Opportunity - Issue 94

christoffscholtz

Quarterly journal for business and industry in South Africa

Business unusual

It has been estimated that the economy will take two to three years to recover from Covid-19 and the subsequent economic collapse. From now to there, the journey will indeed be business as unusual. My pledge, as the new editor of Opportunity magazine, is to provide cutting-edge content that guides our readers on how to rise above the current business trajectory and to circumvent the consequences that are now laid before them.

In this issue, Mike Townshend from Foord Asset Management writes, in ‘The evolving politics of oil’ (page 8), that oil has caused wars, assassinations, man-made disasters, coups and still affects every person in the world today. On page 10, Rebecca Major from leading global law firm, Herbert Smith Freehills, shares her insight on how to navigate African oil and M&A deals in these volatile times. Both of these writers will present more on these topics at Africa Oil Week.

The transport services sector has been severely affected by the pandemic, but help is at hand. Digital transformation is set to disrupt the sector – technology has transformed the railway industry globally and implementing technological innovations could be a game-changer for rail transport in South Africa. Read more on page 17.

Celebrating Women’s Month in August, Opportunity interviews the newly appointed CEO of Petroleum Agency South Africa, Dr Phindile Masangane (page 12), as well as founder and owner of Nemesis Accounting, Shani Naidoo (page 14).

The South African Chamber of Commerce and Industry (SACCI) has a pivotal role to play in guiding the business of its 22 000 members. The Chamber believes that businesses should actively engage in the strategic and recovery implementation processes towards inclusive growth – read more in the CEO’s message on page 4.

Let’s work together in building a resilient, risk-savvy and formidable nation.

Alexis Knipe, Editor

Quarterly journal for business and industry in South Africa

www.opportunityonline.co.za

AUG/SEPT/OCT 2020 • ISSUE 94

The evolving

politics l of oil

Uncovering the path to oil price recovery

Wheels

on rails

Setting railway

on the right track

Exploring SA’s

many prospects

Opportunity interviews

Dr Phindile Masangane

CEO of Petroleum Agency South Africa

THE COVID

EFFECT

E-commerce

on top of the

CEO agenda


Lennings Rail operates from Boksburg in Gauteng

and is the oldest mechanised track construction and

maintenance business in Africa with roots dating back

to 1931.

Lennings Rail focuses on turnkey mechanised railway

development, construction, rehabilitation and

maintenance of track work systems.

Lennings Rail is highly differentiated in the rail industry

because of its in house engineering capabilities that can

repair and build machinery components on site.

Our service offering include:

• mechanized sleeper replacement,

• railway construction and rehabilitation,

• ballast tamping, regulating and screening,

• overhead maintenance,

• rail profile rectification,

• rail flaw detection

• drain cleaning,

• rail signaling & OHTE, and

• smart rail

Get In Touch

Tel: +2711 898 6800 | Email: info@lenningsrail.africa


Operating from Kimberley in the Northern Cape, Rail 2 Rail

has been in the industry for close to a decade.

Rail 2 Rail manufactures pre-stressed PY and P2 concrete

railway sleepers in compliance with SABS ISO 9001 2000

standards. The sleepers are manufactured under technical

license from Rail One.

Rail 2 Rail is one of the biggest manufacturers of concrete

sleepers in South Africa. Rail 2 Rail is the only majority

black-owned supplier of concrete sleepers in South Africa.

We have the capacity to produce 400 000 sleepers per

annum, which are transported via a rail siding all across

South Africa.

Get In Touch

Tel: +2787 330 2221 Email: info@rail2rail.co.za

Your all-African solution to

POWERED BY upgrading MATHUPHA the rail network CAPITAL in

Sub-Saharan Africa.


EDITOR'S NOTE

usiness

unusual

It has been estimated that the economy will take two to three years

to recover from Covid-19 and the subsequent economic collapse.

From now to there, the journey will indeed be business as unusual.

My pledge, as the new editor of Opportunity magazine, is to provide

cutting-edge content that guides our readers on how to rise above

the current business trajectory and to circumvent the consequences that

are now laid before them.

In this issue, Mike Townshend from Foord Asset Management writes,

in ‘The evolving politics of oil’ (page 8), that oil has caused wars,

assassinations, man-made disasters, coups and still affects every person

in the world today. On page 10, Rebecca Major from leading global law

firm, Herbert Smith Freehills, shares her insight on how to navigate

African oil and M&A deals in these volatile times. Both of these writers

will present more on these topics at Africa Oil Week.

