The South African National Roads Agency (Sanral) is planning major road upgrade projects for the King Sabata Dalindyebo (KSD) local municipality, including upgrading and widening of the R61, and upgrading of the N2 from Viedgesville to Mthatha into a dual carriageway. Sanral southern region regional manager Mbulelo Peterson said this week that Sanral had initiated a number of key projects over the last ten years in the King Sabata Dalindyebo municipality, particularly on the N2 and R61 national roads. Current and planned Sanral projects in the municipality include the upgrade of the National Route N2 Section 18 from Viedgesville (65 km) to Mthatha (85 km). The project will include upgrading the road to four lanes divided by median or physical barrier/dual carriageway. The upgrade includes the improvement of capacity for the intersections and interchanges, as well as the provision of pedestrian bridges or underpasses. The preliminary design report is anticipated to be finalised in January and the tender date is estimated to be published in August. The land acquisition process on the project is already in place. Meanwhile, a community development project linked to the N2 Viedgesville-Mthatha project is also planned for the local municipality. It is anticipated to be advertised within the first quarter of 2021, while advertising of the community development project construction works is planned for the second quarter of 2021. Further, upgrading of National Route R61 Section 7 from Baziya to Mthatha Airport, Phase 1, has been retendered. The initial contract was terminated in August 2019 owing to non-performance of the contractor. The contract for the remaining work was re-tendered and currently the process is in tender evaluation stage. Sanral anticipates that a contractor will be appointed in March 2021. Upgrading of National Route R61 Section 7 from Baziya to Mthatha, Phase 2, from Mthatha Airport to Mthatha CBD, includes upgrading the existing road to a dual carriageway from Mthatha Airport to Madeira street in the Mthatha CBD. The design is being reviewed – taking into account a change in land use in this area – to upgrade the dual carriageway beyond the airport to include interchanges to retain the mobility (100 km/h design speed) of the road network up to the Ian Woods intersection. The remainder of the dual carriageway will remain at 60 km/h design speed. The Southern Region plans to advertise 70 projects in the 2020/21 and 2021/22 financial year. Some are in the planning phase, some in the design phase, and some in the construction phase. Sanral on Thursday engaged stakeholders at the Nkululekweni Council Chamber in Mthatha, while some guests joined the meeting from the satellite office at the Viedgesville Community Centre and online.

Engineering News

Sanral shares details on Eastern Cape road upgrades

As automotive component manufacturer Metair anticipates a full-year decline of 30% in South African production volumes this year, the company remains committed to new model launch projects and overall sustainability of models, markets, projects and customers. Planned model launches and facelifts have already had a positive effect in the second half of 2020, the JSE-listed company says. The board earlier this year approved the automotive components vertical business’ planned multi-stepped U-shaped Covid-19 recovery plan, which includes building on the company’s Vision 2022 strategy. Although production volumes in South Africa in the first half of 2020 were down by 42%, Metair has experienced an improvement in second half volumes and production stability from the automotive components business with increased export demand from Europe. Metair still expects full year production volumes to be suppressed. As such, full-year revenues are forecast to fall by between 25% and 30% year-on-year, with full-year operating margins between 1% and 3%, barring any further manufacturing disruptions. This is based on an expected second half improvement in local automotive manufacturing of about 60 000 to 70 000 units from the first half of 2020, driven by export demand and new facelifts, and the achievement of full year volumes of between 400 000 units to 440 000 units. Metair has approved a R1.3-billion investment to support new projects that can deliver between R25-billion and R28-billion of turnover over a seven-year period from the middle of 2022, depending on the final project volumes and product designs. However, one effect of Covid-19 has been a slight change in project timing, resulting in potentially prolonged project model life. Project timings have been under pressure owing to travel restrictions and the finalisation of market positioning, and therefore some projects have been delayed by three to six months. Metair customers have also reassessed project model lives and the company says it appears that there is potential for the secured projects to be extended from the initial five-to-seven years, to seven-to-ten years. The company’s recovery in the energy vertical is based on aftermarket demand, market share gains, brand positioning, economic range expansion and original equipment manufacturer projects. Metair says aftermarket demand has returned strongly and the company has structurally adapted its cost base and business activities to increase agility. Metair continues to increase its market visibility as Covid-19 has potentially impacted the longer term viability of its industrial manufacturing business in South Africa, owing to lower demand. Barring any short-term setbacks, Metair is upgrading its guidance for the full-year outlook. Based on the company’s current visibility, it expects full-year revenues to be between 5% and 10% lower than the prior year, with full-year margins of between 8% and 10%. This outlook is based on prevailing exchange rates and an average virgin lead price of $1 700/t, combined with an overall positive outlook for volumes. “We expect total automotive battery volumes to improve by between 1.5-million and 1.7-million units from the first six months of 2020, to between 7.2-million and 7.6-million units for the full year,” Metair notes. Despite the Covid-19 impact and lower earnings before interest, taxation, depreciation and amortisation generated for the year, the company’s financial position in terms of cash and liquidity has remained strong and with an improved outlook for the full-year 2020, Metair is highly confident that covenant requirements will be met by December 31. Management continues to closely monitor the group’s financial position, and remains focused on effective cash management, specifically in the areas of working capital in conjunction with customer requirements, cost control and capital expenditures, taking into account planned investments required in new...

