Afrimat's product range includes construction materials such as limestone, dolomite and silica.Photo: Supplied
JOHANNNESBURG - The combined market capitalisation of ArcelorMittal South Africa and former listed construction sector heavyweights Aveng, Group Five and Basil Read was less than Afrimat, a relatively small quarrying company, was indicative of the current state of the South African economy.

Andries van Heerden, the chief executive of Afrimat, said yesterday that it was also shocking that a large international company that planned to expand its operations in South Africa now wanted to “just get out” and disinvest, because of the lack of a vision for the country.

He said this had created a new opportunity for Afrimat, because it was involved in discussions with this international company about the acquisition of one of its mining assets. Van Heerden said this company was concerned about the uncertainty about property rights and mining rights and indicated there were not any guarantees that “South Africa would not be the next Zimbabwe”.

He said the mining charter would have a big impact and there was a need for South Africa, like Rwanda, to create a “vision 2030” of where it wanted to be in the future.

“If we try and determine the detail of a charter before we have decided where we want to be, the chances are that we will chop off an arm or a leg that we need in the future. But over the long term it can be a tool to get to an ideal future where it creates value.

“We should focus on things to make it possible for foreign investors to be keen to invest again. There could be short-sighted things in there that will scare off investors so badly that 10 years from now we might not have a mining industry if we get it wrong,” he said.

Van Heerden said Afrimat was still heavily exposed to the construction sector and the company knew this sector had risks, which was the reason for its diversification into industrial minerals.

The group subsequently diversified further into bulk commodities and established its iron ore business, because it wanted exposure to a commodity that was dollar-priced and where the market was determined in another geography.

Van Heerden said there were big opportunities in commodities and confirmed Afrimat could expand into other commodities, such as coal, over time. He said Afrimat was nervous about the mining charter and the policy uncertainty in South Africa.

“In the next 12 to 18 months, a third of group revenue would come out of bulk commodities,” he said.

Transfer its listing

Van Heerden said construction still made up the bulk of Afrimat’s business, but conceded that in three years the group might have to transfer its listing to another JSE sector.

He said Afrimat’s commodities-based segment was impacted in the year to February by a force majeure event when a number of Transnet train derailments impacted the capacity of the railway line.

This had severely impacted production at its Demaneng mine next to Sishen that was destined for export to China.

Afrimat yesterday reported an 8percent decline in headline earnings a share to 180.7cents in the year to February from 196.4c in the previous year. Van Heerden said this was only the second time in Afrimat’s history that it had reported a negative profit growth.

Group revenue rose by 10.3percent to R2.5billion from R2.2bn. Operating profit declined by 13.8percent to R350.4m from R406.6m.

A final dividend a share of 42c was declared, lifting the total dividend to 62c.

Afrimat shares gained 0.04percent on the JSE yesterday to close at R2812.

- BUSNIESS REPORT