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A ‘perfect storm’ for mergers and acquisitions in the oil and gas industry?

Despite the current economic, political and sanitary climate, we are seeing, and expect to continue to see, mergers and acquisitions in Africa’s oil and gas industry, including in particular:

  • Deals already agreed before Covid-19/the drop in oil and gas prices;
  • Sellers looking to sell to raise money; and
  • Buyers with cash/available credit lines looking to leverage opportunities.

Buyers and sellers have been checking the sale and purchase agreements (SPAs) that they have already signed and have been very carefully considering the SPAs that they are about to sign.

Termination provisions

SPAs often include provisions enabling one or other of the parties to terminate the SPA between signing and closing if certain circumstances arise. Generally, the objective of the seller is to achieve as much certainty as possible. Therefore, a seller will only accept very limited rights for the buyer to terminate the SPA before closing. On the other hand, the buyer will generally not want to be bound into a deal that is not as good as was expected when the SPA was signed.

Material adverse change

This enables one or both of the parties to terminate the SPA before closing if something significantly affects the value of the target asset/company. Discussions generally revolve around (i) what kind of event should be covered: political crises in the country, significant damage to the asset, significant fluctuations in oil and gas prices; and (ii) whether there should be some kind of materiality threshold: for example, a decrease of 10 to 25% in the value of the asset.

These kinds of provisions are generally fiercely negotiated and may not be accepted at all. They relate to the asset and not the financial position of the buyer (or the seller) and will generally not relate to the state of the oil and gas industry as a whole (for example a decrease in oil and gas prices – although this may be a point of negotiation).

Material breach of representations and warranties

Representation and warranties generally do not include any kind of comfort concerning oil and gas prices, availability of reserves, production levels or political issues. However, current circumstances might give rise to breaches such as:

  • breach of a warranty to ensure that there is no event of default under any of the existing financing arrangements: low oil prices and/or a suspension of production may trigger events of default relating to financial covenants;
  • breach of material project contracts (for non-performance, non-payment); and
  • the target is unable to pay debts as they fall due.

Price adjustment

For many deals, the price for the asset/company is fixed on a past date (a locked box date or retroactive effective date). In this case, there is a risk of value fluctuations between that date and the date of the actual closing of the deal. This can be significant where oil and gas prices or production have significantly decreased since that date. The parties may still have to close at the original price in these circumstances.

If on the other hand the price is calculated based on the value at the closing date, then the parties may be better protected against any sudden increase or decrease in oil and gas prices or production levels. Deferred price mechanisms based on future performance might also be helpful. Parties may become being more creative with pricing mechanisms in future deals, with both parties looking to mitigate their risks.

Environmental, Social and Governance issues

Before Covid-19 and the oil price collapse, ESG was the key point in the minds of most oil and gas companies and should not be forgotten.

Sellers looking for a clean exit, or buyers looking to avoid having to take on past issues, should negotiate pre- and post-closing indemnities carefully on this basis.

Foreign currency

Some countries have found themselves short of foreign currency, particularly those countries that are dependent on exports of goods (Ethiopia is an example) or oil and gas revenues (such as Nigeria and Angola).

This means that African buyers have struggled to be able to obtain the foreign currency necessary to do deals. It has also meant that foreign investors are concerned about their investments becoming cash trapped in a country.

These issues have arisen on top of the already existing issues around the tightening of regulations in certain regions (like the CEMAC region) concerning the ability to maintain offshore bank accounts.

Partner risk

Many foreign investments in Africa are through joint ventures with local partners and/or with other international investors either for legal reasons or for business reasons, or a combination of both. Many foreign companies are also dependent on local contractors
and suppliers.

Covid-19, combined with the oil and gas crisis, has not only made target companies and projects more fragile but has also made certain investors and contractors, particularly smaller investors and contractors, more fragile. In a company or project where the financial stability of each of the stakeholders is important (for example, an entity requiring shareholder funding or dependent on shareholder services), this can be a real issue. Foreign investors are therefore being increasingly diligent both with new investments and in relation to existing investments.

These circumstances may provide opportunities for larger investors to acquire bigger stakes in companies and projects. However, it may also require them to acquire additional stakes to protect their investments from the financial difficulties of their partners rather than because they wanted a larger stake.

Rebecca Major, Partner, Herbert Smith Freehills LLP

Where local partners or contractors have financial difficulties, international investors may prefer to support them financially rather than buy them out, because it makes legal or business sense to do so.

National sentiment

As African countries are feeling economically more fragile, some will become more protectionist in terms of foreign investments (increasing tax rates, etc). However, this is not universally the case and many countries have realised that they need the support of others either regionally or internationally.

Herbert Smith Freehills is one of the world’s leading global law firms, with 27 offices globally.