Metair still expects lower full-year output, but green shoots are showing

Government will release its draft one-stop border post (OSBP) policy for public comment during the first quarter of 2021, after Cabinet approved the draft policy during its meeting this week. In a statement, Cabinet said that the OSBP policy would give effect to the framework adopted in 2018. The policy sought to harmonise the movement of people and goods between South Africa’s land ports of entry and its neighbouring countries, while also addressing the congestion that resulted in costly trade delays and frustrated travellers. “At a continental level, the policy contributes to the Presidential Infrastructure Champion Initiative, which advances interconnectivity amongst African countries to address infrastructure deficits and boost intra-Africa trade,” the Cabinet statement read. The same statement also highlighted the fact that the African Union (AU) would be holding an extraordinary summit on December 5 and 6 on the African Continental Free Trade Area (AfCFTA). The summit was being held to advance preparations ahead of the start of trading under the AfCFTA on January 1, 2021. Trading under the regime was meant to start in mid-2020, but was delayed as a result of the Covid-19 lockdowns implemented in many of the countries that had ratified the agreement. Cabinet said that the AfCFTA held “enormous” potential benefits for South Africa and could serve as a catalyst to economic growth and investment in the country. “The free-trade area opens our exports of goods and services to a market of more than 1.2-billion people. As chair of the AU, South Africa has been at the forefront of driving the implementation of the AfCFTA.” Cabinet added that the agreement would advance economic integration and strengthen efforts towards peace and stability. Worryingly, moves to liberalise trade was taking place against a renewed flare-up in attacks on truckers in South Africa, with foreign drivers being targeted by groups claiming that these drivers were taking away work opportunities for South Africans. Cabinet “strongly condemned” what it termed the lawlessness affecting the road freight industry and commended recent arrests in Gauteng. “While we understand the frustrations at the violation of immigration laws by some companies, violence is not the solution. Cabinet calls on all affected people to submit their concerns about the freight transport industry to relevant structures instead of resorting to violence.” The statement also confirmed that Employment and Labour Minister Thulas Nxesi was leading a team of Ministers set up to deal with this matter. That team was expected to submit a concrete proposal to Cabinet to address all disputes affecting the industry.

Draft one-stop border-post policy to be released for public comment in early 2021

After a turbulent 2020, the construction sector is eager to make 2021 a much more prosperous year, says Master Builders and Allied Trades Association Western Cape (MBAWC) executive director Allen Bodill. He says the negative effects of the Covid-19 pandemic and subsequent hard national lockdown cannot be overstated when it comes to the construction industry. The economic shock brought on by the two-month work suspension has “caused great hardship for all operating in and around the sector”. “But, the recent Economic Reconstruction and Recovery Plan and supplementary Medium-Term Budget Policy Statement expanded on government’s medium- to long-term plans for the economy, and these timely strategic and policy statements have helped to address some of the uncertainty in the market,” notes Bodill. “Government’s prioritisation of our industry, given the labour-intensive nature of the construction industry and its ability to reinvigorate the economy, is further reassurance this year-end. “We note and welcome the government’s renewed commitment to regulatory reforms and its efforts to ease and reduce the cost of doing business. “As MBAWC we believe that there are exciting opportunities to be unlocked through more public-private partnerships (PPPs),” adds Bodill. “Such PPPs will initially have positive financial short and long-term spinoffs at the local level and will ultimately flow through to the national macroeconomy. “In 2021, we are committed to exploring further business opportunities of this nature.” Builders’ Holiday This December will be unlike any in recent memory for the industry, as contractors try and make up for the lost time during the period of lockdown, says Bodill. “Conventionally in South Africa, the building industry has closed for business from mid-December and reopened in early January, as part of the builders’ holiday. “This year, the Rapid Response Task Team has recommended that the builders’ holiday extend for only five business days, from December 24 until January 5. “The shortened break is intended to ensure that people can earn a livelihood.” That said, the annual shutdown in the Western Cape region is governed by the Building Industries Bargaining Council (BIBC). The council has confirmed the yearly shutdown in the Cape Peninsula, as starting on Friday afternoon December 11 and ending on Monday morning January 11. The council has, however, provided for an exemption process to be followed by those local employers who wish to work later than December 11 and start up before January 11. Bodill says a number of local contractors have already applied for permission to be exempted from the stated shutdown, following consultations with their respective workforce and any trade unions which may be represented among their workers. The BIBC has granted all of the exemption applications received to date.

