in terms of providing water infrastructure and maintaining its wastewater treatments plants. The Western Cape Department of Agriculture has launched a climate action plan called Smart Agri which includes doing studies on conservation agriculture. When the long-term drought was at its worst, tourists to Cape Town were encouraged to “Save like a Local”. Together with a range of technical and legislative measures, the campaign to use less water worked remarkably well. Where residents and businesses were using 1.2-billion litres per day in 2015, by the middle of 2018 the figure was 516-million litres. While the taps were not literally turned off (the dreaded “Day Zero” was averted), pressure in the pipes was reduced. The International Water Association’s Water Loss Conference in Cape Town reported that two of the world’s largest advanced pressure control systems are operating in Cape Town. The drought also led to creative thinking by corporate South Africa. Old Mutual’s large Pinelands campus (accommodating approximately 9 000 staff members) is producing its own water by purifying wastewater. The City of Cape Town is thus relieved of the need to supply 15 000kl of water every month as a result of the plant. SOUTH AFRICAN BUSINESS 2020

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SECTOR INSIGHT An inventor is using macadamia nut shells to filter water.

Technology and innovation Although Cape Town had an urgent need for desalination plants when drought came to the region, the province of KwaZulu-Natal is taking a lead in this technology. Richards Bay has installed a 10-container desalination plant next to the municipal water treatment plant at Alkanstrand. The first mobile sea water purification unit in South Africa, it comprises 10 containers and is located adjacent to the water treatment plant at Alkantstrand. It can deliver


OVERVIEW

10 megalitres of drinking water. In 2018 JG Afrika and technology partner NuWater delivered a R72-million desalination plant to South32’s Hillside aluminium smelter in the same town. A new kind of water filtration was reported in Engineering News in 2019, a system which puts macadamia nut shells to use. The brainchild of Murendeni Mafumo, the idea was first put into action in 2018 and has been used in schools and rural communities by Kusini Water. Powered by solar power, the purification system uses a carbon filter that is made from macadamia nut shells. In an attempt to reduce the amount of water sucked up by alien plants, Coca-Cola aims to recover nearly 3-billion litres of water through the removal of invasive plants. The Coca-Cola Foundation is investing R18-million the Replenish Africa Initiative (RAIN) through catchment restoration, invasive plant removal, wetland rehabilitation and conservation in four provinces. The introduction by the National Department of Water and Sanitation and the Water Institute of South Africa (WISA) of the Blue and Green Drop Awards has been successful. The nation’s municipalities receive scores reflecting how well they are doing in terms of providing clean water. In order to win a Drop Award (Blue for water quality, Green for waste treatment), water systems have to score 95% or

higher. The DWS has allocated R4.3-billion to helping municipalities deliver water. The Interim Water Supply Programme concentrates on 23 district municipalities. Two water companies have recently been sold to local black business leaders. Aveng Water was bought by a group of investors that included E-Squared Investments and Suzie Nkambule, who was the MD of Aveng Water at the time of the sale. Sebata Group Holdings sold a majority shareholding in USC Metering and Amanzni Meters, two of its subsidiaries, to Inzalo Capital Holdings in August 2019. The transaction means that the two companies qualify as “Black Industrialist” businesses in terms of the Department of Trade, Industry and Competition’s Black Industrialist Policy (BIP). Supplying water to households and businesses has often been a task beyond the capabilities of some of South Africa’s municipalities. The newly-formed Municipal Infrastructure Support Agency (MISA) falls under the National Department for Cooperative Governance and Traditional Affairs and will assist municipalities to plan for, provide and maintain infrastructure. The first action of MISA was to commission 81 engineers and town planners to get to work in areas that need the most help. Another response to the municipal problem is a new national strategy which gives a bigger role to well-resourced water boards such as Umgeni Water and Sedibeng Water. In terms of the National Water Resource Strategy, catchment area management agencies have been established to oversee water resource management on a regional basis. The Imkomati-Usuthu Catchment Management Agency covers Mpumalanga, parts of Limpopo and part of the Kingdom of eSwatini. Another example of a CMA is the Breede-Gouritz Catchment Management Agency in the Western Cape. The National Water Resource Strategy considers groundwater to a far greater degree than previous plans. Extracting groundwater takes skill and money, but with droughts becoming commonplace it is likely to become a much higher priority in water planning.

ONLINE RESOURCES National Department of Water and Sanitation: www.dwa.gov.za South African Water Research Commission: www.wrc.org.za Trans Caledon Tunnel Authority: www.tcta.co.za Umzimvubu Catchment Partnership Programme: www. umzimvubu.org Water Institute of South Africa: www.wisa.org.za

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Engineering Training new engineers is a national priority.

SECTOR INSIGHT Murray & Roberts strengthened its mining orders by R10.4-billion.

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study jointly commissioned by the Water Research Commission and the South African Local Government Association (SALGA) found that the country’s four-in-amillion ratio of engineers is a long way from the required 50-per-million. In 2015 there were are 16 423 registered professional engineers in South Africa. One response at national level was the importation of Cuban engineers. Several partnerships between the public and private sectors are trying to address the skills deficit. One example is the partnership that Wits’ National Aerospace Centre has with Boeing and Airbus. The Skills Development Amendment Act is intended to improve the situation. Universities, universities of technology and companies are increasing their focus on the training of engineers. The Engineering Council of South Africa (ECSA) has a programme where trainees can earn certificates in specific disciplines from a range of institutions. The qualifications are in line with the council’s Exit Level SOUTH AFRICAN BUSINESS 2020

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outcomes. Six of South Africa’s biggest construction companies have established a R1.25-billion skills fund. The consulting engineering industry celebrates its best work on an annual basis through the CESA Aon Engineering Excellence Awards. In 2018 the winners were: Projects with a value in excess of R250-million: Winner: AECOM, Construction of the Cape Flats 3 Bulk Sewer – Phase 2. Projects with a value between R50-million and R250-million: Winner:  Aurecon, Sol Plaatje University Library and Student Resource Centre (pictured). The building on South Africa’s newest university campus in Kimberley also won a Fulton Concrete Award. It was designed by designworkshop: sa, the construction work was done by Murray and Dickson and Aurecon provided structural, civil, electrical, fire and wet services design for the project. Projects with a value of less than R50-million: Winner:  Hatch Africa, Tugela River Pedestrian Bridge. A good sign for the engineering sector came in the news that the Boksburg site where DCD Rolling Stock used to make rail wagons and fix locomotives is up and running again, courtesy


OVERVIEW

of TMH Africa, a part of the TMH Group, which has head offices in Switzerland. Mining continues to be an important component of most engineering firms’ portfolios. Murray & Roberts reported that the six months to December 2018 saw its Underground Mining order book increase to R25.7-billion (against R15.3-billion in 2017). Murray & Roberts has completed its transition from being a South African company focussing on contracting to a multinational engineering and construction group with a focus on natural resources markets. ELB Group’s Engineering Services division employs more than 1 000 people and the company is currently working fulltime on the vast Gamsberg zinc project in the Northern Cape. Manganese, coal, iron ore and coal are other mining sectors where ELB is active and it does work for Eskom (the national utility) and companies such Nestlé and Unilever. T he Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) has created an entirely new industry in less than seven years, with investment of about R200-billion in solar parks and wind farms. This has created many opportunities for engineers.