The evolving politics of oil

“We built the modern economy on a global logistical supply chain that could not function without oil and its downstream derivatives. This dependence on oil has enabled the broader
oil industry to be remarkably profitable. It has been one of the world’s more important industrial sectors for much of the past 100 years,” writes Mike Townshend.

And because of the scale of the oil industry, it has always been closely entwined with politics. Since its genesis in the late nineteenth century, the oil industry has drawn more controversy than most others. Oil has caused wars, assassinations, man-made disasters, coups and still affects every person in the world today.

A brief history

Iraq’s 1990 invasion of Kuwait after an oil production dispute dragged the US back into Middle Eastern conflict. US efforts to secure its oil supply, principally from major producer Saudi Arabia, has embroiled it in regional conflict ever since. Ensuring Saudi stability in the strife-torn region has demanded costly US political and defense support.

More recently, elevated oil prices made new US oil fracking production profitable and the US has doubled its oil production over the past decade. The US has once again become the largest oil producer in the world, surpassing Saudi Arabia and Russia. The US is no longer reliant on imports and it is now re-evaluating its expensive and divisive Middle Eastern involvement.

In the meantime, China’s economy burgeoned and the oil-dry country is now the world’s largest oil importer. Simultaneously, Putin’s Russia is smarting at its post-communism loss of geopolitical influence. Putin has been cosying up to Chinese President Xi, realising Russia and China could work together to achieve greater global geopolitical authority.

The current oil imbroglio

In late 2016, Russia and the Organisation of the Petroleum Exporting Countries (OPEC) worked together to support oil prices from the relatively low levels of mid-$40 per barrel. Prices recovered and a new, extended OPEC oligopoly dubbed OPEC-Plus seemed to have become entrenched.

Oil has caused wars, assassinations, man-made disasters, coups and still affects every person in the world today.

When oil prices started falling from $65 at the beginning of 2020, Putin conceived an opportunity to decimate oil prices and thus strike at the booming US shale oil industry while cementing Russia’s goodwill with oil-importer, China. In early March, he chose not to support the OPEC-Plus call for production cuts and encouraged Russian oil companies to instead ramp up production. The Saudis responded by increasing their own production and the supply glut caused a further weakening of prices.

The rapidly spreading Covid-19 pandemic was concurrently decimating global oil demand. The combination of slumping demand and rising supply saw Brent crude prices collapse to $25 per barrel. Investors should expect a six- to 18-month period, if not longer, where oil prices are volatile and likely to languish close to $40 per barrel.

Geopolitical ramifications

The shake-up of the oil sector will have a variety of geopolitical ramifications. It is still too early to establish how this will play out, but some macro consequences are becoming clearer.

Oil demand is normally correlated with the global economic cycle but is now fraught with uncertainties thrown up by an entirely new set of factors.

Firstly, OPEC’s influence should wane. As the energy transition away from fossil fuels gains momentum and the array of economically viable and less price-volatile energy sources continues to emerge, oil’s dominant position in the energy mix will decline. OPEC’s ability to set prices and thus extract geopolitical bargaining power will diminish. Conflict in the Middle Eastern arena, however, could escalate. New power blocs backed by Chinese or Russian interests will replace US involvement and look to exploit Arab nations and assert power in the region.

Secondly, Sino-Russian relations should deepen on the back of this oil crisis. Their partnership is an outcome of their shared dissatisfaction with the US – both feel antipathy towards the US and its perceived meddling in their sovereignty and interests. Russia has already become one of the biggest recipients of Chinese investments under the Belt and Road initiative. The oil war has complicated Russia’s prospects for economic growth, but its alignment with China could deliver early benefits as the latter’s economy recovers first from the Covid-19 fallout.

The uncertain path to oil price recovery

The oil price is a factor of demand and supply. On the supply side, there is now significant excess capacity in oil and related-product inventories due to the Covid-19 pandemic. This excess must be absorbed before product prices can recover. At prices below $45 per barrel, oil supply is largely in the hands of the OPEC-Plus oligopoly. At higher prices, higher-cost producers such as the US onshore fracking industry can restart production.

Oil demand is normally correlated with the global economic cycle but is now fraught with uncertainties thrown up by an entirely new set of factors. These include how quickly economies can rebound from lockdowns, whether working from home becomes the new normal and whether wary office workers avoid public transport to favour self-driving.

Mike Townshend, Fund Manager, Foord Asset Management

Bigger influences include the timing and extent of the recovery in global travel and tourism, the accelerating adoption of electric vehicles and how the global logistics supply chain is affected by de-globalisation, reshoring and the establishment of new supply lines. Many of these decisions will be made by politicians.

Uncertainty relating to supply and demand will, therefore, result in a volatile period for oil prices and oil-related investments. So, while an oil shock of this nature offers investors rare buying opportunities, they should proceed with caution.

Foord Asset Management is an owner-managed boutique built on the principles of investment stewardship.

