Essential business magazine august 2015

Africa

www.essentialbusinessmag.com|August 2015

Lifting Crane specialist Liebherr Africa makes innovation a high priority

Also in this issue: Ingeteam p20 Black Mountain Mining p28 IDtek p36 Feinschmecker p42

EAPIC East African Power Industry Conven on

27 – 28 August 2015 KICC, Nairobi, Kenya

KNOWLEDGE Discover the upcoming power projects in East Africa that will require construction and EPC company involvement

CLEAN POWER EAST AFRICA

Optimising East Africa’s Power Supply Capabilities

TECHNOLOGY The region’s leading power trade exhibition showcasing the latest technologies and service companies

INTERACTION Meet senior representatives from ministries, utility companies and industry to cement relationships and secure new business

Visit the website for more information www.eapicforum.com or email: ade.yesufu@spintelligent.com

@ EAPIC_Expo

East African Power Forum - EAPIC

East African Power Industry Professionals

P R O D U C T I O N Scott Jameson

Publisher sjames@essentialbusinessmag.com

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Production Manager

Sam Wright Editor-in-Chief

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Adil Nazer | Rahim Ali | Daniel Goha Essential Business Publishing 145-157 St John Street, London, EC1V 4PW, England www.essentialbusinessmag.com © Essential Business Publishing 2015

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elcome to the latest issue of Essential Business. Thanks for all of your great feedback regarding the new design– we’re really happy that it has been so well received.

Our lead feature this month (P6) is a look at South Africa’s Operation Phakisa program. For all its vast potential in generating new jobs and revenue for Africa’s most advanced economy, there remains a sense that one crucial part of the country’s maritime sector is failing to benefit.

Meanwhile, in our expert interview Wim Jonker Klunne of the Energy and Environment Partnership Programme tells us about his organisation’s goal of providing renewable energy and energy efficiency projects to 13 countries in southern and East Africa.

Next up, we have our usual array of Africa’s brightest and best companies. First of these is Liebherr Africa, a firm that is at the forefront of Phakisa’s impressive progress. There’s also Ingeteam, a firm that is gaining traction in South Africa’s rail sector; zinc producer Black Mountain Mining, a division of resources giant Vedanta; custom security services provider IDtek; deli meats retailer Feinschmecker; and last, but by no means least, sportswear giant Adidas.

Enjoy the magazine, and we’ll see you next month!

Sam Wright, Editor in Chief

@essentialbizmag

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Contents Operation Phakisa

6

Essential Business takes a closer look at Operation Phakisa, South Africa’s plan to add R189 billion to the country’s GDP while creating roughly one million additional jobs.

Energy and Environment Partnership Programme 10 EEP Africa’s Wim Jonker Klunne fills us in on the fund’s plan to provide off-grid electrification and renewable energy to Africa’s rural communities.

News round-up

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Essential Business takes a look at the biggest stories in Africa this month, including Ethiopia’s plans to buy geothermal power from Kenya.

Black Mountain Mining 28 Located in the Northern Cape Province, Black Mountain Mining is a major name in the zinc industry. Essential Business finds out more.

IDtek

36

Technology-based security solutions provider IDtek is growing rapidly from its base in South Africa, spreading out to Liberia, Tanzania, Kenya, Malawi, and the Democratic Republic of the Congo.

Liebherr Africa

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With a new maritime centre in operation and a key role in Phakisa, the future is looking positive for lifting specialist Liebherr Africa.

Feinschmecker

42

Following a shift in branding, deli meats specialist Feinschmecker has gone from strength to strength, with exports now planned for the first time.

Ingeteam

20

Since its arrival in South Africa, the rail division of engineering giant Ingeteam has not wasted any time in building connections.

Adidas

46

Our lead feature this month focuses on Adidas, one of the world’s biggest sportswear brands. Category manager Adrian De Souza tells us more.

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On

up

Coming

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OnTopic

South Africa’s government is courting investors in a bid to gain overseas support for its Operation Phakisa program.

Yet while the scheme’s potential is vast, offshore exploration for oil and gas continues to fall by the wayside.

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peaking at a conference in London last month, South Africa’s deputy transport minister, Sindisiwe Chikunga, reiterated that Phakisa could add up to R189 billion to the country’s gross domestic product (GDP) in addition to creating roughly one million additional jobs.

These numbers have been at the forefront of the campaign to promote the program since it was launched in October last year. The program was inspired by the Big Fast Results (BFR) scheme used by the Malaysian government, which aims to keep major socio-economic coming

As it stands, South Africa has no significant domestic oil production, instead relying on coal for the majority of its power generation thick and fast. As a result, Phakisa is the flagship of South Africa’s economic plan. As with the BFR system, collaboration “laboratories” are at its centre, with groups of experts from the public and private sectors and academic and civil society organisations all coming together to create solutions to national issues such as poverty, crime and unemployment.

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Out to sea

Initially, Phakisa focused on the potential of South Africa’s oceans, with industries such as marine transport and manufacturing, offshore oil and gas, marine protection and fish farming being the first to benefit.

The reasons for this, Chikunga said, are clear to see.

South Africa is situated on one of the busiest international sea routes, which places us in a critical position in terms of international maritime transportation. Our geographical location presents a huge opportunity for investing in a diversified maritime market.