Infrastructure Several engineering firms have battled in recent years. The reason

normally given is that national infrastructure programmes that were expected to provide work after the 2010 World Cup did not materialise. With slow growth, national freight and logistics company Transnet has not been able to pursue its R300-billion infrastructure programme at the speed that it wanted to. Big names have either seen their share price drop sharply (Aveng), their market capitalisation shrink (Stefanutti Stocks) or they have been subjected to the business rescue process (Group Five, Basil Read and Esor). Aspects of the Transnet programme, such as the acquisition of locomotives, are going ahead and the expansion programmes of Gautrain and the Passenger Rail Agency of South Africa (PRASA) are providing work. Infrastructure spending has slowed, but not dried up entirely. One province alone, Gauteng, spent R30-billion on infrastructure between 2013 and 2016. A further R46-billion has been pledged. In addition, Gauteng municipalities will spend R94-billion using their city budgets. A study carried out by KMPG found that spending on infrastructure resulted in additional economic activity worth R26-billion and created 92 000 direct jobs. The Gauteng Freeway Improvement Project was technically demanding and involved many companies and several joint ventures. GOBA Consulting Engineers and Project Managers supervised the design and construction of the project, as it did the even bigger Vaal River Eastern Subsystem Augmentation Project (VRESAP). This water project entailed redirecting water flows from one system to another to feed the petrochemical and mining industries of Mpumalanga. Marine repair and engineering form a significant sector in the Western Cape and KwaZulu-Natal, with established companies such as EBH South Africa offering comprehensive services. Both KwaZulu-Natal ports are expanding (Durban is building a cruise-liner terminal and Richards Bay is undertaking no fewer than 45 projects) and will continue to attract engineers. Dormac, which is headquartered in the Bayhead area of the Port of Durban, is best known for its marine engineering but it offers specialised services to the sugar industry and provides machinery for industrial giants like Toyota and Defy.

ONLINE RESOURCES Consulting Engineers South Africa: www.cesa.co.za Engineering Council of South Africa: www.ecsa.co.za National Department of Public Works: www.publicworks.gov.za South African Consulting Engineering Firms: www.consultsa.co.za Southern African Institution of Civil Engineering: www.civils.org.za

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Construction and property Corporates are building large new head offices.

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he R3-billion building in Sandton that houses Discovery’s four businesses is the largest of several new buildings that have been constructed in recent years to accommodate corporate headquarters. The main contractors were WBHO and Tiber in a joint venture (JV) with Aurecon consulting on environmentally sustainable design (ESD) and designing and providing mechanical services. Boogertman and Partners were the architects for the building which was developed by a JV comprising Growthpoint Properties and Zenprop Property Holdings. The project won the 2019 SAPOA Property Development Awards for Innovative Excellence and received a five-star rating from the Green Building Council SA. WBHO also had a hand in the construction of the Thavhani Mall in Thohoyandou, Limpopo (pictured). This 50 000m² regional mall won the SAPOA award for Rural and Small Town Development. Another corporate head office that ticks every available green box is Exxaro’s new building in Centurion. Another Growthpoint development, the building includes innovations such as a nutrient recovery urinal and a pilot project for waterless urinals for women. The imposing Absa Towers Main in central Johannesburg is not new, but it is being renewed via a major upgrade in the course of its conversion to a mixed-use building. Within its 30 storeys, there will be restaurants and coffee shops, child-care facilities and 520 flats in the “afSOUTH AFRICAN BUSINESS 2020

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SECTOR INSIGHT Green buildings are becoming more common.

fordable” bracket. The total value of the investment by Divercity is said to be R2-billion. Sandton, which hosts thousands of businesses and has one of Africa’s biggest shopping malls in Sandton City, is also one of the busiest building sites in the country. Apart from the complete Discovery headquarters, Old Mutual is building new premises and The Legacy Group is building The Leonardo, a multi-use building that will be South Africa’s tallest building when it is complete. At 55 stories, The Leonardo


OVERVIEW

will rise 150m above the city streets and will offer retail and office space, a conference venue, a hotel and accommodation options ranging from one-bedroomed flats to eight penthouses and the Leonardo suite. At national level, job losses and business rescues were recurring themes in the South African construction sector in 2017 and 2018. The announcement in late 2018 that work on the R4.3-billion Oceans Umhlanga project had been halted seemed to confirm this trend, but indications are that work on this huge residential, hotel and retail mall development will resume. In this context, it is easy to understand why the annual Cesa Aon Engineering Excellence Awards acknowledged the developer of eight large projects covering commercial, industrial, retail and residential. Property c o m p a n y To n g a a t H u l e t t Developers won Visionary Client of the Year at an engineering awards event in 2017, a recognition of how much construction is underway north of Durban on land that used to be covered in sugar cane. Tongaat Hulett has been rolling out a series of developments for several year, but in 2018 it launched the large nTshongweni Urban Development on either side of the busy N3 highway west of the city. Land use will be housing, light industry and logistics with a private developer committed to building a shopping mall.

In order to fight urban decay and to encourage investment in inner cities, a tax incentive was created called the Urban Development Zone tax incentive. The UDZs for Johannesburg and Cape Town were first allocated in 2004. Making inner cities more liveable is a worldwide trend.

Trends A big new development on Oxford Road in the Johannesburg suburb of Rosebank says a lot about the South African construction and property sector. The 300 000m² Oxford Parks mixed-use development by Intraprop began construction in 2017 and the first phase is valued at about R1-billion. Firstly, South Africans love shopping malls. The South African Council of Shopping Centres calculates that the country has the sixth-highest highest number of shopping malls in the world. R2billion was recently spent on Menlyn Park in Pretoria to expand it to 177 000m² of gross lettable space while the Gateway Theatre of Shopping in Durban, South Africa’s second-biggest mall, recently spent R750-million. Secondly, development often follows existing patterns (Rosebank-Sandton is already the richest and densest retail and office precinct in Africa). Many of South Africa’s biggest firms have their headquarters in this area: BPSA will take up residence in Oxford Parks. Thirdly, the concept of “lifestyle” malls has caught on. The best known of these is Johannesburg’s Melrose Arch. Finally, the Oxford Parks project illustrates a big shift in the construction sector away from large conglomerates towards smaller, blackempowered companies. The sale in 2017 of Murray & Roberts Construction to a black-led consortium is part of a wider trend. Away from the glitz of multi-purpose malls and towering office blocks, Statistics SA has found that the percentage of South Africans living in flats has risen markedly. Whereas 26 out of 100 approved plans in 2013 were for flats, this figure reached 59 in 2016. Although the total number of people living in flats is still relatively small (5.4%), this figure will rise as urbanisation increases.