Africa Oil Week Virtual – reigniting the African upstream

Reigniting the African Upstream

AOW Virtual is kickstarting the African upstream following the global downtime with an unmissable two-day online conference, 7 – 8 October 2020.

Packed full of strategic outlooks, debates, and a much-anticipated government bidding round, AOW Virtual is a chance for you to engage in progressive dialogue with the sector’s most robust leaders, and best of all, content sessions are free to attend.

In addition, 1-2-1 meetings for those attending the main AOW conference in February 2021 will take place virtually and will enable meaningful conversations, re-invigorate partnerships and spark new connections that will reignite the African upstream once again.

Learn more or register here

Why Attend?

  • Reconnect with AOW’s senior community following the global downtime
  • Align your post-pandemic approach with the sector’s most resilient leaders
  • Don’t miss data driven outlooks into new ventures as the world’s economies restart
  • Seize new business, exploration and JV opportunities emerging across the continent
  • Tap into a new community of prospective clients and partners
  • *NEW* Now CPD certified, AOW Virtual will count towards your continuing professional development

Attendance Options

Access to all content sessions, debates and the bidding round is complimentary for all and is a unique opportunity for you to experience our world-leading content totally free of charge.

1-2-1 virtual meetings will also be taking place between those registered for the main Africa Oil Week event taking place 1-5 February 2021.

If you are interested in purchasing a ticket to the next edition of Africa Oil Week and gaining access to the virtual meetings or interested in sponsoring AOW Virtual, please visit the website for details.

Gas finds off the coast of Mozambique could be significant

Sasol's Secunda complex (Credit: Sasol)

Massive natural gas finds in Mozambique’s Rovuma Basin could have a big impact on the economy of Mpumalanga Province in South Africa. The province is already equipped with energy and fuel infrastructure and expertise.

The Liquefied Natural Gas Independent Power Producer Procurement Programme (LNG IPPPP) is part of the broader programme of the National Department of Mineral Resources and Energy which encourages private investment in renewable energy, namely the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).

The total allocated to gas-to-power in the national power plan is 3 726 MW, of which 3 000 MW is for LNG.

The new gas from Mozambique could be shipped as liquefied natural gas to Maputo and continue from there to the Sasol plant at Secunda via the existing Rompco pipeline.

The promoters of the Nkomazi Special Economic Zone believe that the fact that the pipeline passes through the SEZ is a big selling point. An alternative would be for the LNG to be shipped to Richards Bay before being piped north.

Many of the big mining and manufacturing concerns in Mpumalanga have long-term contracts for the supply of gas with big gas companies. Afrox and Air Liquide are two of the biggest, with the latter having 3 500 national customers, which include Sappi and Sasol.

International chemicals and energy company Sasol has several large plants in Mpumalanga and plays a major role in the economy of Mpumalanga.

Sasol’s operations at Secunda are among the most important manufacturing facilities in Mpumalanga province. Sasol Gas is one of the four Sasol operations at Secunda. (Credit: Sasol)

Sasol Gas is one of the four Sasol operations at Secunda, supplying natural gas to Sasol Synfuels and buying Sasol Synfuels’ methane-rich pipeline gas to sell to customers in Mpumalanga and KwaZulu-Natal.

Sasol and the provincial government have commissioned a technical feasibility study for a Petrochemical Technology Park to be located in the province.

Sasol will be a key player when national government finalises policy on biofuels. Sasol is already making 285 000 kilolitres of absolute alcohol in ethanol from sugar fermentation annually. About 60-million litres of liquid fuel is produced each day at the coal-to-liquid plant run at Secunda. Sasol has finished its mine replacement programme and feedstock is secure until the year 2050.

Another part of the REIPPPP covers the conversion of biomass to energy. At Sappi’s Ngodwana mill, a 25 MW project is underway.

Transnet Pipelines runs a 3 800 km network of underground, high-pressure petroleum and gas pipelines throughout the eastern parts of South Africa. The company’s sophisticated multi-product pipeline (NMPP) between the coast and Gauteng transports a range of liquid products.

More resources:

Independent Power Producers Programme: www.ipp-projects.co.za
Petroleum Agency SA: www.petroleumagencysa.com
PetroSA: www.petrosa.co.za

See also: Phindile Masangane appointed as new CEO for Petroleum Agency SA

New agricultural sites are planned for defunct mines in Mpumalanga

A macadamia orchard in Mpumalanga. (Image: Likweti Bushveld Farm Estate)

With several coal mines reaching the end of their lives, steps are being taken to convert the land to useful agricultural land. Safety and health concerns will have to be addressed, but there is potential to improve food security for poorer families in the province.

A number of off-take agreements have been signed between commercial and emerging farmers and wholesalers and distributers in Oman.