“South Africa is situated on one of the busiest international sea routes, which places us in a critical position in terms of international maritime transportation. Our geographical location presents a huge opportunity for investing in a diverse maritime market.

“Our proximity to the growth markets of the offshore oil and gas markets on the east and west coast of Africa mean we are within a few days by ship to these waters,” she continued.

This presents a good opportunity for ships and rig repair, and, through Operation Phakisa, SA is fast-tracking the delivery of rig repair infrastructure.”

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Among other developments, this approach will see South Africa’s state-owned logistics group, Transnet, build a new 10 billion rand (US$871.42 million) jetty and deep sea oil rig repair quay at its Saldanha Port.

The preferred bidders for this project should be announced

by September.

Broadly, investors – both domestic and international – have welcomed Phakisa.

Yet as positive as all of this is, there remains some sense that an opportunity being missed.

While the program hopes to capitalise on a spate of recent oil and gas finds off Africa’s

coastline – many of which, such as in Mozambique, hold the potential to transform the local economy – so far, South Africa’s government has failed to get its own exploration sector off the ground.

As it stands, South Africa has no significant domestic oil production, instead relying on coal for the majority of its power generation. With blackouts and supply shortages remaining frequent, many have looked to the country’s offshore potential as a possible solution.

However, little in the way of drilling has occurred. Instead, industry heavyweights, such as

OnTopic

Could potentially increase GBP by R189 billion, while adding an extra one million jobs

Anadarko Petroleum and Royal Dutch Shell, have said that they will hold off exploration in the country’s waters until the current regulation surrounding South Africa’s mining and petroleum laws is resolved.

In 2013, the government suspended proposed changes to the 2002 Mineral and Petroleum Resources Development Act (MPRDA) following heavy criticism that they would deter investment.

Standstill

This centred on clauses that would force companies to process some output locally, as well as naming some minerals

as ‘strategic’ to the state, while giving the government a free 20% stake in all new energy ventures. In response, some firms, such as mining giant Anglo American Plc, said that the revisions would severely impact on their operations.

As a result, activity is largely at a standstill, not helped by the current drop in oil prices.

Surveys are being carried out, but the prospect of drilling remains remote. On top of this, proposed amendments to the MPRDA have been placed on hold over the past six months.

Earlier this year, Mineral Resources Minister for South

Africa, Ngoako Ramatlhodi, said that excluding the oil and gas legislation from the act was a possibility, but as of yet no draft has yet been put forward. This seems a sensible move – the energy sector has its own set of unique challenges and a separate bill offers a better, more flexible solution.

Yet this could be several years in the distance. In the meantime, Phakisa’s focus will be on helping South Africa service the vessels and rigs of neighbouring countries.

While this is no doubt a major market, it is hard not to feel that a significant opportunity is being lost.

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Expert EEP Africa

— Programme Director of the Energy and Environment Partnership Programme of Southern and East Africa — talks about off-grid electrification and the potential of renewable energy to bring power to rural areas.

Image courtesy of United Nations Industrial Development Organization (UNIDO) www.flickr.com/photos/unido/

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ExpertInterview

Please tell us more about the Energy and Environment Partnership Programme (EEP S&EA).

EEP is a challenge fund supported by the governments of Finland, the UK and Austria that provides grant funding for renewable energy and energy efficiency projects in 13 countries in southern and East Africa. We use Calls for Proposals in which project developers compete to get funding. In this way we have been able to build a portfolio of nearly 200 projects, each of which has a quantified development impact.

Any current projects that you are involved in that you are particularly excited about?

I am very excited about the EEP programme itself. We are currently shifting from building a portfolio of projects to active management and monitoring of that portfolio. We will have a critical look at the project in order to draw lessons learned and active management of the knowledge created.

The intention of the EEP programme was to support the market for small-scale renewable energy and energy efficiency projects in such a way that these types of projects will become mainstream. With our knowledge

management component we intend to see whether we have succeeded and how the market can benefit from our learnings.

What have been the main challenges in the electrification process in East Africa?

The main challenges have been in bringing together entrepreneurs, technologies, sustainable business models and funding. Designing projects in such a way that they are sustainable, that they will be able to survive over time, is an area that needs a lot of attention. The business model needs to ensure financial sustainability while not compromising on environmental and social aspects of electrification.

How can the contribution of renewable energy to the energy mix be improved?

Obviously several options exist, but in my view enabling private sector involvement in the energy sector can be one of the major contributors — both in gridconnected renewable energy generation through IPPs as in off-grid small-scale projects.

A stable and fair legal and regulatory framework will be a key ingredient to this.

What surprises you about the energy sector?

I have been surprised by the large number of very

committed, passionate people in the renewable energy fi eld.

People with a lot of patience and persistence to eventually get their project off the ground.

While on the other hand I have been surprised as well about the lack of recognition of the role off-grid electrifi cation can play in bringing development to rural areas. Having said that, I currently do see a radical change in the thinking around this. The international attention

“Enabling private sector involvement in the energy sector can be one of the major contributors to providing basic energy services to rural people, and in particular the Sustainable Energy for All (SE4ALL) initiative are leading to big changes.