The transport services sector has been severely affected by the

pandemic, but help is at hand. Digital transformation is set to disrupt

the sector – technology has transformed the railway industry globally

and implementing technological innovations could be a game-changer

for rail transport in South Africa. Read more on page 17.

Celebrating Women’s Month in August, Opportunity interviews the

newly appointed CEO of Petroleum Agency South Africa, Dr Phindile

Masangane (page 12), as well as founder and owner of Nemesis

Accounting, Shani Naidoo (page 14).

The South African Chamber of Commerce and Industry (SACCI) has

a pivotal role to play in guiding the business of its 22 000 members.

The Chamber believes that businesses should actively engage in the

strategic and recovery implementation processes towards inclusive

growth – read more in the CEO’s message on page 4.

Let’s work together in building a resilient, risk-savvy and formidable

nation.

Alexis Knipe, Editor

www.opportunityonline.co.za

Editor: Alexis Knipe

Publishing director: Chris Whales

Managing director: Clive During

Online editor: Christoff Scholtz

Art director: Brent Meder

Designer: Simon Lewis

Production: Linda Tom

Ad sales:

Thaakirah Julies

Tennyson Naidoo

Tahlia Wyngaard

Venesia Fowler

Administration & accounts:

Charlene Steynberg

Kathy Wootton

Printing: FA Print

PUBLISHED BY

Global Africa Network Media (Pty) Ltd

Company Registration No:

2004/004982/07

Directors: Clive During, Chris Whales

Physical address: 28 Main Road,

Rondebosch 7700

Postal address: PO Box 292,

Newlands 7701

Tel: +27 21 657 6200

Fax: +27 21 674 6943

Email: info@gan.co.za

Website: www.gan.co.za

No portion of this book may be reproduced without written consent of

the copyright owner. The opinions expressed are not necessarily those of

Opportunity, nor the publisher, none of whom accept liability of any nature

arising out of, or in connection with, the contents of this book. The publishers

would like to express thanks to those who support this publication by their

submission of articles and with their advertising. All rights reserved.

C

2 | www.opportunityonline.co.za


ontents

ISSUE 94 | AUGUST–OCTOBER 2020

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SACCI FOREWORD

The impact of Covid-19 so far

NEWS & SNIPPETS

What has been and what’s to come

THE EVOLVING POLITICS OF OIL

Uncovering the uncertain path of oil price recovery

A PERFECT STORM

Negotiating African oil and M&A deals

EXPLORING SOUTH AFRICA’S MANY PROSPECTS

Interview with Dr Phindile Masangane, CEO of PASA

GAINING YOUR COMPETITIVE EDGE WITH NEMESIS

Interview with Nemesis Accounting founder, Shani Naidoo

TECHNOLOGY: TRANSFORMING RAILWAY TRANSPORT

The implementation of wheels on rails is changing

THE ROOT TO THE FUTURE OF AFRICAN MOBILITY

A profile on rail infrastructure provider, Mathupha Capital

TOGETHER WE CAN

Tshepo Kgare, ACEO of Railway Safety Regulator, shares insights on railway safety

ARE YOU MISSING OUT ON THE TRUE POTENTIAL OF AI?

Understanding the impact of Artificial Intelligence

BECOMING RISK-SAVVY

Post-pandemic procurement

A NEW ORDER OF MAGNITUDE

Covid-19 tests supply chain resilience

COVID-19 AND ITS IMPACT ON E-COMMERCE

The pandemic has pushed e-commerce and supply

chain issues to the top of the CEO agenda

08

12

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28

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FOREWORD

The impact of

Covid-19 so far

Like wildfire, Covid-19 has rapidly mushroomed across the globe, leaving its crippling

imprint on every continent with noticeable trade disruptions and tensions, both locally

and internationally – and imposing significant cuts to the global supply chain.

Since South Africa announced its first case of

Covid-19 on 5 March 2020, the situation has

escalated to where we currently have the

highest recorded case incidences on the African

continent, with 225 989 confirmed cases on 8

July 2020, and 3 694 deaths, despite a total lockdown

which resulted in a devastating impact on every sector

of the economy.

Among the most affected sectors, the coronavirus

has impacted negatively on agriculture, mining,

manufacturing, retail, construction, transport services,

real estate and personal services such as the beauty

industry, causing many businesses (both small and

large) to close permanently and leaving many South

Africans without employment, with loss of income and

food insecurity concerns.

