Bidvest cautious ahead of election

Comments in annual report point to hurdles for Ramaphosa’s drive to attract investments

Bidvest Holdings, one of SA’s largest industrial firms with more than 130,000 employees globally, looks unlikely to make significant growth investments before 2019’s election as its directors adopt a cautious stance ahead of the polls. Comments by Bidvest chair Lorato Phalatse, CEO Lindsay Ralphs and CFO Mark Steyn in the company’s latest annual report indicate that the lead-up to 2019’s election and the poor state of the economy could slow President Cyril Ramaphosa’s drive to attract $100bn in investment in SA over the next five years.

Bidvest Holdings, one of SA’s largest industrial companies with more than 130,000 employees globally, looks unlikely to make significant growth investments before 2019’s elections, as its directors show caution ahead of the polls.

Comments by Bidvest chair Lorato Phalatse, CEO Lindsay Ralphs and CFO Mark Steyn in the company’s latest annual report indicate that the lead-up to 2019’s elections and the poor state of the economy could slow down President Cyril Ramaphosa’s drive to attract $100bn in investments to SA over the next five years.

Their comments further suggest that weak economic growth and the uncertainty associated with the elections could prompt companies to adopt a wait-and-see approach.

Steyn said that while the low-growth environment in SA presents acquisition opportunities for Bidvest Holdings at attractive pricing, the period before the elections will damp organic growth opportunities.

“We will focus on improving market share through this time, as well as maintaining our margins,” he said. The company is, however, alert to acquisition opportunities presented by the low-growth environment.

Phalatse and Ralphs affirmed the company’s guarded stance ahead of the elections.

Ralphs said the company expects lacklustre economic growth over the next year.

There will be caution until the elections, he said.

“It is encouraging that our president recently outlined a significant stimulus package that is squarely aimed at fast-tracking spending in SA, while making the country more attractive to foreign investment. The successful implementation of this

130,000 is the number of employees the company has globally

31% was services business’s contribution to trading profit

package, as well as other regulatory and policy changes, will be an important catalyst to reignite growth and investment in our economy,” Ralphs said.

Phalatse said SA’s economic, political and social instability affect the country negatively.

They contribute to rising unemployment, constraints on consumer spending, a scarcity of foreign investment and rising demands on the state to provide adequate services and facilities for the growing population.

“Considering next year’s national election, we are not expecting any short-term change or improvement in economic reform. Similarly, the nonavailability of funding for adequate investment and upgrades to infrastructure, including within state-owned entities, will prevent any real improvement or job creation.

“Investment is desperately needed to kick-start the economy,” she said.

The lack of investment could prompt ratings agencies to downgrade the country’s sovereign risk rating.

The country should emulate Bidvest’s business model, which entails investment of significant funds in local infrastructural and logistical development, she said.

Alan Fainman, CEO of Bidvest’s services business, said the unit, which contributed 31% of the group’s trading profit in 2017, is considering acquisitions in the UK “while in SA, opportunities are also being assessed and due diligence processes are under way for … bolt-on businesses”.

In September 2017 Bidvest acquired a 100% interest in management services company Noonan Topco.