It would be fair to say 2016 was a most eventful year – although most of the Western Cape business community might have preferred not to have endured ructions in the exchange rate, the prolonged drought and numerous political curve balls.
In truth – at this delicate juncture – it does seem 2017 will prove every bit as challenging for local businesses. But – while surviving the slings and arrows of South Africa’s outrageous fortunes might be foremost in people’s minds – indications are that the year ahead will see the unfurling of some exciting developments across many economic sectors in the Western Cape.
Looking into our crystal ball, here are the 17 developments that might pan out in 2017.
1) TAKING A RAIN CHECK: While most parts of the Western Cape look a little low on water (following below average winter rains) it does seem big summer downpours further north should break the prolonged drought that has played havoc with agricultural input prices (especially in the plucked poultry sector). If agricultural conditions do improve in the months ahead Cape Business News (CBN) reckons the fortunes of PSG-owned agri-business investor Zeder – which owns stakes in Pioneer Foods, Capespan, Zaad, Quantum Foods and Kaap Agri – will be worth monitoring closely. Of interest will be whether Zeder encourages Capespan to expand their fruit farming endeavours, and whether there will be enthusiasm for seed business Zaad to expand its product basket. Another possible development might see KwaZulu-Natal-based Crookes Brothers expanded their deciduous fruit footprint in the Western Cape.
2) SHAKEN NOT STIRRED: The Western Cape liquor industry is likely to take on a whole new flavour this year. KWV’s operating assets and liquor brands have already been sold to international entrepreneur Vivian Imerman’s Vasari. Neither PSG or HCI had any luck pouring consistent profits from KWV in the last decade, so will be interesting to watch how Vasari looks to fortify the margins in KWV’s award winning brandy and wine brands. This year will also almost certainly see SABMiller selling its 28% stake in Stellenbosch-based liquor brands conglomerate Distell to Remgro, which already owns roughly 34% of the company. With the Rupert family controlled Remgro ‘large and in charge’ at Distell, CBN reckons the chances of some inspired deal-making are greatly enhanced…especially with former SABMiller executive Richard Rushton at the helm. One small deal that CBN is pondering is whether Brait – the investment company controlled by retail tycoon Christo Wiese – might sell off its stake in wine and spirits group DGB. There would certainly be no shortage of buyers.
3) The industrial landscape in the Western Cape has looked rather bleak in the last 18 months with the prospects for large Cape Town-based contenders like Invicta and Torre somewhat brittle. At the time of writing CBN had also heard the sad news that ship-building stalwart DCD Dorbyl was heading for business rescue. Invicta and Torre might be worth watching in 2017. Both companies have built their respective growth engines by acquisition, and – with so many industrial companies trading under stressful conditions – still have muscular balance sheets to pounce on well-priced opportunities.
4) LAND-HO: The local property sector appears ready to tick along very nicely this year. Respected property guru Mike Flax has already recently taken Spear to the JSE. Spear is a dead-ringer for Spearhead, the company Flax brought to market over a decade ago (and then sold to real estate giant Redefine). Like Spearhead Spear is exclusively focussed on Western Cape property. It also appears that Trematon Capital might be gearing up for listing two property companies – including one in the residential space. This year might also be a big year for empowerment group HCI, which has become increasingly adventurous in its property development endeavours of late.
5) SHOP TILLS WILL DROP: The handful of Cape Town-based retail giants are likely – judging from recent trading updates – to be in for a tough year as consumers come under increased pressure. Shoprite (see separate story on Whitey Basson) and Pick ’n Pay look best positioned in terms of profitability with Woolworths and fashion retailers Foschini and Truworths likely to struggle to grow bottom line. But niche retailers like sportsware specialist Holdsport, fashion retailer Rex Trueform and catalogue retailer Homechoice may well surprise with fairly robust performances.
6) DIAMOND DAYS: The last great Cape Town-based diamond mining firm, Trans Hex Group, is now under control of two of the country’s most respected investors, retail tycoon Christo Wiese and top rated asset manager Piet Viljoen. Trans Hex – which still has a large cash pile – needs to get bigger in order to secure longer term viability, and Wise and Viljoen may well be able to uncover a few gems to acquiring in the year ahead.
7) CHIPS ARE DOWN: Will 2017 be the year that the Western Cape Government gives the green light to a second casino in Cape Town to rival GrandWest – which has enjoyed an extended period of exclusivity in the city. Gaming group Tsogo Sun appears to think so. The company has bought the shares it did not own in the Mykonos casino, which is the odds on favourite for transferring its licence to the Cape Town metropole. Tsogo – which also owns the Garden Route and Caledon casinos – has also hedged its bets by acquiring significant minority stakes in GrandWest and the Worcester casinos. If the provincial authorities allow a second casino licence in Cape Town, the smart money is betting on an upmarket Waterfront venue pitched at high rollers and well-heeled tourists.