A provincial programme called Phezukomkhono Mlimi is providing mechanisation and input support to subsistence and emerging farmers and households which are engaged in agriculture. Farmers receiving support from government are expected to enroll in courses offered by the AgriSETA. The Fortune 40 programme has a specific focus on developing young entrepreneurs in farming. Twelve of the Fortune 40 farms have been linked to retailers such as Spar, Shoprite and Boxer and with wholesalers and agri-hubs.

The goal is to have an agri-hub in each of the province’s three districts. Small-scale farmers and co-operatives are being given a chance to connect to the formal economy via the hubs which will also provide advice and equipment.

The Mkhuhlu agri-hub in Bushbuckridge, which forms part of the Provincial Government Nutrition Programme, is operational.

The Mkhondo agri-hub in Gert Sibande District is completed and partially operational. The plan is for it become fully operational in the next financial year. A feasibility study is underway relating to the establishment of a hub in the Nkomazi Municipality. A budget of R15-million has been agreed for the first phase and the creation of a pack-house. An International Fresh Produce Market is planned as a means of stimulating agricultural production, but the project has stalled.

Other interventions include the re-commissioning of the Bushbuckridge poultry abattoir and support for soya and maize farmers to supply the Lekwa Oilseed Crushing Plant in Standerton.

Agriculture is responsible for about 3.4% of Mpumalanga’s Gross Domestic Product (GDP).

Crops

Mpumalanga accounts for about 21% of South Africa’s citrus production and a third of its export volumes, with Valencias being the province’s most popular varietal and Nelspruit being the centre of the sector.

Avocados, litchis, mangoes and bananas thrive in the province. Hazyview is an important source of bananas, with 20% of South Africa’s production originating there. Deciduous fruits are cultivated in smaller quantities. About 15 000 tons of table grapes are produced in the province annually and Mpumalanga produces its own wine.

A specialist fruit that does well in the province is the marula. The marula fruit makes a popular beer and is used in the production of a liqueur that has done well on the international market.

See also: Marula Industrial Hub to boost the use of this super fruit

Macadamia nuts have grown in popularity exponentially. About 4 000 hectares of new trees is added each year across South Africa, with most of that in Mpumalanga and neighbouring Limpopo. The vast majority of the nuts are exported, with about 40% going to China.

Credit: Laeveld Agrochem

There are about 450 farmers growing the nuts and there are 14 cracking factories in South Africa. The sector employs about 4 500 people, of which 1500 are permanent employees. Barberton and Hazyview are two prime areas for the nut.

Mpumalanga produces one-million tons of maize from 291 788 ha. About 53 000 tons of wheat and 33 000 tons of sorghum are produced annually. Soya bean is another major crop: more than half of South Africa’s soya bean crop is produced in Mpumalanga’s Highveld areas.

Cotton is grown mostly under dryland conditions in Marble Hall. The province has 1500 ha of dryland under cotton. Much of South Africa’s total annual production of about 34-million kilograms of tobacco, especially Virginia tobacco, takes place in the north-western parts of Mpumalanga, and in neighbouring Limpopo. Other crops produced for export in Mpumalanga include cut flowers, pot plants and nursery plants.

Mpumalanga has the second-biggest sugar industry in South Africa, after KwaZulu-Natal.

TSB Sugar runs three mills in the Lowveld region, two of which have refining capacity, and employs about 4 700 people. More than 1 400 farmers (commercial and small-scale) deliver sugar cane to the company. TSB brands are Selati (sugar) and Molatek (animal feed).

Companies

Astral Foods runs a poultry processing plant in Standerton which has 2 425 employees. Fresh fruit and nut supplier Halls cultivates 375 ha of its own land and has another 1 400 ha under management. Its crops include avocados and litchis.

Westfalia is a diversified agricultural group which runs extensive operations in the province. Umbhaba Estates is one of the biggest banana growers in the province. The drier Highveld region with its cold winters supports crops such as cereals, legumes and nuts. There is extensive irrigation in the Loskop Dam area. Ermelo is one of South Africa’s main centres of sheep farming and wool production.

Subtropical fruit flourishes in the Lowveld with the town of Nelspruit being a major citrus producer. Mixed farming and potatoes, sweet potatoes and beans are mostly found in the southern and western parts of the province.

More sector resources:

Fresh Produce Exporters’ Forum: www.fpef.co.za
Macadamias South Africa: www.samac.org.za
South African Cane Growers’ Association: www.sacanegrowers.co.za
South African Subtropical Growers’ Association: www.subtrop.co.za
Citrus Growers Association: www.cga.co.za

Local Southern African Manufacturing Expo postponed to October 2021

In the address to the nation on Saturday, 15 August 2020, President Cyril Ramaphosa announced that South Africa would move to lockdown level 2 from Monday, 17 August 2020. The decision, he said, was in light of the steadily declining number of Covid-19 infections.

This is positive news for the country and for the local manufacturing industry. In order to give the industry time to recover and allowing for this positive move, moving LME to the fourth quarter of 2021 will entrance participation at the exhibition.