ONLINE RESOURCES Construction Industry Development Board: www.cidb.org.za SA Institute of Architects: www.saia.org.za South African Property Owners Association: www.sapoa.org.za

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Growing a national footprint Maritz Electrical is expanding.

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aving established a loyal customer base in the private and public sectors in the Western Cape, Maritz Electrical has expanded its horizons, showing that it is ready to tackle projects anywhere in South Africa. Recent projects that indicate the versatility that the company brings to lighting projects, in particular in LED lighting and in large-area lighting, include: a world-first LED stadium lighting project in Port Elizabeth, another stadium in the Free State, East London airport building lighting and mast lighting for informal settlements for the Buffalo City Municipality. With an expanding workload, Maritz Electrical made a move in 2018 to new premises in Athlone. Founder and Managing Director Kurt Maritz explains, “We have moved 150 staff from three branches into one customised 3 000-square-metre facility. It is designed in such a way that we have enough space for 50% expansion. Half of the massive space we dry-walled so that we have a suite of offices.” There are no specific targets, but Kurt is clearly looking forward with anticipation. “We don’t have any ceiling we want to hit. Our engine is our sales department. As much work as they bring in, that’s how we will grow.” SOUTH AFRICAN BUSINESS 2020

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Free State Kaizer Sebothelo Stadium was built as a multi-use venue but mainly used to host football matches in the township of Botshabelo east of Bloemfontein. The 20 000-seater stadium is the home ground for Botshabelo Football Club and Tower United FC. Maritz Electrical replaced the existing, outdated lighting, as their output intensity was too low to cater for high-definition camera equipment. Mangaung Municipality’s tender stipulated that the lighting needed an up-


FOCUS

Eastern Cape

grade to HD quality using a local lighting brand. The Maritz solution not only saved close to R3-million, but provided a 10-year warranty, resulting in further savings for the client. Musco 1500w metal halide luminaries were installed for field lighting and LED luminaries for emergency lighting. The stadium’s generator was upgraded to 110KVa. Using any other system would have required the upgrade of the power supply, but this was not necessary as the Musco system uses approximately 25% less power than conventional systems

In 2017, St George’s Park became the world’s first International Cricket Council-compliant, LED-lit stadium and the first such stadium to be fitted with theatrics. Over four days in December 2017, the famous ground celebrated the landmark of being the first South African venue to host a day-night Test match, against Zimbabwe. The R27-million contract was completed on time and on budget by a team from Maritz Electrical led by Warren Williams. Two project managers from Musco Lighting supported the installation. The lights on top of the Duckpond Pavilion were hoisted at night, the process being illuminated by floodlight. Project Manager Diketso Kumalo reports that the six-month contract to install LED energy-saving lights at East London Airport was completed on time and on budget. Says Kumalo, “One of our goals for all projects that we do is to satisfy the client and leave them with a happy face.” LED lighting can significantly reduce power consumption. Maritz Lighting’s pre-installation and post-installation testing confirmed that East London Airport will be saving on electricity costs. The Maritz contract with the Buffalo City Metropolitan Municipality entails providing mast lighting to informal settlements across the municipality. “We are providing them with 20m-high masts with LED luminaires,” says Kumalo. “LED consumes much less power compared to high-pressure sodium or metal halide although the LED the lux level is better.” Costs will be reduced and the power of illumination will be better for residents. Kumalo says that there is a possibility that Maritz Electrical might open an Eastern Cape office. “Our presence is growing,” he notes. “Depending on the amount of work we receive from the province, we might be looking at opening another office in the Eastern Cape.” Kumalo points out that Maritz Electrical’s expertise extends beyond lighting. “We do a variety of electrical works. We also offer project management, consulting, compliance and hazardous area classification and MV and LV maintenance.”

Western Cape The municipal authorities of Overstrand and Stellenbosch have contracted Maritz Electrical to work on low-cost housing projects. This is a big market and Maritz Electrical is building its skills set in this area. Aspects of this market include reticulation, electrification, street lights, road-side furniture and mini-substations. ■

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INTERVIEW OVERVIEW

Manufacturing A new national drug tender is an opportunity for local manufacturers.

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anufacturing’s contribution to South African GDP is 14%, less than half its contribution in the 1980s and a drop of about 10% from the 1990s. In 2018, the real-term contribution to GDP was R386.8-billion (Stats SA). Overall production was up 1.2% on 2017. The manufacturing sector employs the third most people of South Africa’s economic sectors, about 1.7-million, after financial services and retail. Two of the manufacturing sectors that have achieved the best results in recent years, automotive and food and beverages, are featured separately. Food and beverages is the most significant, contributing 25% to total manufacturing activity. South African manufacturing is diverse, a fact that was on show when the winners were announced in the 2019 Factory of the Year competition. Run by management consultants AT Kearney, the overall winner was Port Elizabeth-based exhaust systems company Eberspächer South Africa. (An Eberspächer test bench is shown as the main image on this page.) Other winners included stainless-steel manufacturers (Columbus Steel), casting and machinists (Atlantis Foundries), packaging (Nampak Bevan) and smart meter providers (Nyamazela Metering). Several of the main organisations involved in manufacturing contribute to the judging process: the Department of Trade, Industry and Competition (DTIC), Council for Scientific and Industrial Research (CSIR), the Industrial Development Corporation (IDC), the Manufacturing Circle and the Lean Institute Africa, which has its office in the Graduate School of Business (UCT) in Cape Town. South Africa’s pharmaceutical sector is worth approximately R20-billion annually. Although there are more than 200 pharmaceutical firms in the country, large companies dominate, with Aspen (34%) and Adcock Ingram (25%) the key players, followed by Sanofi, Pharmaplan SOUTH AFRICAN BUSINESS 2020

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SECTOR INSIGHT Clothing and textiles is bouncing back. and Cipla Medpro. The National Association of Pharmaceutical Manufacturers (NAPM) has rebranded as Generic and Biosimilar Medicines of Southern Africa. A new tender for a national supplementary HIV/Aids drug tender which was previously awarded to foreign companies is to be issued, opening up opportunities for local manufacturers such as Cipla Medpro, which made up 23% of the previous tender. The three-year tender is worth R18.3-billion. The opening in May 2018 of a R1-billion specialised product facility at the Port Elizabeth plant of Aspen Pharmacare will add 500 jobs to the existing complement of 2 000 staff members. The new plant will make products for chronic conditions for the company which until now has focussed