Anything you would like to add?

Yes, I would like to stress that I am very excited about current developments in the fi eld. For a long time we have not seen such an interest in renewable energy, in rural electrifi cation and in isolated mini grids. I really hope we can keep the momentum going and that we can provide energy to those that desperately need it.

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News T

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ambia’s copper output is up 2.1% compared to the same period last year, reveals recently released H1 data.

“Increase in copper production in May and June of 2015 was the main reason for the increased output,” the Central Statistical Office said in a statement.

Meanwhile, construction is about to begin in Mali on a hydroelectric dam on the Niger River.

Located in Baguinéda, the dam will be financed, built and operated by Eranove Group, a subsidiary of Kenié Energie Renouvelable. The facility will have an installed capacity of 42MW with production potential of around 175GW/h — the equivalent E N E R G Y of the average annual consumption of around & M I N I N G 175,000 homes.

Elsewhere on the continent, Ethiopa has signed a power purchase agreement with Kenyan-linked Berkley Energy, and will begin buying geothermal power from Kenya once the Corbetti Geothermal Power Project is completed in the next five years.

“We are really happy to buy the geothermal power in a bid to ensure Ethiopia is in the forefront of the renaissance that we are having in Africa of new renewable energy,” said Mr. Njoroge, a director at Berkley Energy.

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he Botswana water pipeline construction, which spans from Zambezi River to South of Botswana, has been fast-tracked and is now aiming for completion within the next seven years. The acceleration of the project is due to the country’s water shortages, which are necessitating the rationing of water for three days a week in the Capital of Botswana and surrounding regions.

CONSTRUCTION Meanwhile, in Kenya, the construction of a multi-million dollar library is now underway. The Kenya National Library complex, located in the Upper Hill area of Nairobi, will have a seating capacity of 5000 and will rival the British Library and the Library of Congress in size.

“The facility which is 53 percent done will be completed by 2017 and it will usher in a virtual library culture for Kenyans where they can virtually access library services online from the comfort of their homes or offices,” said Richard Atuti, CEO of the Kenya National Library Services.

S

News

outh Africa’s manufacturing output fell by 1.4% year-onyear in May, following a 2.1% contraction in April, according to Statistics South Africa. The news goes against market expectations of an expansion of 1%.

“The electricity crisis, rising production costs, low global commodity prices and patchy global and local demand are likely to weigh on production in most manufacturing industries,” said Nedbank economists.

“The sector is likely to record only a moderate growth off a low base in 2015 as a whole.”

On a more positive note, 1000 jobs and 6000 indirect

P

opular American coffeehouse chain Starbucks has announced plans to enter South Africa’s growing coffee retail market during the first half of 2016. The store will be its first in Sub-Saharan Africa, and will mark the beginning of a partnership with South African franchising company Taste Holdings. Other branches elsewhere on the continent are expected to follow.

F O O

jobs will be created in Zambia when the Dangote Cement Plant becomes fully operational. The plant is set to cost US$420 million and was commissioned earlier this month by President Lungu.

“Besides employment creation, the project is MANUFACTURING already greatly benefiting the local people of Masaiti and the surrounding districts through the transfer of skills, technology and business linkages,” said President Lungu.

“In this regard, I hereby direct the Masaiti District Council to reserve land around Dangote cement plant for us to create related industrial clusters whose purpose will be to solely depend on this timely project.”

D

In other news, HMH& BEVERAGES Rainbow has become the biggest processor of chicken in Uganda after a merger between Hudani Manji Holdings’ brand Yotuku and RCL Foods’ brand Enkoko.

“RCL Foods will initially be taking a 33.5 per cent equity stake in HMH-Rainbow and will be injecting funds for further expansion of the business,” said a statement released by Hudani Manji Holdings earlier this month.

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LiebherrAfrica w w w . l i e b h e r r . c o m

Voyage Prosperous

In March, Liebherr Africa launched a new maritime centre in spoke to Henner Durban.

Rodenwoldt, Maritime Division Manager of Liebherr Africa, to find out more about the subsidiary’s activities and growing influence across the continent.

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Maritime

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arch saw the opening of Liebherr Africa’s first maritime hub in South Africa.

Located just outside of Durban, the new service centre is set to offer complete service staff training in addition to sales and spares for all of its products in South Africa. With Africa being the second largest market for its parent Liebherr Group last year, the company has seen a threefold increase in mobile harbour crane deliveries from the 2013-2014 period, and is optimistic about meeting the on-going demands of the African market.

“We’ve had a long business relationship with Transnet. They have over 60 Liebherr cranes now, including 31 ship-to-shore cranes, 13 mobile harbour cranes, and 18 rubber tyre gantry (RTG) cranes,” begins Rodenwoldt. “As a result of that good relationship, and together with the development we’ve seen here in Africa, we decided we would open up this maritime hub as an extended arm of the head offices in Europe.”

The last few years have seen a significant increase in South Africa’s infrastructure spending, with room for more growth to follow.