Construction sector eager to make 2021 a prosperous year

Investment in energy efficiency worldwide is on course to fall by 9% in 2020, the International Energy Agency (IEA) forecasts, warning that the Covid-induced slump threatens international climate goals. The agency’s ‘Energy Efficiency 2020’ report estimates that global primary energy intensity will improve by less than 1% this year, its weakest rate in a decade and well below the level of progress needed to meet climate, pollution-reduction and energy-access targets. The IEA calculates that improvements in energy efficiency can contribute around half of the reduction in energy-related greenhouse gas emissions required over the next two decades to put the world on a path to meeting international energy and climate goals. The poor performance in 2020 has been driven by a plunge in investments in energy-efficient buildings, equipment and vehicles amid the economic crisis triggered by the pandemic. Purchases of new cars, which are more efficient than older models, also slowed, while construction of new, more efficient homes and other buildings is expected to decelerate. In industry and commercial buildings, lower energy prices have extended payback periods for key efficiency measures by as much as 40%, reducing their attractiveness compared with other investments. The IEA says that the stimulus packages being introduced in a bid to recover from the pandemic could help drive the investments and structural changes needed to reduce energy intensity across all sectors of the economy. More than 60% of the funding for energy-efficiency-related measures in stimulus packages announced by governments to date focus on either the buildings sector or on accelerating the shift to electric vehicles, including new vehicle charging infrastructure. Spending on efficiency-related stimulus measures could generate almost two-million full-time jobs between 2021 and 2023, the IEA states, indicating that these jobs will arise mostly in the buildings sector and mainly in Europe. However, the IEA says many opportunities remain untapped, noting that its own Sustainable Recovery Plan suggests that further recovery efforts related to energy efficiency could create another four-million jobs globally. “No announcements have been made to increase the penetration of super-efficient appliances, while spending on vehicle efficiency beyond electric vehicles is minimal to date. The planned spending is also imbalanced on a regional basis, with announcements from European countries dwarfing those from other parts of the world.”

Fall in energy efficiency investment threatens climate goals – IEA

The planned growth of South Africa’s wind-energy sector over the coming decade, and beyond, will require a material upscaling of the country’s training infrastructure to ensure that there are sufficient South African wind technicians trained to support the building and maintenance of an expanding turbine fleet. South African Wind Energy Association CEO Ntombifuthi Ntuli indicated on Thursday that more than 1 700 wind turbine service technicians would be required by 2030 to help build the 14.4 GW of new wind capacity outlined for installation by that date, as well as to service a fleet of some 17.7 GW. The Integrated Resource Plan of 2019 envisages the deployment of 1.6 GW of new wind capacity yearly from 2022 onwards, which Ntuli said would require the training of 192 new wind turbine service technicians every year to match that deployment schedule. Speaking as part of a virtual event to mark the graduation of 12 new wind technicians trained by the South African Renewable Energy Technology Centre (Saretec), Ntuli said the local wind industry was obligated to support domestic skills development so as to localise the talent pool and reduce the need to import skills. Housed at the Cape Peninsula University of Technology (CPUT), Saretec is the first national renewable-energy technology centre in South Africa and its wind turbine service technician training programme is supported by the South Africa Wind Energy Project - an initiative backed by the Global Environmental Facility, implemented by the Department of Mineral Resources and Energy, and supported by the South African National Development Institute and the United Nations Development Programme (UNDP). Saretec’s latest cohort of graduates was trained to meet the needs of projects in the fourth bid window of the Renewable Energy Independent Power Producer Procurement Programme, which required 135 wind technicians. All 12 had already been snapped up by the domestic industry and were working at various wind farms or wind projects around the country. The seven-month course is accredited locally and is recognised internationally and CPUT deputy vice-chancellor Dr David Phaho said that the graduates were regarded as highly specialised technicians able to participate in the construction, commissioning, maintenance and repair of wind turbines. Phaho indicated that CPUT was gearing up to train a further 135 technicians in the coming three years, with the next 12-strong cohort having already been recruited in early 2020. Their training had been disrupted by the recent Covid-19 lockdown, but they would graduate in the first quarter of 2021. Saretec hoped to train at least two more cohorts next year, but was targeting more. UNDP country representative Dr Ayodele Odusola said there was a need for Saretec to upscale its activities in light of the more prominent role that wind energy was set to play in the future South African electricity system. He added that the infrastructure and institutional capabilities developed in South Africa should also be opened up to the rest of Southern Africa and even the wider continent, arguing that, in so doing, revenue could be generated to support and expansion of training capacity locally.