“In consultation with the local manufacturing industry and our partners, we are confident that postponing the Local Southern African Manufacturing Expo will ensure a successful and safe delivery of the event. We look forward to coming together for LME in October 2021, stronger than ever and ensuring an excellent experience and ROI for our entire manufacturing community,” said Charlene Hefer, Event Director, Specialised Exhibitions, a division of the Montgomery Group.

The South African Capital Equipment Export Council, the conceptual partner, fully backs up the decision. “We expressly welcome that Specialised Exhibitions was courageous enough to take this step, which is entirely in the interest of the local manufacturing industry,” says Eric Bruggeman, Chairman of the SACEEC board. During this period, we will be gathering extensive insight from the local manufacturing community, together with our partner SACEEC, to upgrade our content platform, the free-to-attend seminars.

This platform brings together various communities for perspective and discussion on issues affecting the manufacturing industry, challenges and ensuring future sustainability. This three-day live event will be upgraded into a virtual experience that will kick off with a powerful keynote address and provide timely content and education sessions.

Additionally, the Local Southern African Manufacturing Expo together with its partner, The South African Capital Equipment Export Council (SACEEC), will once again host the Exporter of the Year Awards.

“While we believe in the power of face-to-face events and what they deliver, our focus is on evolving our offerings to what our customers need now and in the future and how we can deliver the experience to best meet those needs. After speaking to our customers and working on a variety of opportunities to meet the needs of the manufacturing industry, we are pleased to provide value to this community,” said Hefer.

The Local Southern African Manufacturing Expo will once again offer peer-to-peer networking, vendor product and service demonstrations and matchmaking assistance between decisionmakers and sellers.

The LME team will continue to be in touch with all attendees, exhibitors, and sponsors to answer any questions. There will be further communication to these groups over the coming days and weeks to facilitate a smooth transition.

For more information, please contact:
Natasha Heiberg, Marketing Manager natashah@specialised.com
www.localmanufacturingexpo.co.za

Air Products reallocates CSI funding to help fight Covid-19

The Thuthukani Special School in Empangeni received sanitiser and face shields as part of the Covid-19 relief donations.

Air Products prides itself in the innovative work they do in the communities in which they operate through their corporate social investment (CSI) efforts. The projects are strategically focused on the youth and education and are all structured according to a specific framework.

However, in times like these, as we face the global Covid-19 pandemic, Air Products did not hesitate to allocate funds for Covid-19 related projects.

According to Arthi Govender, Chairperson of the CSI Committee, they have already made annual financial donations to organisations such as Nazareth Care House, Community Chest in KZN and the Western Cape, Hospice in Rustenburg, Empilweni Drop In Centre and Cotlands in the wake of the pandemic. “The funds of most of these organisations are already thinly spread, and the added costs of acquiring PPE, sanitisers and other protective goods are really leaving most in a dire situation – we are pleased that we have made these much needed donations early in the year to assist with preventing the spread of the coronavirus.”

Reaching out and creating innovative solutions at schools, preventing the spread of Covid-19

Air Products strives to make a difference, not only when it comes to service delivery, but also in other instances, such as providing support to their surrounding communities.

The most recent examples of such projects are the hand wash stations built at primary and secondary schools. Govender comments on these bays: “The CSI Committee approved funds to install hand wash stations as we realised that we could play a role to prevent the spread of COVID-19 at these schools by providing proper facilities.

Hand wash stations were recently erected at schools in Alexandra, Tembisa, Vanderbijlpark and Rustenburg.

The stations consist of concrete basins and taps with refillable wall mounted soap dispensers. We have completed seven bays at the Kwabhekilanga Secondary School in Alexandra, six at the Seotloana Primary School in Tembisa, seven at the Lebohang Secondary School in Vanderbijlpark and three bays at different schools in Rustenburg.

This project is sustainable and will benefit the learners and the school during the current crisis and for many years to follow as it ensures that water is easily accessible and encourages hydration and proper hygiene.”

Air Products launched the WitnessHappiness project more than three years ago where they provide assistance to early childhood development (ECD) centres at a national level for a period of three years. Through this award-winning project, commitment is made and a relationship built with a centre which is selected by the employees from the different facilities. They are supported with different donations over time, from education to personal care items. As the centres could not be visited for Mandela Day, donations were made based on their needs. The majority were supplied with Covid-19 relief items that they can use to prevent the spread of Covid-19 at the centres. They received items such as face shields and sanitisers and mattresses to ensure social distancing during nap time.

Govender further explains that they were overwhelmed with requests from non-profit organisations since the start of the pandemic in March. “In order to assist in stopping the spread of Covid-19, we have reallocated funds in an effort to help more organisations. One example of such a donation was to the Government’s national Solidarity Fund which was established by the President.”