OVERVIEW on generics. Annual production is planned of about 3.6-billion tablets. South Africa’s chemical industry contributes 5% to national gross domestic product (GDP) and about 60% of earnings are derived from exports. The complexes run by Sasol at Secunda (Mpumalanga) and Sasolburg (Free State) underpin the national manufacturing capacity. Sasol Chemical Industries makes about 60% of South Africa’s polypropylene. Safripol is South Africa’s only other producer. More than half of Sasol’s production of 625 000 tons is exported. Omnia and Kynoch (fertiliser), Karbochem (rubber and carbo-chemical), Safripol (plastics) and Afrox are among the other major companies operating out of Sasolburg. The by-products of the sugar and forestry processing plants of KwaZulu-Natal benefit the chemicals sector. Illovo Sugar manufactures downstream products such furfural, furfuryl, alcohol, diacetyl and ethyl alcohol. Sappi makes 17% of the world’s dissolving wood pulp. Two of the company’s three mills are in South Africa, Ngodwana (Mpumalanga) and Saiccor (KwaZulu-Natal). The latter mill has a capacity of 800 000 tons per annum of sulphite dissolving wood pulp, making it the world’s single largest manufacturing site. AECI is one of South Africa’s biggest groups. The two principal divisions are AEL Mining Services (with a large factory site at Modderfontein near Johannesburg) and Chemical Services, which has 20 separate companies. Foskor is the country’s only vertically integrated phosphates producer.

The Manufacturing and Competitiveness Enhancement Programme (MCEP) of the Department of Trade and Industry and Competition (the dtic) has disbursed grants which have resulted in 230 000 jobs being “sustained”. Because of the Clothing and Textile Competitiveness Programme, that sector currently now employs around 95 000 workers, contributing 8% to manufacturing GDP and 2.9% to overall GDP.  In the leather sector 22 new factories have been opened, supporting 2 200 jobs. In the Western Cape, this revival is reflected in member companies of the Cape Clothing and Textile Cluster hiring 35% more staff in four years. Some 23 600 people are employed in the province and exports from the Cape amounted in 2017 to R4.4-billion with sales up by 34% above inflation.

Metals Among other important sectors are metals beneficiation (more than 50% of the world’s ferrochrome is produced in South Africa), coke and refined petroleum products and information and communication technology. Steel and petroleum collectively make up about 45% of South Africa’s total manufacturing production capacity. Steel has been experiencing a volatile few years, with reduced demand from China. This sector makes up 28% of manufacturing. The country consumes about 150 000 tons of stainless steel every year. South Africa makes about 500 000 tons of primary stainless steel (most of which is exported) and imports a further 40 000 tons. Cheap imports have been at the heart of problems for the steel sector, but other issues include energy prices and labour costs. Middelburg-based Columbus Stainless is a major supplier of stainlesssteel products to the domestic and international markets. The Manganese Metal Company in Nelspruit is the largest producer of pure electrolytic manganese metal in the world. Iron production at Saldanha in the Western Cape includes hot-rolled coil produced by ArcelorMittal and cold-rolled and galvanised steel by DSP, a joint venture between South Africa’s Industrial Development Corporation (IDC) and a Belgian company, Duferco.

ONLINE RESOURCES Centre for Advanced Manufacturing: www.cfam.co.za Chemical and Allied Industries’ Association: www.caia.co.za Manufacturing Circle: www.manufacturingcircle.co.za South African Textile Federation: www.texfed.co.za Steel and Engineering Industries Federation of Southern Africa: www.seifsa.co.za

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OVERVIEW

Food and beverages Small municipalities are struggling to supply services to processors.

SECTOR INSIGHT PepsiCo has bought Pioneer Foods.

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wo of the best-known large companies in South Africa’s food and beverages sector were purchased by international companies in 2019. The involvement of PepsiCo (which bought Pioneer Foods) and Central Bottling Co of Israel (which made on offer on Clover) confirms that the idea of South Africa being a stepping-stone to the rest of Africa is still alive. Pioneer Foods, which makes and sells a wide range of products from bread, cereal and fruit juice to spreads and pies at various locations around the country, sold for R24.4-billion. Clover is a listed dairy company which in 2017 produced 554-million litres of milk and had revenues of R10-billion. Clover’s action in 2019 in closing three small-town plants in rural areas illustrated a less positive aspect of South African manufacturing: the inability of small municipalities to adequately supply services to companies. Clover moved production to Port Elizabeth, Durban and Johannesburg. Poultry producer Astral’s appeal to national government eventually led to positive results in the Mpumalanga town of Standerton after water and electricity had become scarce commodities. Food and beverages make up 26% of the South African consumer products sector, just ahead of agri-business (25%), diversified companies (23%) and sugar producers. Between 2009 and 2016 the sector grew by 2%. Most recent capital expenditure has targeted improving

ONLINE RESOURCES Agricultural Research Council: www.arc.agric.za FoodBev SETA: www.foodbev.co.za National Agricultural Marketing Council: www.namc.co.za Perishable Products Export Control Board: www.ppecb.com

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efficiency rather than expansion of production. The food and beverages sector employs about 230 000 people. Beverages account for just over 4% of all manufacturing sales while food is responsible for 13.5%. Within the sector, beverages accounts for 24% of sales. One quarter of the 37% of national GDP that is generated by agri-industries derives from agri-processing. Gauteng, the Western Cape and KwaZulu-Natal are the leading provinces, with half of the companies in the sector in Gauteng. There are about 4 000 food-processing companies in Gauteng, employing more than 100 000 people. Global consumer goods company Unilever has invested nearly R4-billion in recent years. This highlights a trend across the food and beverages sector. In 2016, Nestlé South Africa invested R1.2-billion in adding instant coffee to the products it makes in South Africa. By volume and value, the Joburg Market is the biggest in Africa. There are 55 cold rooms that can accommodate 4 561 pallets of fresh produce at any one time. An average of 10 000 buyers congregate daily on the market’s 65 000m² of trading space.


CONTENTS PROFILE

Kemtek pursues continual growth Kemtek keeps abreast of industry developments and potential new markets while offering the best solutions to customers.

Targeted industry events and product demonstrations are proving highly popular with Kemtek customers and prospective customers alike.