8) FOOD FOR THOUGHT: The convenience food sector in Cape Town could see a new recipe in 2017. Grand Parade Investments (GPI) – which owns the Burger King and Dunkin’ Donuts franchises – has already shown it has a voracious appetite for the perennially profitable Spur Corporation. This might be the year GPI – which was unsuccessful in increasing its existing 10% stake in Spur to 28% – looks for another big bite. Might it be possible that Taste Holdings, which owns the Starbucks and Dominos franchise is also on the menu for deal-hungry GPI?
9) EDUCATED GUESS: The private school market is hotting up in the Western Cape. Advtech recently acquired Glenwood House in George – adding to its existing Abbotts schools in the province. Curro, which has a number of schools in the Western Cape (Durbanville, Langebaan, Century City etc), is rumoured to be looking at possible school locations in the Fish Hoek/Noordhoek precinct, while Trematon-owned Generations is expected to add another handful of locations (including Hermanus and Noordhoek) to its existing school in Sunningdale.
10) NOTHING VENTURED: The so-called Cape Silicone Valley may spring to life in 2017. Remgro controlled InVenfin has found considerable momentum with recent acquisitions in the specialist food sector, while African Dawn Capital’s Knife Capital appears to be going great guns with its Grindstone business accelerator programmes. Could these successes spur further initiatives? We hope so.
11) LOTS OF BITES: Aside from the listing of premier Fishing later this year (see separate story), there might be some action in the hake fishing sector. Sea Harvest has already signalled its intention to diversify away from its traditional frozen hake offering by buying control of Marreteram, an Australian fishing and seafood distribution business. Talk around the harbour is that Sea Harvest – which is controlled by empowerment group Brimstone – is determined to diversify even further. The other big hake business I&J – controlled by consumer brands giant AVI – is once again subject to rumours that it might be up for sale. It might well make sense for AVI to sell I&J or haul aboard a meaningful empowerment partner ahead of 2020 when fishing rights will be re-allocated.
12) DRILLING DOWN: There has not been much action on the Western Cape oil and gas front – which is understandable considering the depressed crude oil price. But CBN did note that empowerment giant HCI is underwriting a rights offer at Impact Oil and Gas – which hints at some enthusiasm for exploration efforts.
13) WAKE UP AND SMELL THE COFFEE: Cape Town has a well-established coffee house culture. So it will be interesting to see how long before Starbucks – which is percolating slowly in an enthusiastic Gauteng market – waits before venturing into Cape Town. There appears to be some debate around whether the Starbucks will be launched in 2017 in the competitive Cape Town coffee market. In the meantime Dunkin’ Donuts has stolen a march on Starbucks, and – on first impressions – seems to be enjoying vibrant trading.
14) THE ASSET TEST: Cape Town’s asset management market is changing fast with market leader Coronation seeing its empire being challenged on various fronts by new contenders – some of whom are offering game changing client pitches revolving around lower fee structures on investments. The upstart to watch in 2017 is Sygnia, which is growing its assets under management in tough trading conditions by offering affordable fee structures. Sygnia is likely to make selected acquisitions this year, which could see it becoming a more formidable competitor.
15) DRINK IT IN: Epping-based plastics packaging specialist Bowler Metcalf might well make a surprise move this year by offloading its major stake in soft drink bottler, SoftBev. With Bowcalf wanting to focus on its core packaging operations, stake in the R1.2bn a year soft drink business (which includes Cape-based Quality Beverages) might be coveted by players in the beverages sector. Ceres Beverages and KWV have been cited as possible candidates to buy SoftBev, which has also hinted at raising capital by looking for a separate listing on the JSE.
16) SOMETHING MUST GIVE AT PSG: Adventurous Stellenbosch-based investment company PSG – which has big stakes in Capitec Bank and private schools group Curro – has been uncharacteristically quiet when it comes to new deal flows. With the company’s balance sheet fortified with cash, it surely can’t see 2017 out without pulling off a significant new deal?
17) THE GOLDING TOUCH: There are several Western Cape business personalities that readers can’t afford to take their eyes off – including Johann Rupert of Remgro, Jannie Mouton of PSG, Khalid Abdulla of AEEI, Johnny Copelyn of HCI, Hassen Adams of GPI and the irrepressible Christo Wiese. But CBN reckons 2017 might be the year that former HCI executive Marcel Golding cements his corporate comeback with several inspired deals. Last year Golding surprised the market with investments in engineering firm Esor, as well as Cape-based companies like Rex Trueform and Vunani Limited. Golding has plenty capital from offloading a large parcel of HCI shares, and if the Cape Town rumour mill is correct, there could be plenty more deals in 2017.