There can be little doubt that 2014 is going to be a hectic year for Cape business.
Activity is the last quarter of 2013 certainly confirm the big segments of the Western Cape economy are buzzing with activity. In CBN’s opinion there are a number of economic segments will be definitely be worth monitoring closely during 2014.
At the time of going to press the agricultural sector looked to be on a firm footing, despite some fruit and grape growing areas hit by frost and hail. The wheat crop looks to be slightly down – but an acceptable yield looks on the cards considering that last year’s crop was outstanding. Farmer’s retailer Kaap Agri reported reassuringly recently that production and crop prospects across the whole operational area “are as normal as can be expected in a variable industry such as agriculture.”
Asides from the crop consideration, CBN reckons it should be worth looking out for potential agri-business deals. Late in 2013 the Stellenbosch-based investment giant signalled its intention to track down quality agri-business assets. Remgro’s associate company Grindrod bought into former co-operative businesses, Senwes and NWK. Whether Remgro intends scouting around for other agribusiness assets should be interesting to gauge.
PSG-controlled Zeder could also be an active player in new agri-business ventures in 2014 – having just completed the merger of its highly profitable seed businesses in Zaad. Zeder is a major shareholder in staple foods giant Pioneer, and will play a key role when that company splits off its poultry business held under Quantum Foods.
Another small agri-business operation to watch in 2014 is Bellville-based pesticides, herbicides and irrigation services business Ububele Holdings, which is now controlled by the same entity that controls farming equipment supplier Rovic & Leers. Admittedly the new controlling shareholder will need some time to clean up the Ububele business, but there could be some exciting expansion plans later in 2014.
On the liquor industry front, readers should keep close tabs on both Stellenbosch-based Distell and smaller Paarl-based rival KWV in 2014. Distell is now under the leadership of former SABMiller executive Richard Rushton (who replaced the long serving MD Jan Scannel in December 2013.) Rushton has extensive overseas experience, and could hasten Distell’s efforts to market its Savanna and Hunters cider ranges internationally.
KWV bears watching from the perspective of its strenuous efforts to diversify away from the traditional brand cocktail in brandy and wine. KWV has in recent years started to market a few ready-to-drink (RTD) ranges in a bid to push up volumes and mobilise its large holdings of brandy stock (through the brand ‘KWV & Cola.’) Liquor industry observers also feel there’s a good chance KWV – which has the ultimate backing of investment giant HCI – could look to acquiring specialist liquor businesses this year.
The official launch of the Saldanha IDZ (or industrial development zone) will hopefully provide a much-needed boost to the West Coast economy. While it will be a few years before the IDZ makes its mark on the economy, it might be worth watching the share price of Trematon Capital Investments.
Trematon owns Club Mykonos Langebaan, a company that owns great swathes of leisure property near Saldanha Bay.
The Saldanha Bay Industrial Development Zone was officially launched by President Jacob Zuma at the end of October. Feasibility studies conducted prior to the launch, suggested the zone had the potential to create 12,000 new jobs in the area and could attract foreign direct investment of R9,3bn.
Trematon has noted that Saldanha Bay area is already developing rapidly, arguing that the “excellent road infrastructure and ancillary commercial activity should provide opportunities for Club Mykonos over the next decade.” Trematon’s willingness to make new investments into CML is a major vote in confidence in the economic resurgence of the Saldanha Bay area. The company’s most recent project was a complete redesign of the Club Mykonos reception area to create a contemporary check-in area.
Speaking of the West Coast, all eyes will also be on the Tsogo Sun controlled casino at Mykonos – which remains a firm favourite to have its casino licence transferred to Cape Town. Cape Town has for a while been mulling the possibility of a second casino in addition to the existing facility at GrandWest. GrandWest’s exclusivity arrangement has already run out, but so far no decision has been taken on the second casino license award (which, effectively, requires transferring an existing license from one of the other four smaller casinos in the Western Cape.)
Perhaps the year ahead will see some authoritative pronouncement on the second casino?
On the construction side, it is heartening to see that two Cape Town-based stalwarts Afrimat and Mazor have pulled through a tough few years with their respective balance sheets still in good shape – even after accommodating selected acquisitions. Could the year ahead be a period in which both of these companies accelerate their acquisition efforts? Plenty of opportunities at reasonable prices abound…
On the docks, there will be plenty of intrigue around whether Africa’s biggest fishing enterprise Oceana Group manages to land Foodcorp’s fishing business. Competition authorities have approved the deal, but on condition that the pelagic quota does not pass from Foodcorp to Oceana. This looks like a deal-breaker unless the competition authorities are successfully petitioned. Should the deal go ahead, there will be further fascination as to which entity will snap up the Glenryck canned pilchard brand, which Oceana has agreed to sell as part of the Foodcorp deal.
Sekunjalo’s Premier Fishing also bears watching in 2014. At the time of writing there were increasingly audible rumours that Premier Fishing – which earns the bulk of its profit catch in west and south coast lobster - was looking at bulking up its pelagic side.
In the local health care industry it seems a prescription for rapid growth has been written by Steenberg-based Ascendis Health. The company listed on the JSE in November, and has since already announced one acquisition (the R336m takeover of Surgical Innovations.) From what CBN understands, Ascendis has a strong pipeline of acquisitions that it could bring to book in 2014. The business currently has a market capitalisation of R2,4bn on the JSE, but CBN would not be surprised to see this growing to around R4bn at the end of 2014.
The other major health care issue for 2014 is whether Litha Health Care will finally get its much vaunted vaccine plant in Pinelands churning out product this year. Initially the Biovac plant was due to start producing vaccines at the end of 2013. The latest Biovac manufacturing facility update suggested the facility continues to work with the regulatory authority for its license, which is now likely in 2014. The facility is currently manufacturing stability batches for regulatory filing next year.
On the industrial side, the Parow-based Invicta (aligned to retail tycoon Christo Wiese) and Steenberg-based Torre Holdings will almost certainly be active of the deal-making front. Invicta is likely to look at African and international opportunities, while Torre (under cautionary at the time of going to press) could look to accumulating more local assets.
By Jenni McCann