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ong-established in the lithographic, flexographic, digital and large-format printing and packaging arenas, Kemtek has evolved over time into a multi-pronged organisation, entrusted with channel responsibility by many of the world’s leading brands in the barcoding and labelling sectors through widespread professional resellers, plus 3D printing, through its joint venture partner Rapid 3D. Aligning with internationally-acclaimed brands is one aspect of Kemtek's continued success, coupled with expert sales and service support, and an agile and specialised national distribution network, annually achieving some 15 000 deliveries. This fast-growing enterprise also represents specialist additive manufacturing equipment and materials providers in multiple sectors including aerospace, automotive, manufacturing, medical, dental and jewellery, with brands such as EOS, Envisiontec and Zortrax.

by Kemtek's principal brands. Providing a winning edge for all Kemtek's customers means delivering the most advanced technological equipment and service, backed by a total commitment to service excellence. With digital printing firmly growing in Southern Africa, Kemtek and partner, HP Indigo, have recently expanded their labels and packaging portfolio with technology solutions to drive printing and converting toward more flexible, productive and profitable digital printing. Taking digital finishing to the next level is the ability to integrate the Indigo 6900 with an HP Indigo GEM digital embellishment unit – a one-pass label-printing and embellishment system for spot, tactile, foil, holograms, mini textures and lamination. In the packaging sector, Kemtek’s alliance with Flint Flexographic products goes from strength to strength. Flint has extended the range with nyloflex FTF-UV plates, designed for high-resistance to UVbased inks, and nyloflex FTP for paper packaging applications such as multiwall sacks and liquid dairy cartons. Another important development between Kemtek and Flint Group is a distribution agreement that allows Kemtek to supply the full range of ThermoflexX laser imaging systems in South Africa.

Building on core strengths Creating value on a sustainable basis is Kemtek’s marketing approach that's based on a detailed understanding of markets and the needs of the end user. These needs are then married to the technologies provided

For more information, visit www.kemtek.co.za

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Automotive Vehicle exports are boosting the South African economy.

SECTOR INSIGHT Giant vehicles for defence, construction and mining are a growth sector.

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outh Africa’s automotive sector continues to excel in production volumes and exports. Another first was achieved in 2018 when the country’s vehicles were sent to a total of 155 countries. Vehicle and automotive component exports in 2018 brought in R178.8-billion, fully 14% of South Africa’s total export basket. Automotive and automotive components make up 30.2% of total manufacturing output and about 7% of the nation’s Gross Domestic Product (GDP). Two of the newest production lines are up and running at BMW’s Rossyln plant (BMW X3 SUV) and in Uitenhage where Volkswagen has added an additional production line to produce more Polos. All of the country’s major manufacturers such as Mercedes-Benz (East London), Toyota (Durban) and Ford (Port Elizabeth and Tshwane) have invested large sums in increasing production or in taking on new vehicle models. The purchase by the United Arab Emirates of an armoured personnel carrier made by defence and aerospace company Paramount Group at a trade show in early 2019 was a reminder that the South African automotive industry extends beyond sedans and pickup trucks (or bakkies as they are known in South Africa). The Mbombe 4 (pictured) is the third in a series of combat vehicles produced by Paramount. Paramount South Africa has been created so that it can participate in the local market. Gauteng also has DCD Protected Mobility which manufactures armoured cars in Boksburg, branded as SOUTH AFRICAN BUSINESS 2020

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Vehicle Mounted Mine Detectors. In nearby Benoni, BAE Systems OMC designs and manufactures protected vehicles. Bell Equipment, which originated in Richards Bay and still has a large manufacturing facility there, now claims 50 000 machines operating in over 80 countries around the world. Its articulated dump trucks supply hundreds of mining operations and it has over 100 other products. Bell is in the process of transferring production of its truck range to its factory in Germany, which will double in size to accommodate the growing demand for trucks in Europe and America. The shift will not affect employment levels at the Richards Bay site because Bell started assembling Kamaz heavyduty trucks in 2019 for the African market. Kamaz, a Russian brand that has won 14 Dakar rallies, is known for its reliability in tough conditions. Bell’s intention is to increase the percentage of local components over time. Dezzi Equipment also makes loaders, dump trucks and haulers in KwaZulu-Natal, 300km south of Richards Bay at Port Shepstone.


OVERVIEW Long-term state support of the industry through the Automotive Production and Development Programme (APDP) is a major reason for the continuing health of this vital sector. The industry itself is looking to Africa for new markets. By increasing total production numbers to one-million vehicles, the sector will be more viable. The National Department of Trade and Industry and Competition (the dtic), working together with the National Association of Automobile Manufacturers of South Africa (NAAMSA) has set targets for 2035 to increase production to 1% of world volumes (which would mean 1.4-million more vehicles made in SA), increasing local content and doubling employment and blackowned businesses in the sector. The Eastern Cape manufactures half of the country’s passenger vehicles and provides 51% of South Africa’s vehicle exports. The sector accounts for over 40 000 formal sector jobs in the province. Phase 1 in the construction process of the vehicle assembly plant of Beijing Automotive Group South Africa (BAIC SA) was completed in 2018. The total project involves an investment of R11-billion. BAIC expects to be building 50 000 vehicles per year at its site at Coega SEZ by 2022. The decision in 2017 of General Motors to disinvest from South Africa has not had any knock-on effect. The company’s sale of its plant in Port Elizabeth was just one sale of many around the world. Isuzu has bought the factory. In January 2018, Mercedes-Benz South Africa (MBSA) started producing the Mercedes-AMG C 63 S at its

East London factory, after an investment of R200-million. MBSA started exporting record volumes in 2016 and has kept up the pace since then. BMW South Africa has invested R6-billion in its Rosslyn plant to manufacture the new BMW X3 model. Nissan is another big automotive manufacturer with a plant at Rosslyn, north-west of Pretoria. Gauteng is also home to a strong automotive components industry, together with several bus and truck assembly plants. These include Scania, TFM Industries and MAN Truck and Bus South Africa, as well as the Chinese truck manufacturer FAW, which owns an assembly plant in Isando. Bejing Automotive Works (BAW) assembles taxis at Springs. In 2016, Toyota invested R6.1-billion into its massive plant at Prospecton, Durban. The company regularly sells about a quarter of the vehicles sold in South Africa, and accounts for the same proportion of exports. The Corolla car, the Hilux bakkie and the Fortuner SUV are manufactured at the plant.

Automotive components South Africa has a sophisticated automotive components sector. The catalytic converter sector experienced incredible growth for a number of years but volatility in the platinum mining sector, together with increased interest in electric vehicles and hybrids, means that exporters (largely based in Port Elizabeth) have had to work harder. Tyre and glass manufacturers are clustered around the areas where the automotive industry is active. Tyre manufacturer and distributor Sumitomo Rubber South Africa was established in 2014 and makes and sells brands such as Dunlop, Falken and Sumitomo Tyre into Africa. Bridgestone Tyres has plants in Port Elizabeth and Brits and Continental makes tyres in Port Elizabeth. The large number of vehicle models produced in South Africa is a complicating factor for the components sector: low volumes often mean high prices. Two Port Elizabeth companies export significant portions of their production to overcome this: Schaeffler SA exports to its international parent so that it can achieve higher volumes. Shatterprufe supplies the majority of windscreens to the South African market but there are 12 model ranges to serve.