“If you look at all the landlocked economies, they have started to thrive and develop now. That helps us, and the ports in general, to deliver the products to and from these economies,” explains

Over the last few years, we’ve seen that a lot of ports or shipping companies in the oil and gas sector are pushing for productivity and safety, so we looked to different industries to see how we could improve productivity on the skills front

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Maritime

We looked at the realistic simulators of the aerospace industry, and we spent significant money, R&D and also resources in developing simulators specifically for our products Rodenwoldt. “Over the last few years, we’ve seen that a lot of ports or shipping companies in the oil and gas sector are pushing for productivity and safety, so we looked to different industries to see how we could improve productivity on the skills front,” he continues.

“We looked at the realistic simulators of the aerospace industry, and we spent significant money, research and development (R&D) and also resources in developing simulators specifically for our products. This will drive productivity, reduce risk of damage on the machines themselves, and eliminate risk factors — and then pass these advantages on to the customers.”

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The South African skills shortage has proved challenging for Liebherr Africa, but the company’s solution benefits both its business and the local economy. “We’ve started an apprenticeship programme here in South Africa, where we take on a number of apprentices each year and start training them for the next three years so we can reduce our expat contingency and work with local people,” explains Rodenwoldt.

“The crane simulators are for both operational and technical training, and we cover the whole maritime range — from ship-toshore cranes and RTG to mobile harbour cranes and offshore cranes. It’s one of the best training centres we have in our group.”

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In October last year, the South African government launched Operation Phakisa.

The initiative aims to have government, academia, and industry working together to fi nd methods of reducing unemployment, and hopes to create over one million jobs by 2033. Operation Phakisa will begin by exploring the potential of South Africa’s oceans — focusing on industries such as marine transport and

The SmartGrip innovation has received a lot of attention, and it’s something that the market has been wanting for a long time

Maritime Cranes.

maritime.cranes@liebherr.com facebook.com/LiebherrMaritime www.liebherr.com

The Group

manufacturing; offshore oil and gas; marine protection; and fish farming to name just a few.

“Phakisa is a very interesting initiative that will help the South African economy significantly, specifically the shipbuilding and ship repair industry,” says Rodenwoldt. “And Liebherr is very strong in this field as well, in terms of delivering cranes and infrastructure. A lot of the infrastructure that is in place here in South Africa is very old, and over the years there have been a lot of exciting new innovations in this sector. We are very happy to play our part in helping to propose possible solutions for what can be done in the shipyards in terms of innovation and progress.”

Liebherr’s worldwide reputation for innovation extends to its subsidiaries, with Liebherr Africa demonstrating its talent for forward-thinking designs and solutions.

“We’re working on a lot of innovations at the moment. One thing we’re looking at is increasing our product portfolio, and in April 2015 we issued the world’s largest mobile harbour crane, the LHM 800. It has a lifting capacity of 308 tonnes, which is 100 tonnes more than its predecessor,” says Rodenwoldt. “We’ve also looked at certain operations, specifically the grab operations, where we’ve developed the SmartGrip system.”

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Maritime

The SmartGrip system Rodenwoldt refers to is an intelligent grabbing technology, designed to increase turnover and eliminate stress and overloads on the crane.

SmartGrip technology is currently in use across the grab operations sector, and is being tested on transshipment operations in Africa.

“The SmartGrip innovation has received a lot of attention, and it’s something that the market has been wanting for a long time,” says Rodenwoldt.

Operation Phakisa is a very interesting initiative that will help the South African economy significantly, specifically the shipbuilding and ship repair industry Liebherr Africa is also looking to expand into new markets, and with its order books already very full in South Africa, it certainly looks to be a busy year for the company.

“Obviously the west-African market is a big market for us, and we have a very strong presence within it,” says Rodenwoldt. “This year, we’re able to break into the east African market, where traditionally our competition has been strong. We’re able to deliver ship-to-shore cranes to Kenya, and we’re able to deliver mobile harbour cranes to Maputo, so all from the beginning of the year we will be represented in the east African countries as well, which is very interesting.”

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Ingeteam w w w . i n g e t e a m . c o m / z a

Gathe

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Electronics

ering steam T As a market leader in the South African Power Electronics sector, Ingeteam specialises in the development of traction / energy recovery systems for the energy and spoke to transport industries.

Tumelo Malekutu, Sales Manager of the Rail Division, to learn more about the company, its involvement in the Africa Rail exhibition, and its position in the rail and transport industry.

he energy division of multinational firm Ingeteam has maintained a strong presence in South Africa since the company was founded in 1972, but it was only in 2012 that the transport side of the business in South Africa — a subsidiary dedicated to providing railway traction systems and energy recovery systems — found its home in Midrand, Gauteng.

“I actually joined the company in November last year,” Malekutu tell us. “The traction division has been present here two years before that, but they were operating from Spain, where the Ingeteam headquarters are.”

The arrival of Ingeteam’s transport division has also been good news for the energy side of the fi rm: despite being present in Africa for a while, it

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was not until 2012 that they had offices and training facilities on the continent.

Since its arrival in South Africa, the rail division has not wasted any time in building connections.

Last month, over 7000 rail industry professionals gathered in Johannesburg for the annual Africa Rail exhibition. Africa Rail — Africa’s largest event for the rail industry — saw over 300 speakers and 250 exhibitors share their knowledge and experience through talks, demos and breakout sessions. One of these exhibitors was Ingeteam.

