In DepthSoapboxInterview: Oyama Mabandla, Executive Chairman, Vodacom, South Africa


Posted on Monday, 26 January 2009 16:10

Interview: Oyama Mabandla, Executive Chairman, Vodacom, South Africa

By Patrick Smith and Nicholas Norbrook


South Africans are adjusting to the new world prices for their minerals and the sudden reluctance of the banks to extend credit. If life is not going to get easier soon in the manufacturing sector because of Chinese dominance, the service sectors should propel the economy through the worst of it, with telecoms leading the charge


Oyama Mabandla ?is Non-executive Chairman of Vodacom and Executive Chairman of Langa Group, an investment holding company, South Africa


The Africa Report: How did the financial slowdown affect the operations of African companies in 2008, and what are the prospects for 2009??


Oyama Mabandla: In South Africa, we are seeing mergers and acquisitions drying up. You can’t get debt now from banks to do anything. The credit markets are on holiday. Some of the expansion that was under contemplation – that is southern companies going northwards – is slowing down. ?

 SA top 500 performers

Are the banks’ problems due to the global financial slowdown or to the internal dynamics in South Africa??


Both. The slowdown in debt provision has been happening since the latter part of 2007, ending up with the global contagion. Banks are conserving their firepower. This should be a buyers’ market because assets are cheaper, but nobody has the money because banks won’t lend. South African banks are very conservative. And the Africans who were looking to China as an alternative to the West didn’t think that China is also risk-averse. Chinese companies were among the first to leave the Democratic Republic of Congo. ??


Will telecoms fare better than other sectors in the slowdown?


Analysis of the Top 500 companies in Africa 2008

Search our interactive Top 500 ranking

?Indeed. The view is that we make money no matter what. At the lower end people may use our services less, but you’re going to see companies picking up on our other products. We are getting into data services in a big way, investing in new infrastructure.


??Looking at the Top 500 companies, is African manufacturing growing or contracting?


?Our manufacturing sector has eroded with the emergence of China. Our textile industry has been decimated. I’m certainly not seeing new industries strengthening in South Africa. What we’ve seen in South Africa of course is the emergence of ICT, and our banks remain very strong.??


South Africa dominates the Top 500 companies. Do you see any changes in the economic drivers there?


It’s mines and services, financial services, telecommunications services. Sasol – the coal-to-oil plant – is an exception; it’s become stronger in the last ten years. You have a lot of ICT companies in South Africa, such as Datatec. Most of the companies are extractive, and our retail sector – Shoprite, Pick ’n Pay, Spar – is very strong. They’ve grown in the last ten years with forays into Africa and the Middle East.??


With low growth and tighter credit, will the service sectors be squeezed? ?


Absolutely. But people have to eat. Food companies, especially those that have diversified, like Tiger Brands and Shoprite, are doing well, but Woolworths has stumbled. ??


And the banks? ?


Standard Bank is in a pretty strong position, largely because of Chinese investment, and they’re just a very well-run bank. First Rand group have some difficulties; they’ve closed down their international private-equity business. Absa is in robust health, as is Nedbank. Investec bought some toxic assets, but it’s a small bank so it hasn’t caused ructions. If you’re looking at the top four, three of them are in reasonably good health. On the insurance side, Old Mutual is in trouble – their US operation has been decimated and their share price has collapsed – but Sanlam is robust.


??When will commodity prices rise again? ?


With things like platinum, it will depend on the emergence of the North American auto industry from recession. We’re not going to see any recovery within 18 months.


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