ONLINE RESOURCES Automotive Industry Development Centre: www.aidc.co.za National Association of Automotive Component and Allied Manufacturers: www.naacam.co.za National Association of Automobile Manufacturers of South Africa: www.naamsa.co.za

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OVERVIEW

Transport and logistics A private-public partnership is upgrading facilities at ports.

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frica’s first plastic road is under construction near Humansdorp in the Eastern Cape. Finding ways of creating roads that can last longer is an important priority for South Africa which has yet to find a way to direct significant amounts of goods traffic back to the rail system and away from trucks. Scottish company MacRebur will partner with local firms Scribante Construction and SP Excel Holdings in building 1km of road to test the technology which adds waste plastics to asphalt for road construction to strengthen the bitumen binder. It is estimated that 1.8-million plastic bags could go into the building of just 1km of road. With the completion the Gauteng Freeway Project, the South African National Roads Agency (SANRAL) has been tackling big projects in every province: • the R573 east of Johannesburg, traverses three provinces and is used by 50 000 commuters daily, is to be upgraded • the R1.14-billion Mount Edgecombe interchange has been opened in KwaZulu-Natal • the R71 road out of Polokwane towards Moria in Limpopo carries more than 17 000 vehicles per day at Easter time. A new intersection and double carriageways have been constructed • the N2 between Mtunzini toll plaza and Empangeni has been made safer by the creation of a dual carriageway • the Wild Coast toll road project – the bridge over the Mtentu River will be the highest bridge in the country at 217m and will cost R1.6-billion South Africa has 21 000km of railway lines and 747 000km of roads, 325 019 heavy-load vehicles and the road freight industry employs 65 000 drivers. The logistics and courier market is worth R10-billion. There are 135 licensed airports in the country, 10 of which have international status. SOUTH AFRICAN BUSINESS 2020

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SECTOR INSIGHT Plastic bags are being used in road construction.

Air Airports Company South Africa (ACSA) owns and operates the country’s 10 biggest airports. The company also manages airports in India and Brazil. Ekurhuleni wants to leverage the location of South Africa’s biggest airport, OR Tambo International, into a major economic asset. OR Tambo International Airport in Gauteng (pictured) caters for more than 21-million passengers annually. The Cape Town International Airport recorded 10-million passengers in 2016. King Shaka International Airport (KSIA) is north of Durban.


OVERVIEW Several airports are possible future regional freight nodes: Wonderboom Airport in Pretoria, Polokwane Airport in Limpopo and Mahikeng Airport in North West Province. The South African Department of Transport has several agencies and businesses reporting to it: Air Traffic and Navigation Services Company, Airports Company South Africa (ACSA), National Transport Information System, Road Accident Fund, South African Civil Aviation Authority, South African Maritime Safety Authority (SAMSA), the South African National Roads Agency Limited (Sanral) and the Passenger Rail Agency of SA (PRASA).

Rail Transnet is the state-owned enterprise focussed on transport and logistics. It comprises Transnet Freight Rail, Transnet Engineering, Transnet National Ports Authority, Transnet Port Terminals and Transnet Pipelines. Transnet Freight Rail’s operations represent about 80% of Africa’s rail infrastructure. With 25  000 employees TFR has specialist divisions for hauling coal and iron ore together with a general freight division which transports everything from grain to chemicals. The major rail haulage lines are the manganese line from the Northern Cape to Port Elizabeth; iron ore from Sishen in the Northern Cape to the Port of Saldanha; and from the coal fields of Mpumalanga to Richards Bay. More than 55-million tons is regu-

larly transported along the former and upwards of 70-million tons can travel annually along the latter. A total of 600 new passenger trains will be added to Metrorail’s fleet at a cost of R51-billion. Transnet Freight Rail has ordered 1 064 diesel and electric locomotives from four suppliers. Sheltam Group is expanding its services beyond rail services. A new lease company (for rolling stock) and an investment company (focussed on rail infrastructure) underpin the group’s African ambitions.

Logistics South Africa’s largest agricultural company has signed an agreement with Transnet to partner in upgrading grain facilities at two ports. East London and Durban will receive R100-million revamps as part of a 15year tender won by Afgri. The East London Grain Elevator is operating well below capacity, processing about 90 000 tons a year. At full capacity, the elevator could handle as much as 720 000 tons. Durban’s other two agricultural terminals are currently run by Bidvest and SA Bulk Terminals. Transnet is hoping that the partnership will help it towards reaching its goals in its road-to-rail strategy. The building of the Musina-Makhado Special Economic Zone (SEZ) will boost Limpopo’s role as a transport and logistics hub. The Musina Intermodal Terminal is 15km from the busy Beit Bridge border crossing. It will boost efforts to move cargo from road to rail. The Nkomazi SEZ near the border with Mozambique in Mpumalanga has similar advantages as it forms part of the Maputo Development Corridor. Investment in improved infrastructure is being made at all of South Africa’s ports and Special Economic Zones are in place at four of them. The Maputo Development Corridor is Africa’s most advanced spatial development initiative. Run by the Maputo Development Corridor Logistics Initiative (MCLI), the corridor runs from near Pretoria in Gauteng, to Maputo in Mozambique. The Harrismith Logistics Hub at the Maluti-A-Phofung SEZ on the N3 is an inland port that can handle cargo containers and shift cargo from road to rail, reducing congestion and costs.

ONLINE RESOURCES Airports Company South Africa: www.acsa.co.za National Department of Transport: www.transport.gov.za Road Freight Association of South Africa: www.rfa.co.za South African Association of Freight Forwarders: saaff.org.za South African Heavy Haul Association: www.saheavyhaul.co.za

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OVERVIEW

ICT Cloud services have come to South Africa.

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ape Town and Johannesburg recently became the first South African cities to host Microsoft Azure data centres. Microsoft will make available cloud services for Office 365 and Dynamics 365. Amazon Web Services (AWS) will set up a data centre in Cape Town in 2020 to serve Sub-Saharan Africa. The French government has officially designated the city as one of six global French Tech Hubs. The Industrial Development Corporation (IDC) estimates that spending on cloud services in South Africa will reach R11.5-billion by 2022, nearly three times its level in 2017 (Tech Central). This trend could generate more than 100 000 new jobs. Acuity Consultants was quoted in 2019 as saying that software developers’ salaries had risen by 30% in a year (Business Times). The Council for Scientific and Industrial Research (CSIR) in Pretoria will host a new body aimed at preparing South Africa for the Fourth Industrial Revolution (4IR), the South African Affiliate Centre of the World Economic Forum. Among the biggest investors in new technology are banks and other players in the financial sector, where technology is rapidly lowering the barriers to entry for new businesses. The Small Enterprise Development Agency (Seda) runs the SoftstartBTI ICT incubator in Midrand and Tuksnovation, a high-tech incubator, at Pretoria University. Several incentives relevant to companies and educational bodies in the ICT sector are available from the Department of Trade, Industry and Competition (dtic). The Information Technology Association (ITA) is the trade and employer body of the Information Technology industry in South Africa. The ITA represents more than 200 companies which supply information technology equipment, systems, software and services. Members include IBM, Microsoft SA, Siemens, SAP and Axiz. South Africa’s appetite for fast Internet connectivity is growing. The state-owned company Telkom controls most of the country’s fibre cable

