Sasol’s joint venture is focused on growth
Enaex Africa, which officially began operating last week, is a joint venture between Sasol and Enaex, a South American explosives manufacturer. The deal has been years in the making and after approval from the competition authorities in February, resulted in a sale of a 51% stake of Sasol’s explosives and rock fragmentation division in SA to the 100-year-old company. Enaex Africa already provides a range of explosives and value-added services to mining companies in Southern Africa. CEO Francisco Baudrand says the company has big plans for the future.
Last Wednesday was the first day of operation for Enaex Africa. What are your plans as you embark on this new joint venture?
We are acquiring a business as a going concern. But of course as majority shareholders and the controlling partner, what we expect, and what Sasol expects, is that we make this business grow. That is why Sasol selected us as a strategic partner, because they knew that it is important for Sasol to sell as much explosives as possible, because of the ammonia that they have. But they didn’t have the resources they needed to do it alone. So they did an international competitive search for a partner, and Enaex was selected as the partner. We expect this joint venture, Enaex Africa, to become not only leaders in SA but important players on the African continent.
What does Enaex bring to this partnership?
We have experience making business grow, as we have done in Brazil and Chile. We are an agile and responsive company. We are not bureaucratic; we make fast decisions.
Our SA operations will be very local in the sense of the decisions [we take].
How have your acquisitions in other countries performed?
In 2015 Enaex acquired Britanite from Brazil, valued at more than $100m. Applying a new business model, a solid mixture of competencies and best practices were shared by Enaex and implemented in Britanite in the short term.
[At the time] Brazil was experiencing a severe economic crash combined with a sociopolitical crisis that resulted in the impeachment of president Dilma Rousseff. Despite this challenging environment, in only three years Enaex was able to not only execute a successful acquisition of Britanite, but also to become the market leader, expanding its share of the Brazilian mining explosives business from 38% to 65%.
The same happened with Davey Bickford [a global detonation and blasting group], which was also acquired in 2015. The company saw an increase of up to 52% in worldwide sales of electron initiation systems in 2016, driving its ebitda [earnings before interest, tax, depreciation and amortisation] up by 2.5 times.
What is your rationale for entering the SA and African market more broadly?
If you look at our strategic plan, SA and Africa were part of that for a number of years in that we needed to be here. We already had a small presence here; Sasol’s explosive division was the old distributor of our electronic initiation systems. So it’s not that Africa just came to mind in the last month. This process took us four years since the first discussions about potential partners, which then became a formal process. So we believe in the continent, we believe in the country. SA is not growing but the continent will grow and there is also a lot of market share that we are planning to gain.
How do you intend to grow Enaex Africa’s market share?
SA IS NOT GROWING BUT THE CONTINENT WILL GROW AND THERE IS ALSO A LOT OF MARKET SHARE THAT WE ARE PLANNING TO GAIN
We believe we are able to bring value-added solutions to our mining customers. Solutions that are not only about price but about improving our customers’ performance and trying to solve the problems they have.
It’s through those solutions where we believe we can make a difference and help to decommodify the industry.
How do you anticipate the Covid-19 pandemic and the economic fallout in SA will affect the explosives industry?
Open-cast mining has been operating at 100% production and, in underground mining, government is now also allowing 100% production. But in underground the spaces are more confined so in some cases you see cases of coronavirus in the mine and then they shut the mine for 14 days. So, technically, we are at about 80% of our volumes underground. But in opencast we are at 100%. In terms of the future, I don’t think it will get any worse. My belief is this is going to improve, but I’m not an expert in pandemics.