“We’ve always been a part of Africa Rail, and we’ve been exhibiting there for the last three years or so,” says Malekutu.

“It’s always nice to exhibit

what you do, but obviously we couldn’t bring our solutions to the exhibition because it’s huge systems, so we played demo videos and handed out informative brochures and so on,” he continues.

“I’m planning something else next year, like a miniature demo that I’m going to put into the show. We’re going to help people understand more about what we do.”

According to Malekutu, it can often be challenging to carry out the company’s work to the African market. While South Africa uses a lot of diesel-electric motors, the majority of neighbouring countries are still heavily reliant on diesel locomotives.

“We are focusing on South Africa until the other countries make strides on the electric locomotives. The solutions we are trying to

We would definitely like to be a part of the Gibela project, and I would love our technology to be readily available.

The best way to do that is to involve local companies and have them work together with Ingeteam Tumelo Malekutu, Sales Manager of the Rail Division, Ingasteam

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offer are actually quite complex, so we need the train operators to understand how they can benefit from it.”

Demand within the South African market is growing, but there is still work to be done.

While the issues with Eskom and the rolling blackouts are still a long way from being resolved, there is a silver lining: an increased demand for energyconserving technology.

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of the energy consumed by the locomotive can be saved

“That’s the greatest part about the solution that we offer.

Obviously Transnet / PRASA are both powerful organisations, but they are not the energy regulators, so they can actually benefi t from our products to help alleviate power consumption.”

Ingeteam’s energy recovery systems can recover kinetic energy via regenerative braking, and when installed in traction substations, has the ability to transmit this recovered energy back to the main distribution grid, the operator’s grid, or a storage system. If anything, Ingeteam is the only company with this technology in commercial operation (in several projects they are not in a prototype

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stage) and the Ticket-to-Kyoto group report outline Ingeteam as the company with the best technology for these solutions.

This is well proven technology and Ingeteam is offering real, substantial, and not just empiric, savings to their customers.

Reports have shown that up to 40% of the energy consumed by the system can be saved.

“Our solutions can work on all the trains during peak time, when the network need more power, so we can basically eliminate all of the problems,” he explains.

I would like to work with companies in other parts of the country, in order to better reach those rail divisions and depots

“Not long ago we had Transnet selling their locomotives to neighbouring countries. If these trains are going to be used in other parts of Southern Africa, we

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can start modifying those trains and their infrastructure as well.”

While Ingeteam is more than eager to continue expanding, not all countries on the continent are ready to adopt this advanced technology.

“Botswana is thinking of reopening their passenger rail, so I think they could be our next market, but obviously they’re currently receiving some of their power from South Africa,” he says.

“Mozambique, Zambia are possibilities too, and I would give it a couple of years before entering other SADC countries.

We are going to have a couple of trains going through these countries as well, but it’s mostly diesel motors that are going through these countries to get

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to the ports,” Malekutu explains.

“The inland countries don’t have access to the sea, so they’ll be using the ports in South Africa, and in the very close future we’ll be looking at retro fitting a lot of electric motors.”

Ingeteam is always on the lookout for new opportunities within South Africa, too

Electronics

— one of which is the Gibela project, a new empowered South African rail company aiming to revitalise rail transportation in metropolitan areas.

“We would defi nitely like to be a part of the Gibela project, and

I would love our technology to be readily available. The best way to do that is to involve local companies and have them work together with Ingeteam, and basically be involved with projects like Gibela,” he says.

We are focusing on South Africa until the other countries make strides on the electric locomotives. The solutions we are trying to offer are actually quite complex, so we need the train operators to understand how they can benefit from it

“It’s a good platform to be involved with because we can bring a lot of experience, and it’s a safe platform because it’s an ongoing project. So I’m looking at collaborate with the Gibela project with the creating of new locomotives.

Most currently I’m working on modifying the current trains, the traction system and their substations as well.”

For the rest of 2015, Ingeteam will continue its work with several companies in Johannesburg, but is open to involvement with companies in other parts of South Africa.

“I would like to work with companies in other parts of the country, in order to better reach those rail divisions and depots.

We need to avail our solutions to all rail operators,” he explains.

“Cape Town and Durban are in other provinces, but they do have trains. Ideally, we’d most like to work with new companies in the country to localise the expertise.”

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Black Mountai www.vedanta-zincinternational.com/operations/black-mountain/

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in Mining

Mining

B

lack Mountain Mining’s parent company, Vedanta Zinc International, is on a mission to achieve sustainable production of 1 million metric tonnes of metal.

While the firm is set to lose one of its major assets later this year — the Lisheen mine in Ireland, which will close in October — a new open-pit mine under construction in South Africa should set them back on track.

Based in Northern Cape, Black Mountain Mining has just broken ground on its second major zinc mine, the Gamsberg takes a look at Project. the history of the company and its position in the South African mining sector.

Located in the Northern Cape Province, Black Mountain Mining now consists of two assets: the Black Mountain mine, which has been productive for over three decades, and the Gamsberg Project, which is set to produce its fi rst ore in early 2018. While the majority of South African mining operations have been in decline for the past few years, Black Mountain continues to prove itself as an efficient producer of zinc, in addition to copper, lead, and silver.