ONLINE RESOURCES Independent Communications Authority: www.icasa.org.za Information Technology Association of South Africa: www.ita.org.za State Information Technology Agency: www.sita.co.za Technology Innovation Agency: www.tia.org.za

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SECTOR INSIGHT IT skills are at a premium.

but several smaller private companies are winning contracts to lay fibre-optic cables around the country. Allowing access to the Internet to rural people and poorer people in urban areas is a policy priority. As part of its mandate, the Independent Communications Authority of South Africa (ICASA) has organised that private operators have connected more than 623 schools. Dark Fibre Africa, a Remgro subsidiary, has established a Digital Villages unit to roll out fibre in low-income areas. Another company in which Remgro has a stake, Vumatel, plans to offer uncapped broadband services in Alexandra (Johannesburg) for less than R100 per month. Private mobile communications company Vodacom has pledged to spend R50-billion on network infrastructure in rural areas. Vodacom is also developing an affordable sheep-tracking collar with farmers in the Eastern Cape. There are 2 000 ICT firms in the Western Cape, with 17 000 employees. The Cape Innovation and Technology Initiative (CiTi) supports startups and entrepreneurs.


OVERVIEW

Banking and financial services New stock exchanges are attracting investors.

SECTOR INSIGHT Discovery Bank has been launched.

O

n top of the recent issuing of new banking licences, South Africa’s financial services sector has also been enlarged with the opening of several new stock exchanges. The decision by pharmaceutical giant Aspen Pharmacare to conduct a second listing on one of them, A2X, suggests good timing by the people behind the latest trend. A2X has attracted nearly 20 companies in a wide range of sectors in less than two years, with a primary focus on secondary listings. Patrice Motsepe’s African Rainbow Capital is an investor in A2X. Of the four new exchanges, Equity Express Securities Exchange (EESE) trades in Black Economic Empowerment (BEE) while ZARX and 4AX are targeting companies that are not listed elsewhere. ZARX has agricultural holding companies like TWK and Senwes among its first clients. The JSE is the world’s 19th-biggest exchange and nearly 400 companies are listed on the JSE or AltX, the JSE-owned exchange for smaller companies. The green bond issued by the City of Cape Town is a sign of the “climate change” times. South Africa’s third-ever green bond attracted bids over R4-billion on an initial offering on projects worth R1-billion. The JSE intends opening a green section to deal with the expected growth of such instruments. The lead arranger for the bond was Rand Merchant Bank. In 2017 Tyme Digital received a licence to run a bank. By early 2019, TymeBank was available in 500 Pick n Pay and Boxer stores and more

ONLINE RESOURCES Financial Sector Conduct Authority: www.fsca.co.za Insurance Institute of South Africa: www.iisa.co.za South African Institute for Chartered Accountants: www.saica.co.za South African Reserve Bank: www.resbank.co.za

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than 50 000 customers had an account. Tyme stands for Take Your Money Everywhere and refers to the fact that the bank does not have a branch network. The bank is targeting the lowerincome segment and promises speedy transaction and approval times. African Rainbow Capital began as the venture’s BEE partner but in 2018 bought out the Commonwealth Bank of Australia. Second to market among the country’s new banks was Discovery Bank, which officially launched in March 2019. Discovery Bank will apply the behavioural model it uses in its health business to reward good financial behaviour. The Discovery group is already a giant on the JSE (market value of R83-billion) with access to millions of customers. T he insurance market now offers a greater variety of products to more market segments, including middleincome earners. An example of a specific product responding to new realities is Old Mutual’s iWYZE medical gap cover, designed to pay the difference between what a medical aid scheme is willing to pay and what the hospital or doctor is charging.

SOUTH AFRICAN BUSINESS 2020


OVERVIEW PROFILE INTERVIEW

Developing excellence in the auditing industry Natalie Khambi, Business Development Manager of Audit and Risk Management Solutions (ARMS), gives an overview of the company history.

Natalie Khambi, Business Development Manager

How do you differentiate yourself as a company? Audit and Risk Management Solutions (ARMS) is a 100% black-owned and black-staffed company. We develop black entrants to the auditing industry and are committed to prove that black excellence does exist. Our client list built over 13 years of existence is testament to this. What are your main services? Our services include internal auditing, risk management, assurance and advisory, forensic investigations as well as training. Do you focus on particular sectors? Currently our client base is predominantly the public sector; however, we have made noticeable inroads into the private sector in the last year. How was the company formed? The founders met while working together at a university where one of them was the Chief Financial Officer. They decided to start a company and couldn’t get funding from the banks. They then set out to self-fund and gradually grew the business to where it is now.

BIOGRAPHY Natalie Khambi is the Business Development Manager at ARMS where her responsibilities include managing a team of business development consultants, stakeholder relations, marketing and communications. Natalie joined the company in February 2018.

SOUTH AFRICAN BUSINESS 2020

How important is the training component of the business? Training is a very important part of our business. We grow our own talent internally through training and mentoring new entrants. We also offer training as a service to our clients to capacitate their organisations. Further to this, we ensure that skills transfer is prioritised with each project that we undertake. Please list some clients you are working with/have worked with. Some of our clients include National Treasury, City of Ekurhuleni, City of Mbombela, Polokwane Municipality, the Department of Social Development, just to mention a few.

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OVERVIEW PROFILE

Audit and Risk Management Solutions (ARMS)

A

RMS is a dynamic South African auditing firm founded by black professionals with a passion for transformation, professionalism and upliftment of previously disadvantaged persons. The firm focuses on servicing all spheres of government and SMMEs in South Africa. ARMS has established its base of operations in Gauteng with headquarters in Johannesburg. ARMS assists clients with all matters relating to assurance, enterprise wide risk management and governance. The founders and par tners of this firm bring decades of accounting and auditing experience to the business. This group of professionals are leading the company as it establishes a reputation of providing high quality professional services. The value drivers that ensure that we provide consistent highquality service to our clients are: • Client focus • Utilising appropriately skilled staff for each assignment • Rigorous staff selection and development • Innovation • Developing in-depth specialised knowledge in each service area • Competitive pricing

Our services We provide the following services:

• Advisory & Assurance • Internal Auditing • Governance & Compliance • Risk Management • Specialised Training • Special Investigations • Performance Auditing • Performance Management Systems and Support • IT Auditing • SCOA implementation, support & training

Clients include • City of Johannesburg • Johannesburg City Parks • Greater Tzaneen Municipality • Randfontein Local Municipality • City of Tshwane • City of Ekurhuleni • City of Polokwane • Eastern Cape Liquor Board • Joe Gqabi District Municipality • Mkhondo Municipality • Department of Home Affairs • National Heritage Council South Africa

CONTACT INFO Address: 1st Floor, Block 9, St David’s Place PI, Parktown 2019 Tel: 011 484 1235 • Fax: 086 619 9887 Nkululeko Swana: 083 462 5606 Adv Boreka Motlanthe: 084 588 3820 Namhla Gogo: 078 213 0746 Email: info@armsaudit.co.za • Web: www.armsaudit.co.za

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OVERVIEW

Development finance and SMME support Supply chains can create and support small businesses.