Upscaling of wind technician training needed to support 14.4 GW roll-out

Total new-vehicle sales in South Africa declined by 12% in November, to 39 315 units, compared with 44 670 vehicles sold in the same month last year. The new-passenger-car market fell by 18.1%, to 25 707 units, with the car rental industry accounting for 11.6% of car sales in November. Domestic sales of new light commercial vehicles, bakkies and minibuses gained 5.3% in November, to 11 243 units. Medium truck sales, at 664 units, were down 9.5% compared with November last year, while the heavy truck and bus market declined by 8.4%, to 1 701 units. November new-vehicle export sales, at 31 966 units, fell by 7.6%. The National Association of Automobile Manufacturers of South Africa (Naamsa) says there has been a “steady, small recovery” in the new-vehicle market in recent months, but it believes that “real growth” is still some way off. “The economic scars of the Covid-19 pandemic are extreme and the domestic, as well as global, economic environment will remain uncertain and volatile over at least the next six months, until safe and effective coronavirus vaccines are available and rolled out in South Africa and around the world.” Vehicle finance house WesBank concurs with Naamsa that there is some positive movement in the new-vehicle market, especially as vehicle sales in November continued to increase for the fifth consecutive month. “Amidst an overall market down 30.6% year-to-date, November’s sales performance shows signs of resurgent consumer demand and relief for motor retailers as volumes continue to increase. “In essence, November sales doubled-up the performance increase over October (down 25.4%), to close 12% down on November last year.” “Generally, we have recovered to about 70% of pre-Covid-19 volumes,” says WesBank Vehicle and Asset Finance marketing and communication head Lebogang Gaoaketse. “While it would be unrealistic to expect the market to return to 100% in the short to medium-term, the industry has adapted quickly to the new levels of demand to remain sustainable and continue contributing towards [South Africa’s] economic recovery.” Working From Home Lengthening Replacement Cycle WesBank CEO Chris de Kock says that new blended working arrangements, implemented as a result of the Covid-19 pandemic, have reduced the demand for consumers to own cars. “For those who do [own cars], it is likely that their annual mileage will reduce considerably, increasing the time between replacement cycles. The South African economy will simply not be able to support a market of 500 000 vehicles per year.” De Kock says there are two significant trends at play, both centred around affordability. “Consumers are clearly seeking to reduce their monthly instalment by buying a more affordable vehicle. “The evidence of this can be seen in the market growth of the new-car segment offering lower-priced vehicles, where customers seem willing to substitute high profile brands for more practical and affordable options.” Contributing to this trend is the increase in new-vehicle prices, now averaging close to double-digit inflation this year. “The other trend is the shift towards the used-car market, again driven mostly by the buydown effect,” says De Kock. Used Cars in Short Supply South Africa’s hard-pressed motor dealers are cautiously optimistic about the future, says the National Automobile Dealers’ Association (Nada). “Even though retail sales figures remained muted in November . . . the general feeling among dealers is that they are slightly more hopeful than they were a few months ago,” says Nada chairperson Mark Dommisse. “What we need to know now, is what direction government is going to take to handle the growing number of coronavirus infections, while still preserving a recovering economy. Dommisse adds that the pricing of used vehicles is currently holding up well, but notes that Nada is concerned about a decrease in the supply of these vehicles. He believes this shortfall will...

Buying-down trend, working-from-home impacting new-vehicle sales

The main environmental and social impacts of the proposed 2 400 MW Batoka Gorge Hydroelectric Scheme (BGHES) on the Zambezi river, including serious negative impacts on adventure tourism and on the habitat of a rare bird species, were highlighted during a virtual stakeholder engagement on Wednesday. Located 47-km downstream of the Victoria Falls, the proposed project is being advanced by the Zambezi River Authority (ZRA), a binational organisation owned jointly by the governments of Zambia and Zimbabwe, and which is responsible for managing the Kariba dam and its reservoir, as well as for sustainably harnessing the hydropower potential of the Zambezi river. The river forms the physical border between the two Southern African countries. A consortium comprising the Power Construction Corporation, of China, and General Electric, of the US, has been selected to develop the project, the estimated capital cost of which has been reported to be $4-billion. Financial close on the build-operate-and-transfer initiative is anticipated by the first quarter of 2022, followed by construction by mid-2022. Under the current schedule, it is anticipated that the BGHES scheme – comprising a 175-m-high dam wall, two 1 200 MW power plants on either side of the river, as well as substation, transmission, township and road infrastructure – could begin producing electricity from the second half of 2028 onwards. A public-comment period, which closes on January 25, is currently under way for three environmental and social impact assessments (ESIAs) prepared for the project. The ESIAs cover the project site itself, including proposed new townships in both Zambia and Zimbabwe, as well as the impacts that the associated roads and transmission infrastructure would have on communities and the environment on both sides of the border. As part of the disclosure process, a webinar was hosted on December 2 by the environmental consultants, ERM, and attended by representatives from ZRA, the Zimbabwe Electricity Supply Authority and the Zambia Electricity Supply Corporation. Physical disclosure meetings are also reportedly being held with affected communities on both sides of the river. The ESIAs point to the scheme having significant implications for the adventure and nature-based tourism industries that have developed over the past three-and-a-half decades around the spectacular Victoria Falls and the surrounding national parks on either side of the falls – the Victoria Falls National Park, in Zimbabwe, and the Mosi-oa-Tunya National Park, in Zambia. Once the gorge was inundated, the Zambezi’s world-renowned white-water rafting activities would be severely curtailed, with rafting impossible during the high-water season from January to July and operations limited from rapids 1 to 10 during the low-water season, from August to December. The consequences were likely to be severe for the ten rafting companies operating in the area, which employ about 300 people. It would also negatively affect tourism revenue, with white-water rafting a large contributor to the estimated $3.4-million in yearly tourism value downstream of the falls. The ESIA suggests that economic-displacement compensation would have to be considered by the two governments. The reports also indicate that tourism associated with the region’s unique birdlife could be affected, owing to the loss of bird habitat associated with reservoir inundation. Particular concern has been raised over the fate of the Taita Falcon, with the Batoka Gorge currently supporting the largest-known population of the rare bird species. Likewise the impacts downstream of the proposed dam wall would be negative for communities and wildlife alike, with only limited mitigation solutions available. However, the ESIAs also point to various socioeconomic benefits from the BGHES development, including the creation of 8 000 construction jobs and 1 500 operational jobs. There is also potential to imp...