Govender concludes: “When President Cyril Ramaphosa declared a state of national diaster in the wake of the Covid-19 pandemic and called for assistance to combat the spread, we reacted swiftly and found innovative ways in which we can provide assistance. At Air Products, we believe nothing is more important than safety at our facilities, and with this pandemic we are ensuring that we assist where we can to make this ethos a reality beyond our operations.”

For more information on Air Products, visit www.airproducts.co.za

The importance of how we see as managers

At the most basic level, we assess that how and what we observe, will directly impact what we do and that will influence the results we get. Ontologically speaking, we can assume that we can change our results by changing the way we do things. Also referred to as the systems and processes, in the normal run of the business, we will typically change structure, process, remuneration, technology and people, to name a few.

The challenge is, however, if we are still observing the world from a mindset that is not conducive for growth, our results will most probably not change, leading that most change initiatives fail.

As managers and leaders, it is essential to observe how our employees and we observe, as we as a collective will influence the results we get.

The following questions arise:
  • How can we change the way we and our employees observe the world?
  • How can we change the way we and our employees respond to change?
  • What influence the way we observe the world?
  • How do we stay engaged as a team?
  • How do we collaborate as a team for sustainable results?
  • How do we unlearn and learn to adapt to changing circumstances?
  • How do we then change the way we observe?

How we observe is also referred to as our way of being in ontology. Our way of being is formed by our moods, language and our somatic (body). This phenomenon is depicted in the following diagram:

As leaders and managers, we are in constant conversations, with ourselves, teams, and employees. We are listening. How present are we when listening? We are making assessments and assertions of the world, employee and company performance, challenges, and opportunities. How grounded are these assessments? How are ungrounded assessments influencing our results?

What is our general mood, as our mood is the pre-disposition for the action we take? Are we living in a mood of resentment, resignation, anxiety, and industrious busyness? Are we living in a mood of ambition, wonder and being in the zone of learning, creating and productivity? What is the energy that we embody and engage with life?

To influence the results we get, start by observing (seeing) our own and our employees’ way of being, and influencing these moods by the quality of conversations, or will we say the quality of the coaching conversations we have.

Coaching for Managers

The Business School at the University of the Free State, offers a 12 week online short learning programme, namely Coaching for Managers, supported by webinars to ensure that you will gain skills and tools to enable you to engage in coaching conversations and observe differently.

Ready to be a learner, gain some new coaching skills and stop for momentum to observe your way of being?
Contact Ansie Barnard: 082 900 1080 | 051 401 3204 | barnardam@ufs.ac.za

 

A 2020 regional overview of business and investment in Limpopo Province

The mining sector continues to invest in projects in Limpopo. (Image: Implats)

The Limpopo tourism sector received a boost in February 2020 when the Armed Forces Day was held in and around Polokwane, the provincial capital. Fully booked signs went up from Mokopane to Haenertsburg and tourism operators had reason to expect a bumper year ahead.

Then on 5 March, the National Institute for Communicable Diseases announced that the first case of Covid-19 had been reported in South Africa. Any hopes of maintaining the positive increase in visitor numbers recorded in recent years had to be put aside and the focus was on saving lives. In 2018 Limpopo received 2.2-million international visitors in addition to 1.1-million domestic travellers.

Last year’s regional overview referred to the sector’s “almost limitless potential” but most of that will have to wait until the global pandemic is under control. Nearly eight-million international tourists visited the province between 2014 and 2018 and more than 27-million South Africans visited some part of Limpopo in the same period.

The combined land area of Limpopo’s national, provincial and private game and nature reserves is 3.6-million hectares. It is possible that these reserves will be able to receive visitors before other parts of the tourism sector are opened up so there is the possibility of some relief from that quarter. According to the Premier’s office, the tourism sector employed about 22 400 people in 2018.

The absence of travellers in the wake of the coronavirus epidemic is obviously going to have a big impact on the Limpopo economy. Fortunately, the province’s other two big economic sectors, mining and agriculture, are strong and both of these sectors are the focus of public and private investment.

Agricultural infrastructure upgrades

The provincial government is putting considerable resources into agricultural infrastructure. This includes upgrading old irrigation schemes and building new ones, building a packhouse, investing in processing equipment at a tomato paste factory and constructing and supplying Farmer Production Support Units around the province.

These all constitute attempts to bring small-scale farmers into the value chain at a point where more money can be made. Limpopo is home to some of South Africa’s largest commercial agricultural enterprises who are drawn to the fertile and varied soils that the province has to offer. This is one of the reasons why Limpopo punches above its weight in exports.

Potatoes are grown, together with 75% of South Africa’s mangoes and tomatoes; papayas (65%); tea (36%); citrus, bananas and litchis (25%) and 60% of the country’s avocados. ZZ2 is one of the country’s largest agricultural companies. ZZ2 is most famous for the large quantity of tomatoes and avocados produced but its product range is also large: mangoes, onions, dates, cherries, apples, pears, stone fruit, almonds and blueberries.

