Schalk Venter is a glass half full kind of man, viewing every situation with optimism and hope. “There’s always opportunity,” he tells gasworld. “If one looks through the dark clouds, you will see a ray of light.”
And as the Managing Director of African Oxygen Limited (Afrox), Venter has every reason to be positive at the moment. In the face of the biggest fall in South Africa’s gross domestic product (GDP) since 1960, sub-Saharan Africa’s leading industrial gases and welding company has reported strong cash management and cash flows.
Afrox has steered a managed but flexible path through the economic destruction of the Covid-19 lockdown, which saw a large percentage wiped off South Africa’s GDP in a matter of months. “And that’s the key, to remain flexible. We’ve been making good, but small, strategic steps in the right direction that will lead to larger investment. There’s a lot been happening at Afrox this year,” Venter says.
So, what exactly does such a strong position mean for a company like Afrox in a relatively weakened economy like those of Southern Africa? “I think it gives a company a bit more confidence,” Venter replies, “and it gives a company and its leadership team the ability to meet its obligations, as well take advantage of growth opportunities. It also means a company has enough cash flow to sustain its cash requirements through difficult times. There will always be ups and downs, so it’s always good to have a bit in reserve.”
Afrox has certainly been taking advantage of growth opportunities this year. It just approved a R75m ($4.5m) capital investment in Mozambique to establish and develop a new regional branch in Pemba and an onsite store in Palma. “This is an area where we don’t currently have a presence,” Venter explains. “We have a site in Mozambique, but this new investment is like 2,000km the other way in the North. We will supply bulk gases, packaged gases and hard goods from this site.”
From its new sites, Afrox will also supply LNG to the Mozambique LNG Project. Operated by Total and ExxonMobil, the project is aiming to help meet the world’s increasing demand for sustainable, reliable and cleaner energy sources. “With this project, when it’s at full capacity, you’re talking about 65 trillion cubic feet of recoverable natural gas. It’s a $20bn project and it has the ability to expand up to 43 million tonnes per annum (MTPA),” Venter said.
“Taking advantage of those first mover philosophies is always good. If you’re not there in the beginning, it’s going to be very difficult to get in.”
Afrox also just completed a new, special gases mixing plant on the company’s major cylinder filling facility in Germiston, Johannesburg. This new plant will enable Afrox to locally fill more complex and high purity gas mixtures accurately and faster to cater for the needs of the special gases markets across its footprint in SADC, minimising the need for more costly and long lead time imports.
Other points of interest from 2020 so far for Afrox include the completion of the South African State Healthcare Contract that the company was awarded in 2018. Worth over R1bn ($60.08m), the contract involved Afrox supplying medical gases to government hospitals across all nine provinces in South Africa – a total of more than 400 hospitals and 1,600 clinics.
“We also installed 50,000 Integrated Valve Regulators (IVR) into the healthcare market, and that’s got the benefit of having two devices in one. It’s quite a sophisticated piece of equipment and we’re just about to ramp that up,” Venter highlights. Designed specifically to address the needs of medical practitioners and respiratory therapists for the administration of medical oxygen in portable cylinders, the ready-to-use, mobile IVR cylinders from Afrox are fitted with a built-in valve, regulator, live contents gauge and flow controls.”
“Then of course we’ve put around 70,000 small LPG cylinders into the domestic market. We developed a new model with a partner and this model is where customers can buy gas as their resources allow,” Venter explains. “Say they want ZAR 5 or ZAR 10 of gas and they have their small 5kg safety cylinder, now they can buy gas as they need it. Where there’s fairly low-income housing, we are catering to the daily cash flow requirements of the customer. It’s also not cash bound, it’s via a voucher on a cell phone. This helps people not to carry cash in areas where maybe it’s not that safe. In this model the product is taken to the people since the outlets are stationed right in those communities where this service is required”
In June, Afrox announced it had achieved Level 1 status under South Africa’s Broad-Based Black Economic Empowerment (B-BBEE) regulations. A historic achievement for the company, Venter confirmed at the time that it will open doors to many more contracts awarded on the basis of a company’s contribution to uplifting fledgling black businesses.
“Afrox is committed to changing the face of business in South Africa, supporting small black businesses and supporting our government’s objectives to provide opportunity for the previously oppressed majority in our country,” Venter says.
“All these investments position us really well. I think the market in South Africa maybe a little depressed today due to coronavirus (Covid-19), but we certainly see the longer-term future is good. There’s good growth to be had.
Afrox has been at the forefront of Covid-19 in sub-Saharan Africa. Find out more about this in part two of gasworld’s exclusive interview with Venter here.