Black Mountain Mine is the largest private employer in the Bushmanland and Namaqualand region. Of the 1500 people it provides with

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stable employment, 80% are local. The town of Aggeneys was established in 1976 to service the mine, and now provides accommodation and companyfunded municipal services to the majority of its employees.

30,000 tonnes of zinc in concentrate is produced each year at Black Mountain, and while the potential is there to continue production for another 20 years, steady production levels will not help Vedanta Zinc International to meet its onemillion-tonne target.

Reporting a 38% decline in operating profit in the quarter ending June 2015, and citing volatile commodity prices as the primary cause, Vedanta’s focus on the comparatively stable zinc mining seems a wise decision — its Zinc International business posted a fall of just 3% in EBITDA (earnings before interest, taxes, depreciation, and amortisation), as opposed to the 12% for its iron ore business, 78% for Konkola Copper Mines in Zambia, and 102% for its aluminium segment.

of zinc in concentrate is produced each year at Black Mountain “Zinc has held up quite well in view of its strong fundamentals and is now largest contributor to our EBITDA,” said Vedanta CEO Tom Albanese.

Southern Africa has one of the world’s largest undeveloped zinc deposits — with 40 million tonnes

While the majority of South African mining operations have been in decline for the past few years, Black Mountain continues to prove itself as an efficient producer of zinc

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tonnes

in the Northern Cape/South Namibia area alone — but while copper found investment early on due to the size and ease of identification of resources in the Copperbelt, zinc has historically failed to attract such interest.

However, with a record shortage of zinc set to grow even larger in the next two years, it seems entirely possible that South Africa’s zinc deposits will begin to attract the attention they deserve. Analysts Kenneth Hoffman and Sean Gilmartin predict a global deficit of two million tonnes by 2017, as mines continue to close at a rate faster than new ones are opening.

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“Looking a little further out, there’s a strong argument that zinc prices will rally as we go into 2016,” said mining analyst Stefan Ioannou in an interview with The Gold Report. “We’ve seen a number of large zinc mines shut down over the last couple of years. The market continues to face an undersupplied mediumterm outlook, which will drive prices higher.”

“In the medium term, say the 2016 –2018 timeframe, there is potential to see spectacular prices on the order of $1.50/ lb to $2/lb. That said, one thing to remain cognizant of is that higher medium-term pricing will prompt additional production over the longer term, which will eventually balance the market and regulate zinc pricing.”

Southern Africa has one of the world’s largest undeveloped zinc deposits — with 40 million tonnes in the Northern Cape/ South Namibia area alone

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There are concerns, though, that a decrease in demand in China will negate the shortage in supply and keep zinc prices from rising. An estimated half of all zinc is used to galvanise steel, and with China’s steel output — which accounts for 51% of crude steel production globally — reporting the worst first quarter in 20 years, these concerns are valid.

“We’ve seen a lot less restocking than we’d normally get this time of year,” said Bart Melek, head of commodity strategy at TD Securities. “There’s concern that China’s steel output will be lower because of a glut of steel, and that means you’re going to use less galvanised product, which means less zinc.”

But the extent to which this will affect zinc prices is still unclear. Wayne Taylor, managing director of Heron Resources, suggests that ultimately the impact will be negligible.

“The zinc market fundamentals are really great. There is a supply side issue which is improving and despite discussions about China’s economy, globally we are consuming more zinc,” he said.

“We are not talking about a balanced market price going up and then fresh supply coming on, we are talking about supply coming off and a demand side that is continuing to grow.

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Additional supply will come on when prices surge but forecasts suggest that for those curves to come together, we are going to see a big increase in price.”

For Vedanta, work on the Gamsberg project could not have begun at a better time. Ground was broken earlier this month to mark the beginning of Zinc International’s plans to develop an open-pit zinc mine.

“We are very excited to have reached this stage of the project.

We believe that this region has the highest concentration of zinc on the African continent and that we can develop integrated zinc and lead complex here, anchored around Gamsberg and the

Skorpion Refinery, which will boost economic growth and create sustainable employment,” said Albanese.

“Vedanta believes strongly in the philosophy of sustainable development and we commit to protecting the unique ecosystem around Gamsberg for future generations.”

In 2014, Vedanta announced its plans to invest $782 million into the mine over the next three years.

With an estimated ore reserve of 186,000 metric tonnes, and more than 250,000 metric tonnes of potential reserves, the opportunity here is considerable — and while it can’t fill the 18.9-million-tonne void left by the Vedanta’s Lisheen

In the medium term, say the 2016–2018 timeframe, there is potential to see spectacular prices on the order of $1.50/lb to $2/lb

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Mine in Ireland, or come close to closing the deficit, the impact it will have on the local economy is still quite impressive.

“We’re developing Gamsberg in a phased manner using cash generated by the VZI operations, while remaining focussed on sustainable cost reduction at both Gamsberg and Skorpion,” said Vedanta Zinc International CEO Deshnee Naidoo.

“The Gamsberg project will help us to create future opportunities and to ensure that our operations create value for the communities in the region. It is expected to generate approximately 500 permanent jobs, with the potential to create a further 1,500 temporary jobs during the construction phase.”