Proposed 2 400 MW Batoka Gorge hydro scheme to have major impact on adventure tourism

The Agricultural Business Chamber (Agbiz)/Industrial Development Corporation Agribusiness Confidence Index (ACI) has rallied to 61 points in the fourth quarter – its highest level since the third quarter of 2014. This followed a notable recovery to 51 points in the third quarter of the year, implying that agribusiness’ optimism about business conditions in South Africa is rising. Agbiz says the fourth-quarter improvement in the ACI likely reflects strong optimism about the 2020/21 production season on the back of expected higher rainfall across most regions of the country. Additionally, the chamber explains that various high-frequency data shows that most of South Africa’s agriculture and agribusiness sectors performed relatively well in a year of unusually elevated uncertainty with minimal impact, at an aggregate level, from the Covid-19 crisis and related lockdown restrictions. The ACI reflects the perceptions of at least 25 agribusiness decision-makers on the ten most important aspects influencing a business in the agricultural sector, including turnover, net operating income, market share, employment, export volumes and economic growth. The index comprises ten subindices and most of these showed a notable uptick in the fourth quarter. Agbiz chief economist Wandile Sihlobo says confidence regarding the turnover and the net operating income subindices soared by 32 and 35 points from the third quarter to 82 points each in the fourth quarter, respectively. He explains that, for both these subindices, these are the highest levels since the third quarter of 2014. Similar to the third quarter, the optimism is mainly supported by firms operating within the field crops, horticulture, livestock and financial services segments, owing to a large harvest in 2019/20, and an anticipated good season in 2020/21. The sentiment regarding the employment subindex rebounded by eight points from the third quarter to 41. This is a preliminary indication that agricultural employment could recover somewhat in the coming quarters. The subindex measuring the volume of exports improved by five points from the third quarter to 60 in the fourth quarter, as exports continued to soar on the back of large supplies and the relatively weaker domestic currency. The perception on economic conditions improved by four points to 24 in the fourth quarter of this year. Nevertheless, this specific subindex is still far off the neutral 50-point mark, which indicates pessimism about South Africa’s broader economic growth fortunes. Sihlobo notes that confidence regarding general agricultural conditions jumped by 15 points to 94 in the fourth quarter. This is the highest level since the inception of the ACI, which points to optimism about expected La Niña-induced rains in the 2020/21 agricultural season. Meanwhile, the debtor provision for bad debt and financing costs subindices are interpreted differently from the other indices. A decline is viewed as a favourable development, while an uptick is not a desirable outcome as it shows that agribusinesses are financially constrained. In the fourth quarter, sentiment regarding the financing costs fell by 15 points to 68, which is a favourable direction. In the fourth quarter, the sentiment regarding the debtor provision for bad debt increased by eight points from the third quarter to 35, which is an unfavourable direction. However, this subindex remains fairly low, suggesting that bad debts have not become a generalised problem at this stage, Agbiz states. Meanwhile, the market share of agribusinesses subindex deteriorated marginally by two points from the third quarter to 62. This view was largely shared by agribusinesses operating in the livestock subsector, while others in various subsectors maintained an unchanged view from the previous quarter. The capital investments confidence subindex fell by three points from the third quarter to 41. This was despite the robust agricultural ma...