Avocado packing factory in Limpopo. (Image: Westfalia)

Agri-processing is strong elsewhere, with Pioneer Foods, McCain, Granor Passi, Kanhym, Westfalia and Enterprise Foods all prominent, but this sector still has potential to grow.

The best performing subsector of South African exports in recent years has been fruit and nuts. Limpopo has been a major contributor to the country’s excellent export record: fruit and nuts from the province’s eastern regions are hugely popular in international markets and Limpopo’s commercial farmers are extremely efficient.

Investment encouraged

In July 2016 the national cabinet approved the Musina-Makhado Special Economic Zone (MMSEZ). Located in the far north of Limpopo in the Vhembe region, the SEZ is strategically located near the border of Zimbabwe and on the Great North Road which links South Africa to the broader Southern African region.

The location promotes the Trans-Limpopo Spatial Development Initiative. Logistics will be one of the key focus areas of the SEZ. Soon after the announcement of the designation of the SEZ, the National Department of Trade, Industry and Competition (dtic) said that a consortium of Chinese investors, Sino, had agreed to operate the mineral beneficiation operations.

The initiative has already attracted other (local) investors in the form of Eco-Industrial Solutions (EIS), the private sector investor behind the Limpopo Eco-Industrial Park (LEIP). LEIP aims to be an integrated and industrial development comprising five major industrial components that sets new standards in sustainability. Set on 6 400 ha of land, the LEIP will include a nature reserve, two residential estates and schools.

The Limpopo Economic Development Agency (LEDA) is working with EIS to establish a petro-chemical cluster within the Musina-Makhado SEZ.

Location of the Limpopo Eco-Industrial park (LEIP) in Limpopo Province, South Africa. (Source: LEIP)

Another SEZ is intended for Tubatse in eastern Limpopo. This project, together with an industrial park designed to promote and enhance opportunities related to the marula fruit and the revitalisation of industrial parks at Seshego and Nkowankowa, point to the centrality of clusters and concentrated land use in provincial economic planning.

LEDA, an agency of the Limpopo Department of Economic Development, Environment and Tourism (LEDET), is the primary driver of the provincial government’s drive to boost the economy through investment.

Two of the largest engineering projects in the history of South Africa have recently been undertaken in Limpopo: the Medupi power station (at Lephalale in the far west) and the De Hoop Dam (in the south-east).

The province is home to two universities, the University of Venda and the University of Limpopo, and seven Technical and Vocational Education and Training (TVET) colleges. The Turfloop Graduate School of Business is in Polokwane.

Mining investment

The mining sector continues to invest in projects in Limpopo. The province has huge reserves of coal, platinum, chromium, uranium clay, nickel, cobalt, vanadium, limestone and tin. Demand will always fluctuate, and the commodities cycle has recently been very volatile, but the world will always need minerals.

Limpopo’s assets include the largest diamond mine in South Africa (De Beers Venetia Mine), the biggest copper mine in South Africa (Palabora Mining Company), the biggest open-pit platinum mine in the country and the biggest vermiculite mine in the world.

The province has 41% of South Africa’s platinum group metals (PGMs), 90% of South Africa’s red-granite resources and approximately 50% of the country’s coal reserves. Antimony, a strategic mineral found in large quantities in China, is another of Limpopo’s major assets.

De Beers Venetia Mine – The Venetia Mine underground project bank area. The Venetia Underground project is currently sinking two vertical shafts to a depth in excess of 1,000 metres, and is on track for production to commence in 2021.

According to the State of the Province Address given by Premier Chupu Mathabatha in February 2020, mining employment decreased from 106 000 to 86 000 between the 4th quarter of 2018 and the 4th quarter of 2019. This situation was partially reversed in the early stages of 2020 as global demand for PGMs increased and prices rose.

The mining sector was less affected by shutdowns due to the pandemic than some other industries. The Premier further reported that the province would be receiving a total investment of R36.3-billion over the next five years from mining activity.

The Provincial Government is in the process of reassessing its industrial strategy, the main thrust of which involves strengthening the drive to promote clusters in the mining, agriculture and tourism sectors. The other strategic thrust of the planning initiative is to help prepare Limpopo to exploit new sectors such as renewable energy and the creative sector and to examine the implications of the Fourth Industrial Revolution.

Geography 

Limpopo covers about 10% of South Africa’s land mass and is home to about 10% of the country’s population. The 2011 census recorded 5.4-million residents. The main languages of the people of Limpopo are Sesotho, Xitsonga and Tshivenda but English is widely used in business and government. The Limpopo Province’s 125 754 km² covers a remarkably diverse geographical and cultural landscape that is also rich in minerals and agricultural products.