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Idtek

w w w . i d t e k . c o . z a

A secure IDtek has been providing technology-based building solutions to South African businesses since 2004 and for the past five years it has been rapidly expanding into spoke to Managing Africa.

Director Julian Thorrold and Regional Head Western Cape Duane Viljoen to find out what makes the firm so successful.

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Security

future ‘‘T

he company grew nationally to service our clients,” begins Thorrold. “For instance, in Durban, one project would lead to the next and a need for on-going service arose. Soon enough we established an office in Durban to service these clients. The same then occurred in many other regions, and is now happening in many countries in Africa.”

This burst of growth has seen IDtek secure projects in Liberia, Tanzania, Malawi, the Democratic Republic of the Congo, and even on St Helena Island.

“Through getting to know the South African industry, we’ve met people involved with security and fire projects — I’m talking

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about design engineers and EPC contractors in a solid network across Africa — and they took us along with them,” Thorrold tells us.

Working outside of South Africa comes with its own set of challenges, primarily due to difficulties with logistics, planning, and unforeseen delays. Projects can often take twice as long as they do in South Africa, but this issue comes with the territory, and is not unique to the technology sector.

Through getting to know the South African industry, we’ve met people involved with security and fire projects — I’m talking about design engineers and EPC contractors in a solid network across Africa – and they took us along with them “We’re currently working on a project in Uganda, and because what we’re doing ties in closely with what the main contractor is doing, the project can take three or four times longer due to things outside of our control,” explains Thorrold. “For example, the main contractor gets delayed by the electrical contractor and this in turn delays our progress. There’s a host of things that can hold us up.”

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Shifting attitudes

From installing new technology to building management systems, a lot of the work IDtek does is relatively new to the market, even within South Africa. The need to convince clients to adopt this new technology means that building trust is a crucial part of business, particularly in other parts of Africa.

“In an African context this technology is a fresh start, and we have to go through these learnings with the client and

manage it very carefully,” Thorrold tells us.

The market has become a lot broader over the past few years, with security becoming more varied and advanced.

Thorrold goes on to say that previously, a surveillance system could be installed by any kind of contractor, as the systems were all so similar. Now, each subsystem is specialised.

“Everything is migrating more and more towards a TCP/IP type of

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offering. The projects are much larger, and people are starting to take the need for security seriously and are willing to invest in a pedigree product. Even the customers are getting excited about what they are getting,” he says.

“So now, typically you have the heads of ICT looking at what they’re installing in their facilities, when it comes to security and building management, when previously they wouldn’t even be remotely interested.”

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It’s a very exiting space for us – there’s a lot of opportunities in the natural energy sphere, particularly with the perimeter surveillance tech we are working on

This shifting attitude suggests that the industry is becoming more and more receptive to new security technology, with clients increasingly willing to invest seriously in the security of their staff and property.

“For the last couples of years, we’ve even seen ICT companies like Cisco trying to get into camera surveillance and CCTV surveillance to broaden their scope of offerings. If they had done that ten years ago, people would have laughed at them.”

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Keeping busy

Just last month, IDtek started work on the Prieska solar power project in South Africa, two months ahead of schedule.

The nature of this project aligns with the broader path that IDtek is taking, with security and fire safety technology being a key focus for the future.

“At 75MW, it’s a big plant. We designed a thermal perimeter solution around the sides,” Viljoen tells us. “It’s a very exiting space for us, with an EPC client, and there’s a lot of opportunities in the natural energy sphere, particularly with the perimeter surveillance tech we are working on.”

“When we’re focusing on security and fire, the design is more about the electronic risk, specifically regarding the PV installation. It’s happening more and more in terms of where we’re using the command and control platform to pull all of these subsystems together,” says Thorrold.

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Feinschmecker w w w . f e i n s c h m e c k e r . c o . z a

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Food&Drink

A

A above Since 1983, continental deli specialist Feinschmecker has been establishing a formidable reputation as a market leader in the South African food industry. spoke to Managing Director Alistair Hayward about products, positioning and plans for the future.

fter trading for decades under the name Polony King, Feinschmecker recently underwent a rebrand, changing its name in order to more accurately reflect the standards of its produce. With deli meat ranging from gammon to duck breast, the name Feinschmecker — meaning “gourmet” in German — addresses the broad scope and premium quality of the range in a way that Polony King could not.

“The Polony King brand was strong among retailers who knew the products, but polony was getting such a bad name at the time that selling to new customers became very difficult. That, and polony is not really what we do at all,” explains Hayward.

The firm was bought nine years ago by a group who transformed the focus of the business towards the retail sector, and the brand now supplies its products to companies of all profiles, from small local restaurants to huge chain stores.

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Unusually, Feinschmecker is owner-run, which affords the firm the flexibility and dexterity it needs to stay ahead of the competition and keep its customers happy.

“We are able to make nimble decisions on the spot in order to service our clients,” he tells us.

“Many of our competitors are very corporate and stuck in a quagmire of bureaucracy.

Feinschmecker prides itself on being the only supplier in the industry that doesn’t use MDM (mechanically deboned meat), MSG, or any off-cuts in its produce. Deli meats are made from only the finest ingredients, and are cooked using traditional European methods.