Agribusiness Confidence Index jumps to 61 in the fourth quarter

The Absa Purchasing Managers’ Index (PMI) has declined to 52.6 index points in November, from 60.9 points recorded in October. Financial services provider Absa explains that the decline comes after three consecutive upward moves and brings the index to its lowest level since July. “While still signalling an improvement in business conditions, the drop suggests that the manufacturing sector’s recovery is starting to lose momentum. “This was to be expected as output levels for many subsectors are nearing pre-pandemic levels and will need sustained demand growth to fuel a further output expansion,” the bank notes. In this regard, Absa adds that it is worrying to see the new-sales orders index dip back below the neutral 50-point mark for the first time since May. This was in part driven by a renewed decline in export sales, which could possibly be linked to lower activity in Europe due to the renewed Covid-19 lockdowns. This, as well as concerns about coronavirus developments in South Africa, likely explains why purchasing managers turned less positive about business conditions going forward. The indicator tracking business conditions in six months’ time dipped for a second month to 52.7 index points and is now about 12 points below the level of just two months ago. While positive news regarding vaccine developments may result in an improved global growth outlook over the medium term, the next six months remain highly uncertain, the bank notes. In addition to the new-sales orders index, the other four components of the headline PMI also declined on a month-on-month basis. However, encouragingly, both business activity and inventories still signalled expansion. “Even so, the fact that both indices fell by about ten points suggests that the pace of the recovery has slowed significantly. Further, the employment index dipped lower in November. Unlike the other indices, employment never breached the neutral 50-point mark in its recovery from the lockdown-induced slump in April. “The supplier deliveries index remained high in November, suggesting that supply chains and product availability are still constraints,” Absa adds. Finally, the purchasing price index came down from a two-year high reached in October. The deceleration in cost pressure was likely driven by the, on average, stronger rand exchange rate which lowers the rand-cost of imported raw materials and intermediate goods.

Absa PMI decreases again to 52.6

JSE-listed packaging manufacturer Nampak has reported a loss of R4.3-billion for the year ended September 30. CEO Erik Smuts attributed the loss mainly to impairments related to goodwill at Bevcan Nigeria and assets at Bevcan Angola, Plastics South Africa and DivFood. He adds that the group results were also adversely affected by significant currency devaluation of the Zimbabwe dollar and hyperinflation. Total impairments of R4-billion included an impairment of R2.2-billion of Bevcan Nigeria’s goodwill; and an asset impairment of R1.2-billion in Angola owing to depressed consumer demand, resulting from the significant fall in the oil price, lagging wage inflation, changes in pricing dynamics, Covid-19 and other risks, as well as an increased weighted average cost of capital. In South Africa, lower expected cash flows and a higher weighted average cost of capital resulted in asset impairments of R187-million in the DivFood business, which falls under the company’s metal cluster and R423-million in the company’s plastics cluster. The basic loss a share of 595c apiece from continuing operations and 538c from total operations, respectively, compare with basic earnings a share of 42.2c and a loss a share of 132.1c reported for the prior year. Nampak recorded headline losses a share of 78c apiece for continuing operations and 88c apiece from total operations, respectively, compared with headline earnings a share of 54.1c and a headline loss a share of 19.4c in the prior year. Nampak’s trading profit was down 56% year-on-year to R682-million, while the company stated an operating loss of R283-million. Smuts says weak economies, reduced economic activity in key markets owing to Covid-19 and the impact of currency devaluation in Angola impacted heavily on the company’s profitability. Particularly, the ban on the production and sale of alcohol in South Africa resulted in Nampak not selling beverage cans and ends to brewers, nor drums for bulk alcohol exports. The lack of social events, reduced sales during strict lockdown and closure of borders also impacted the company’s businesses in Angola and in Nigeria, while the Zimbabwean operations suffered from hyperinflation factors. In the year under review, the company took steps to preserve cash including taking 30% paycuts at executive level and 15% at junior management level. The company also increased scrutiny of all its expenditure and increased focus on working capital by reducing inventory levels to match reduced demand. Nampak will not be undertaking capital expenditure projects, except for those that have been legally committed to, at this stage. The company nonetheless achieved key operational successes in the year under review, including remaining cash positive, having renewed key contracts for Bevcan South Africa and Bevcan Nigeria, as well as export contracts for Bevcan Angola. The group cash and cash equivalents as at September 30 of R1.4-billion marginally exceeded the prior year, after settling borrowings of R1.8-billion. The company’s total gross debt reduced by 15% in the year under review to R6.8-billion and used proceeds from disposals during the year to pay down debt. Nampak has identified more assets for disposal and plans to minimise the need for a capital raise to pay down debt. In the year under review, the company finalised the disposal of Nampak Plastics Europe in December 2019, while the sale of Nampak’s glass division was effective from March 31 this year. After repaying dollar-denominated debt, the company had a R369-million profit from discontinued operations. Smuts says the plastic bans being imposed in various countries globally, coupled with a global shortage of cans, have created an environment whereby Nampak can increase its supply to more markets in Europe and the Americas. These new contracts will contribute to earnings in the 2021 financial year. Hardest hit in the year under review had been the company’s met...

