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AEEI: locked and loaded

CAPE TOWN-based investment company African Empowerment Equity Investments – the old Sekunjalo Investments – appears to be going great guns with a high calibre investment in Saab Grintek Defence (SGD.)

AEEI has largely re-invented itself after the old Sekunjalo came close to imploding around 15 years ago when its main investment – LeisureNet (the old Health and Racquet Club) – collapsed under the weight of excessive liabilities.

It’s been a long walk to financial freedom for AEEI – including several restructuring efforts and the occasional setback. But in the last four years CEO Khalid Abdullah has restored some operational stability and secured strong cash flows, allowing the company to finally shift onto the front foot. Most importantly, the company has started snagging empowerment deals again … and some of these are starting to pay off. SGD is one that looks capable of explosive growth in the next few years.

AEEI has enjoyed a long relationship with Saab SA, the local arm of Swedish defence and civil security company, as a minority shareholder. But in late 2015 AEEI swopped out that minority stake and in its place clinch a R125m deal to acquire a 25% (plus one share stake) in SGD. Initially the deal elicited little excitement in the market – even though AEEI’s first equity partnership with a multi-national (BT Telecoms) has proved rather fruitful. AEEI’s main investments are in Premier Fishing and a specialist technology hub that focuses on the health care sector. The selling point of the SGD deal was that the arrangement did offer AEEI regular minimum annual dividends. But news of a large contract in India could really bolster the value of this investment to the local company.

Last month SGD signed a ground-breaking agreement with India’s Tata Power Strategic Engineering Division (Tata Power SED.) This forms part of the ‘Make in India’ programme that promotes defence trade manufacturing in India and creates new export opportunities for South Africa. The Memorandum of Understanding (MoU) between the two companies was signed during Indian Prime Minister Narendra Modi’s visit to South Africa last month.

Apparently partnership discussions between the two companies started in March this year. The end result of these deliberations is a collaboration that will serve the Indian market – as well as regional and global markets – with electronic self-protection systems for land-based platforms. Trevor Raman, the CEO of Saab Grintek Defence said the company was excited about the signing of the MOU.

“It is our strategy to take South African indigenous technology and products beyond local markets with well-established expert partners who add value to our supply chain and open new markets.”

Raman said the transfer of technology for production of initial orders for Saab’s global customers had already commenced at Tata Power SED’s facility in Bangalore. SGD will be responsible for the transfer of technology for production in India. Tata Power SED will manufacture a large part of the defence system in India, manage final assembly and will also be responsible for marketing the system locally. Abdulla said that the company’s relationship with SGD and Saab AB’s commitment in South Africa was bearing fruit.

“Our South African expertise is now being ‘exported’ to companies where we are supplying quality technology and products.”

Abdullah said the MoU would positively enhance South Adrica’s exports and set a platform to improve trade relations with India (which is part of the BRICS nations.)

“This is testimony to the fact that South Africa is a serious exporter and international collaborator.”

Abdullah pointed out that almost three-quarters of SGD’s total turnover was represented by the export of various products.

AEEI’s success at SGD might prompt further thrusts as an empowerment partner into export orientated industries. CBN also wonders whether there is scope for AEEI to increase its stake in SGD, noting government’s keener focus on black ownership of key South African industries?

Aside from BT Telecoms, AEEI has secured valuable equity partnerships with consumer brands giant Pioneer Foods and fund management group Sygnia.

Some corporate action is expected later this year – if rumours are to be believed – when subsidiary Premier Fishing might be set up for a JSE listing. Premier is expected to embark on acquisitions and partnerships to further diversify its catch – which currently comprises south coast and west coast lobster as well as pelagic fish and squid.

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