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We are able to make nimble decisions on the spot in order to service our clients. Many of our competitors are very corporate and stuck in a quagmire of bureaucracy “We are proud of the fact that our products do not cut corners in terms of production,” says Hayward. “Even in continental

Europe, manufacturers are substituting meat in their processed meats. We are adamant that we will not compromise our products, although it is getting harder and harder as costs continue to escalate.”

From Polish specialties like Krakauer smoked sausage to Italian salami Milano, Feinschmecker is an expert in authentic European recipes.

While this European flavour is key to the brand, some things do need adapting for the South African market.

“We do have to take into account the taste profiles of South African consumers. For example, we’ve found that the spicy products can’t be too

Food&Drink

We have played with lines like game salami, however we have found consumers are not interested. It’s only tourists who find it attractive, and that market is super small Feinschmecker is the only supplier that doesn’t use MDM, MSG, or off-cuts in its produce.

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hot. The essence of what we do though is European, not South African,” he says.

“We have played with lines like game salami, however we have found consumers are not interested. It’s only tourists who find it attractive, and that market is super small.”

Having recently received an export licence, Feinschmecker’s next focus is to expand into subSaharan Africa and the Indian ocean islands.

“Demand is massive in these regions but the practicality of logistics, documentation and doing small loads is a headache,” Hayward admits.

“It is proving challenging, but not impossible.”

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Adidas

w w w . a d i d a s . c o . z a

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Sportswear

Winning t h e r a c e For over fifty years, German sportswear giant Adidas has been growing its presence in finds out South Africa. more localisation, sponsorship, and the relationship between the company and its head office in Germany.

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As one of the world’s leading brands, things rarely stand still at Adidas according to Category manager..., the company’s South African division is no exception.

“I’ve been here for nineteen years so obviously there’s been a lot of change in that time.

Sales have grown astronomically and the staff force is probably four times as big,” he continues.

“We now have more offices to accommodate all the staff, so things have defi nitely moved with the times.”

Globally, Adidas is the secondbiggest sportswear brand in the world, closely behind the multinational American corporation Nike. Since De Souza has worked for Adidas, the two firms have vied for the top position in South Africa, with the title being passed back and forth.

“There’s a constant battle between Adidas and Nike. It’s a

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good challenge and it obviously keeps us on our toes, from a company point of view. It keeps us innovative. It keeps us looking after ourselves.”

This focus, however, extends beyond the country’s borders.

“We’re not solely South Africa.

We have a few other countries we look after,” De Souza continues. “The key ones in Africa are Ghana and Nigeria, and we are also in Zimbabwe, Namibia, and surrounding

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countries. Other divisions, including Dubai and France, handle other countries in Africa.”

Adidas SA falls under the Emerging Markets & Territories category, meaning that while the majority of branding and target discussions happen with head office in Germany, there is also frequent communication with the regional head office in Dubai.

“But generally everything we do comes from Germany. Globally, there are brand campaigns that develop ads, and these trickle down into our area and support us,” De Souza says. “We do localise a few things, a few sporting codes that Germany isn’t involved in, but a lot of what we do comes from a global point of view that we then implement and localise.”

There’s a constant battle between Adidas and Nike. It’s a good challenge and it obviously keeps us on our toes, from a company point of view. It keeps us innovative

An example of this is the Orlando Pirates, one of South Africa’s oldest and most successful teams.

“With the Orlando Pirates, there will be a global campaign that is passed onto us from Germany, and we localise that so the Orlando Pirates’ artwork looks like the global artwork. So we work in tandem with head office to

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Sportswear

keep things consistent across all territories,” says De Souza.

In addition to an on-going contract with the Pirates, Adidas is also associated with Ajax Cape Town. While football is not the brand’s only focus, it is one of their priorities, alongside running and training. Ambassadors and sponsorship are heavily emphasised in these areas, too.

“With running, we sponsor the Two Oceans Marathon, and we have contracts with various individuals.

With training, we’ve got a relationship with Virgin Active.

They’re our main training partner.”

I’ve been here for nineteen years so obviously there’s been a lot of change in that time. Sales have grown astronomically and the staff force is probably four times as big.

Virgin Active’s relationship with Adidas began back in 2008, when the sports brand began supplying apparel and footwear to staff at Virgin Active health clubs across South Africa.

“When you have these assets who wear the product, the exposure helps boost the sales.

Having the key individual under contract is obviously key from a business point of view,” he says.

On a global level, Adidas is in collaboration with singer Pharrel Williams and footballer Lionel Messi. While none of this impacts Adidas SA directly, De Souza tells us he does notice an accumulated effect, particularly where product collaborations are concerned — such as the Messi15 football boots that were worn in Barcelona’s recent

victory in the Champions League final. These are set for global release later this year, Meanwhile, with the South African Premier Division starting in August, Adidas SA is keeping busy preparing for pre-season with new product lines and contracts.

“For the rest of the year we’ll be focusing on our key assets, the Orlando Pirates,” De Souza explains. “Then there are also

running contract activations and some other football activations.

We’ve got a full enterprise and jersey launch in July.”

Later this year, Adidas will also be launching the new Revolution footwear range and the Saga line of football clothing.

“We have various projects on the go across two or three across the sporting categories, so it’s all quite exciting,” he adds.

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