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unding for more than 2 300 small, medium and microenterprises (SMMEs) and support for 50 000 jobs – that’s what Anglo American’s Zimele programme has achieved in 30 years of supporting small businesses. Most of the support came through the purchase of goods from small businesses in the supply chain of Anglo mines or from companies supplying services to the relevant mine. Zimele (which means “stand on one’s own two feet”) changed focus somewhat in 2017, with more emphasis being placed on building up skills and on improving the sustainability of SMMEs. Most big companies in South Africa have two main programmes to support SMMES: enterprise development (ED) and local supplier development (or procurement). Venetia Mine in northern Limpopo is a De Beers Group mine. Anglo American is a majority shareholder in De Beers. As of 2019, more than 50 SMMEs had enrolled in incubation programmes, 27 businesses were supported by the mine’s ED programme and 34 locally owned companies were doing business with the mine. For Patience Nqaba of Ikefree Projects (pictured), the chance to offer maintenance services to the Venetia Mine was an opportunity to take her business to a new level. With 29 employees, Ikefree has subsequently signed up with Nando’s (to deliver food) and with Tiger Brands, to mainSOUTH AFRICAN BUSINESS 2020

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SECTOR INSIGHT Anglo American’s Zimele celebrated 30 years in 2019. tain the food company’s property. One of biggest problems faced by SMMEs is cash flow. Most government departments have rules about procurement which are biased in favour of purchasing from SMMEs or co-operatives. However, for many South African entrepreneurs, the inability or unwillingness of government to pay within 30 days presents a major risk to sustainability. Public procurement from township enterprises from provincial and municipal governments


OVERVIEW FOCUS in Gauteng, the province where more than half of the country’s SMMEs are located, increased in 2017 to R17-billion, up from just R600-million in 2014. This expenditure has allowed many township businesses to enter the formal economy and for them to become more sustainable. The City of Johannesburg runs seven SMME hubs where office space, Wifi and advice and training are available for small business operators. South African Breweries, a subsidiary of AB InBev, wants to use its four entrepreneurship programmes to create 10 000 jobs by 2022. In 2018, Coca-Cola Beverages South Africa launched the Mintirho Foundation, a R400-million fund to pay for training of farmers and support business in the agricultural value chain. Toyota South Africa Motors is funding the newly created Toyota Empowerment Trust (TET) to the tune of R42-million. The trust will at first train specialised automation technicians with the long-term intention of helping qualified technicians to start their own maintenance firms. An Incubation Centre has been launched at Nissan’s assembly plant in Rosslyn, north of Pretoria. The facility supports small enterprises through subsidised rental and mentorship and training. Management of the centre is done by the Automotive Industry Development Centre (AIDC), a subsidiary of the Gauteng Growth and Development Agency (GGDA). The Jobs Fund contributes to financing the project. A small business can become a substantial business quite quickly

with the right support. Programmes such as the Black Umbrellas offer different levels of support, from early advice about business plans through office support to mentoring. Civtech Engineers, a Richards Bay consultancy, has grown its revenue and staffing levels as a result of being on the full incubation programme. The National Department of Small Business Development (DSBD) has several programmes to assist SMMEs and co-operatives. These include: • The Black Business Supplier Development Programme, a cost-sharing grant to promote competitiveness • The Co-operative Incentive Scheme, a 100% grant. The Small Enterprise Development Agency (Seda) is a subsidiary of the DSDB. Seda has 42 incubation centres in South Africa under its Seda Technology Programme (STP). In a recent publication, Seda reported that the number of SMMEs in South Africa increased by only 3%, from 2.18-million to 2.25-million between 2008 and 2015. The National Department of Trade and Industry and Competition (the dtic) is trying to stimulate township and rural economies. Various programmes within the dtic and its agencies contribute to the creation of SMMEs or to the rescue of ailing SMMEs in tough times. The Enterprise Investment Programme (EIP) has achieved considerable success. Having received a grant in 2014, Thorax LP Equipment, a 100% black-women-owned company based in Gauteng, has subsequently turned over more than R8-million and employed many young people. A grant to Kalagadi Manganese in the Northern Cape helped to create 8 857 jobs. The National Gazelles is a national SMME accelerator jointly funded by Seda and the DSBD. The aim is to identify and support businesses with growth potential across priority sectors. Businesses can receive up to R1-million for training, productivity advice, business skills development and the purchase of equipment.  The Industrial Development Corporation (IDC) supports SMMEs either by disbursing loans or by taking minority shares in enterprises and giving advice. An agricultural project in the Northern Cape is an example of the kind of work it does. Through the IDC’s Transformation and Entrepreneurial Scheme, a black economic empowerment project is underway at Kakamas. The emerging farmers of Vaal Community Citrus are planting citrus.

ONLINE RESOURCES Industrial Development Corporation: www.idc.coz.a National Department of Small Business Development: www.dsbd.gov.za National Small Business Chamber: www.nsbc.org.za Small Enterprise Development Agency: www.seda.co.za

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OVERVIEW INDEX

INDEX Afrimat

9

Air Products

IBC

Audit and Risk Management Solutions (ARMS)

90

BCX

IFC, 41

Brand South Africa

OBC, 4, 19

Chartered Institute of Finance Audit and Risk Officers (CIGFARO)

35

Citiq Prepaid

63

Council for Geoscience (CGS)

48

ENERTRAG South Africa

65-67

Export Credit Insurance Corporation of South Africa (ECIC)

54

Exxaro Resources

46

Implats 39 Invest Durban

24

Kemtech

11, 83

Limpopo Economic Development Agency (LEDA)

26

Maritz Electrical

36, 78

Metropolitan

2, 92

Minerals Council South Africa

44

National Cleaner Production Centre of South Africa (NCPC-SA)

13

NOSA Testing

43

Palabora Mining Company (PMC)

50-53

Petroleum Agency SA

70

South African Mohair Industries Limited (SAMIL)

60

Unemployment Insurance Fund (UIF)

7

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96

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South African Business 2019/2020  

South African Business 2019/2020 is a trade and investment journal for public and private entities either based in South Africa or looking t...

South African Business 2019/2020  

South African Business 2019/2020 is a trade and investment journal for public and private entities either based in South Africa or looking t...