The N1 highway is a key reason for the province’s important role in the nation’s logistics sector. It passes through Limpopo from the south to the border town of Musina and on to Zimbabwe and its neighbours in the Southern African Development Community (SADC). The busy N11 highway links the province to Botswana to the west and Mpumalanga Province to the east.

Most of South Africa’s logistics operators have a presence in the provincial capital city of Polokwane and logistics hubs have been established in that city and in Musina. The province has a sophisticated rail network which Transnet Freight Rail aims to further expand,  primarily to haul the province’s vast reserves of coal away to the coast at Richards Bay.

The centrally situated city of Polokwane is the capital of Limpopo Province. Located on the Great North Road and almost equidistant from the high-density population of greater Johannesburg and the neighbouring countries of Botswana, Zambia, Zimbabwe and Mozambique, Polokwane’s upgraded international airport plays an increasingly important regional role.

Polokwane is the province’s main centre for industry, commerce, education and medical services. The city is close to big concentrations of mineral deposits and to fertile agricultural lands. Its industries reflect this diversity.

The (digital) show will go on!

The 20th edition of African Utility Week and POWERGEN Africa may now be postponed in person, but is still scheduled to take place from 24-26 November this year as the organisers have promised attendees and partners an inspired and inspiring online platform with world-class speakers, live discussions and virtual networking and product showcases.

The postponed live, in person edition of this leading conference and exhibition at the Cape Town International Convention Centre will take place from 11-13 May 2021.

In announcing the postponement to industry, “the global pandemic has impacted live events from across the globe, and our local market is no exception,” says David Ashdown, MD of Clarion Events Africa, which has been organising this multi-award-winning power, energy and water utility event for the last two decades.

“The live events industry is a core economic revenue generator for suppliers and buyers alike, and our commitment to the energy industry, despite being unable to meet in person, is to provide a market leading digital platform for buyers and sellers to connect and conduct business. Our project teams will be introducing this exciting pivot opportunity as they talk to customers individually.”

Remaining engaged with the industry

He adds: “Since the start of the pandemic we have made a very successful and innovative transition from live events to digital and virtual conferencing and networking. Throughout these challenging times we have made sure to remain engaged with the industry and stay focused on meeting our clients’ and partners’ needs as there is a demand from the industry to engage, ask questions, find solutions and close deals.”

“Whilst looking ahead at the post-pandemic energy landscape we are aware that technology has been, and will remain, an important part of this journey. The innovation shown by the project teams and their commitment to customer outcomes has been wonderful to watch and support. These are tough but exciting times and I believe with certainty that African Utility Week and POWERGEN Africa will be a stronger industry platform with greater industry reach in years to come. We are excited to meet again in person in Cape Town in May and with our technology advancement this year, we believe there is an opportunity to also engage a digital audience to the live edition in 2021.”

More interactive, full value chain

The first Virtual African Utility Week and POWERGEN Africa took place from 11-15 May this year and was the first event in the sector to pull this off and the attendee numbers and level of engagement speak for themselves: 3,642 registrations and 7,015 matchmaking recommendations.

According to David Ashdown: “As event organisers we also heed the attendees’ feedback and the upcoming Digital African Utility Week and POWERGEN Africa will be even more interactive and the content will be of interest to the sector’s full value chain, from utilities and regulators to project developers and technology and service providers.”

Digital African Utility Week and POWERGEN Africa will run a three-day programme from 24-26 November and highlights will include:

  • Conference: 24-26 Nov 2020
  • Utility CEO Forum: 24-25 Nov 2020
  • Matchmaking: 24-26 Nov 2020 (throughout the three-day event programme)
  • Training sessions: 24-26 Nov 2020

Value added exposure

“The Digital African Utility Week and POWERGEN Africa will provide a mix of free and premium sessions,” David Ashdown explains, “ensuring that all levels of attendee can get the most value from in-depth content. It is our way to offer both our long time partners and friends, as well as new acquaintances, the opportunity to stay connected. For those industry leaders who want to join us in a commercial capacity for extra exposure to this fast growing regional energy market, we also have some exciting opportunities available to add value to their participation.”

Multi-award winning events

African Utility Week and POWERGEN Africa is organised by Clarion Events Africa, a multi-award-winning Cape Town-based exhibition and conference producer across the continent in the infrastructure, energy and mining sectors. Other well-known events include the Utility CEO Forums, Future Energy East Africa, Future Energy Nigeria, Nigeria Mining Week, Africa Mining Forum and DRC Mining Week. Clarion Events Africa is part of the UK-based Clarion Events Group’s Clarion Energy Series, which runs over 40 events that cover the oil, gas, power and energy sectors, making it one of the group’s largest portfolios.

African Utility Week and POWERGEN Africa dates and location:

Digital conference and matchmaking: 24-26 November 2020
Venue: Online

Website: https://www.african-utility-week.com/
Twitter: https://twitter.com/AfricaUtilities
Linkedin: African Utility Week and POWERGEN Africa

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