Nampak posts R283m operating loss

Seven water innovators have been awarded an aggregate R7-million grant to kick off field testing and further product development after a call for solutions to help resolve some of South Africa’s water challenges, particularly those exacerbated by the Covid-19 pandemic. The United Nations Development Programme (UNDP) in South Africa and the Water Research Commission (WRC) received 36 applications from private businesses, academia and nongovernmental organisations, with 16 shortlisted to pitch their ideas to a panel of water sector experts. The seven innovators, namely GreenGold Technology; Adsorb Technologies; Hydro Blü; MagnaClear; h-u-m-a-n Life Designs; Trapstuutjies Environmental ; and ENTEC, will now start the next stage of product development towards an eventual product that can impact South Africa’s water and sanitation landscape. The joint initiative formed part of a partnership agreement between the UNDP and WRC to fast-track the development and promote the adoption of promising innovations in the water sector and make more progress on Sustainable Development Goal (SGD) 6 on clean water and sanitation. The two entities aim to collaborate to facilitate research and innovation sharing, co-creation, and promotion of access to water and sanitation for people in South Africa and the rest of the Africa.

UNDP, WRC award R3m grant to water innovators

Barloworld will, in the medium to long term, focus on two verticals, namely industrial goods and related services, as well as food and food ingredients, says CEO Dominic Sewela. “As we manage the pivoting out of the automotive and logistics business . . . we are very clear that we don’t want to be a conglomerate akin to the old Barlowold. Whatever acquisitions we make will be around these two businesses. “While we are the owners of the automotive and logistics business, these businesses will continue to be run efficiently.” Barloworld’s industrial goods ambitions have already seen the acquisition of the Mongolian Caterpillar dealer to strengthen its capital equipment position in Eurasia, with the acquisition of Tongaat Hulett Starch, now Ingrain, kicking off the group’s move into the food vertical. Barloworld’s financial results for the year ended September 30, released on Monday, revealed that the automotive and logistics businesses faced an especially tough financial year. Revenue fell by 17% compared with the previous financial year, to R49.7-billion. Operating profit declined by 54%, to R1.8-billion. The automotive and logistics business saw earnings before interest, taxes, depreciation and amortisation (Ebitda) decline by 33%, to R2.4-billion, with revenue down by 27%, to R24.6-billion. Automotive and logistics CEO Kamogelo Mmutlana says the business, which also operates Avis, has closed more than 20% of its car rental branches. “We were able to rightsize the rental fleet, sitting at 27 000, to 14 000 at the end of September, generating cash sales of R1.8-billion in the process.” The business has also retrenched more than 40% of its car rental employees, as well as 17% of its motor trade employees. More than 20% of employees in the logistics business were also retrenched, bringing the total number of jobs lost in the automotive and logistics business to 2 003 people. “We will realise total savings of R660-million in the year 2021 as a result of these actions,” says Mmutlana. Barloworld’s Equipment Eurasia business saw revenue increase by 22%, to R7.5-billion for the year ended September 30, with operating profit up 16%, to R834-million. The business reported an order book of $105-million at the end of the financial year, with $37-million dollars in new orders signed since September 30. The order book stood at $113-million at the close of the previous financial year. Equipment Southern Africa saw a 14% drop in revenue, to R17.6-billion, with Ebitda declining by 24%, to R1.8-billion. The order book for this business was strong at the end of the financial year, at R2.3-billion, up from R2-billion a year ago. Equipment Southern Africa CEO Emmy Leeka said on Monday that the mining sector was being supported by a rebound in commodity prices, as well as a resilient contract mining model. The construction sector, however, was expected to remain slow, with a potential boost from government investment in infrastructure on the cards.

Barloworld to focus on industrial goods, food sector going forward

Infrastructure and contract mining group Aveng has expressed confidence that its recently unveiled debt restructure and recapitalisation plan will provide the “reset” required for its two remaining core businesses, McConnell Dowell and Moolmans, to begin growing again, with the Australasian region poised to be the main driver of that growth. The JSE-listed company, which reported a headline loss of R950-million for its pandemic-affected 2020 financial year compared with a R1.5-billion loss in 2019, is at the tail-end of a far-reaching restructuring exercise, initiated in 2017 when its debt burden became unsustainable. Besides the disposal of noncore businesses, including the Grinaker-LTA construction business with which it was hitherto synonymous, the restructuring has involved a series of debt and equity transactions designed to place the company on a sound financial footing. To date, most of the 14 noncore units have been sold, with only Trident Steel, Automation & Control Solutions and Infraset still remaining. These disposal processes were disrupted by South Africa’s Covid-19 lockdown, but are all progressing again, with four potential buyers lining up to compete for Trident. CEO Sean Flanagan reports that management attention has turned to implementing the latest restructure and recapitalisation plan, announced on November 25, which he said would be a “watershed” for ensuring that the group‘s capital structure could, at last, provide the platform for the execution of a growth strategy. Under the multi-part transaction, which should be finalised by the end of February, Aveng aims to increase its stated capital by R700-million, while reducing its debt and overdraft facility from R2.1-billion to R1.1-billion. An in-principle agreement had already been secured with its largest shareholder, Highbridge Capital Management, to underwrite a 1.5c a share rights offer to introduce a minimum of R300-million of new capital into the business. Aveng’s share price was trading at 3c on the last day of November. The group’s stated capital could also be increased by an additional R400-million by settling debt by way of the issuance of new ordinary shares at 5c a share. CFO Adrian Macartney tells Engineering News that Highbridge Capital Management, which holds 19.9% of Aveng, was approached using the ‘wall-crossing’ practice, whereby a transaction can be discussed with a shareholder with the proviso that the shareholder is restricted from dealing in the shares or acting on the information provided. Aveng intends approaching other shareholders with the same offer in the coming weeks and may consider an “upsizing” of the rights issue thereafter. Macartney reports that a decision on any upsizing would be taken prior to the issuance of a circular on the transaction, while the scale of the upsizing would depend on shareholder appetite for the offer. Besides Highbridge Capital Management, one other shareholder has already indicated that it too will be taking up the offer. The transaction still requires shareholder approval. Unless the uptake is significantly higher than the R300-million assumed, however, the rights issue is unlikely to affect the debt-restructuring portion of the transaction, through which Aveng intends deleveraging its balance sheet by more than R1-billion. The debt-reduction portion of the transaction involves an early settlement of R660-million-worth of debt for R210-million in cash and the extension of the group’s South African lender debt maturity to December 2023. Flanagan tells Engineering News that, besides alleviating a long-standing debt constraint, the transaction will also materially reduce its interest charges, which will release funds for project bonds required by McConnell Dowell and for the purchase of mining equipment by Moolmans. “Therefore, it’s a significant event for us, as we now have a significantly stronger balance sheet from which we can grow the business,” he says. A...

Aveng may ‘upsize’ R300m recapitalisation should shareholders show appetite

Despite this year having been the worst year of growth for the global economy in the past 40 years, and with sub-Saharan Africa facing its first recession in 25 years with a 3.1% gross domestic product (GDP) contraction expected, there remains a strong case for a rebound, as international institutions have committed a significant amount of resources to Africa's economic recovery, The European House – Ambrosetti CEO Valerio De Molli has said. For example, the European Union (EU) has committed almost €40-billion toward recovery in Africa, while the African Development Bank committed around €10-billion, the World Bank €135-billion, the International Monetary Fund €2.7-billion and the Africa Export-Import Bank around €3-billion. All these resources combined make up 8% of the continent’s GDP. Particularly, South Africa ranks as the most attractive country in Africa in the Global Attractiveness Index Africa 2020 report, which is the first statistical tool to measure economic attractiveness in Africa. De Molli spoke during the seventh edition of the Southern Africa-Europe CEO Dialogue, held this week. The event once again brought together world-leading think tanks, key decision makers and influential business leaders, governments and scholars from Southern Africa and Europe to discuss the opportunities for the regions’ trade relationship post Covid-19. Italy Foreign Affairs and International Cooperation deputy Minister Emanuela Del Re told delegates participating in the event that, besides South Africa being a key political partner for Italy, it is also its most important economic and commercial partner in sub-Saharan Africa. “Yet, both our governments recognise the existence of a huge untapped potential that it is our duty to unleash. We value South Africa’s infrastructure and the most developed network on the continent guarantees accessibility and connectivity, as well as an efficient distribution on a regional scale, starting with the fifteen countries of the Southern African Development Community (SADC),” she added. Del Re said her government intended to build on and reinvigorate its multifaceted relation on every level, be it political and economic, or scientific and cultural, which she said sectors are in our view instrumental to establish a wide-ranging strategic partnership. “By looking at the way South Africa acts in the global arena, I believe there are clear common grounds on which our nations operate in global affairs: protection of the environment, sustainable development, internal security, fight against terrorism, promotion of good governance. “As a founding member of the EU, Italy is engaged in strengthening the already good relations between Bruxelles and Pretoria, who are both convinced supporters of free and fair trade, human rights and democracy. “The EU and South Africa are key partners as they share common values and principles such as the commitment to reinforce multilateralism, peace, sustainable investments, and the fight against climate change,” Del Re explained. She added that, while the global economy has been battered by the devastating effects of Covid-19, the two regions needed to be prepared for the post-Covid phase. “Despite the crisis, indicators show that there will be opportunities in economics. Partnerships like ours can make a difference. Italy’s presidency of the Group of Twenty Summit in 2021 will be a unique opportunity to work together with Africa in addressing global challenges,” Del Re pointed out. South Africa, as the “main voice” of Africa, will have the opportunity to bring to the table at the summit the main issues of the continent, including sustainable development and youth and women empowerment, which are also priorities for many European countries. Del Re explained that the forward-looking economic reforms put in place by South African President Cyril Ramaphosa, together with the implementation of the African Free Trade Continental Agreement (AfCFTA)...

Africa poised to benefit from strong European backing in its recovery

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