___ __ ___ __ _ _

SACCI’s Business

Confidence Index (BCI)

reflected a marked

decline of 22.9 index

points between May

2019 and May 2020,

emphasising the

substantial effect the

lockdown is having on

real economic activity

___ __ ___ __ _ _

SACCI’s Business Confidence Index (BCI), which is

a composite index of economic and financial market

indicators (rated by business as critical indicators of

the business climate), reflected a marked decline of

22.9 index points between May 2019 and May 2020,

emphasising the substantial effect the lockdown is

having on real economic activity. Notable negative

annual impacts on the business climate were exerted

by the weaker rand, depressed new vehicle sales, lower

merchandise import and export volumes, and weaker

share prices on the JSE. Financial conditions were

somewhat easier mainly due to lower inflation and

monetary relief measures.

Though our government financial relief transfers

are helping to substantially support the total income of

households in the lower half of the income distribution,

their efforts are still far from eradicating the impact

of Covid-19 for both households and the business

sector. This narrows the options for all efforts by both

government and the private sector to be channelled

towards recovery strategies for the rapid economic

upliftment of the economy at large.

Though the economy is slowly reopening, and

precautionary measures continue to be implemented to

flatten the infection epidemic, the negative fear mindset

will continue to influence the perceptions around

growing the economy out of this slump. The medical

experts believe that South Africa is likely to see a peak

demand for hospital and intensive care unit (ICU) beds

between August and September. However, based on

current resource levels, projections indicate that the

number of available hospital and ICU beds will likely

be exhausted by the end of July 1 .

The coronavirus is affecting not only the health,

daily life and psychological wellbeing of the South

___ __

Since South Africa

announced its first

case of Covid-19

on 5 March 2020,

the situation has

escalated to where

we currently have

the highest recorded

case incidences on

the African continent,

with 225 989

confirmed cases

on 8 July 2020, and

3 694 deaths, despite

a total lockdown

which resulted in a

devastating impact

on every sector

of the economy.

4 | www.opportunityonline.co.za


FOREWORD

African population, but is also having a significant

impact on our businesses. In its efforts to cushion the

business community, SACCI continues to play a pivotal

role in advocating for the consideration of reasonable

accommodation for essential services and other key

sectors of the economy, especially for small and medium

businesses, and engages with the government in

strategic mitigation processes to ease lockdown for the

survival of businesses, from the onset of the lockdown.

___ ___ __ _ _

The coronavirus is

affecting not only

the health, daily life

and psychological

wellbeing of the

South African

population, but

is also having a

significant impact

on our businesses

___ __ ___ __ _ _

Though working remotely,

SACCI continues to see an influx

of requests for intervention by

members for assistance in the

day-to-day management of their

business in these unprecedented

times. The South African Chamber

of Commerce and Industry has

reached out to its over 22 000

members with daily business

updates on coping, mitigation

reports, requests for comments

on policy and regulatory input

by members, as well as general

support for business survival and

return to work preparation and

compliance plans, and assistance

with access to financial relief

platforms for small businesses.

SACCI believes that businesses should more actively

engage in strategic and recovery implementation

processes which include contingency planning,

financial recovery strategies and legislative compliance

challenges, as well as communication, especially

with employees, to manage the psychological impact

of Covid-19 imposed changes and conduct scenario

analysis towards inclusive growth. This, we hope, will

pave the way towards the recovery of our economy.

Alan Mukoki,

SACCI CEO

___ __

1

Publication by

Modelling and

Simulation Hub, Africa

(MASHA), University

of Cape Town; South

African DSI-NRF

Centre of Excellence

in Epidemiological

Modelling and Analysis

(SACEMA), University

of Stellenbosch;

Health Economics

and Epidemiology

Research Office

(HE2RO), University of

the Witwatersrand,

Johannesburg; Boston

University School

of Public Health;

National Institute

for Communicable

Diseases (NICD),

South Africa.

www.opportunityonline.co.za | 5


BUSINESS UPDATE

News & snippets

Industry insights from the past quarter

SA HOUSEHOLDS FACING HIGH FINANCIAL STRESS

A staggering yet understandable 58% of households across South Africa are facing overwhelming

financial stress as the Covid-19 crisis knocks savings and raises debt levels, according to the latest

Old Mutual Savings & Investment Monitor (OMSIM). Just over half of those surveyed are earning

less than they were at the end of February 2020, while 40% of those currently employed only have

enough funds to survive for one month or less should they lose their jobs. The levels of dependency

have also grown. In 2015 those with other adult dependents (excluding spouse/partner) was at

35%. This year it spiked at 52%. Lynette Nicholson, Head of Research and Insights at Old Mutual,

says: “A very alarming consequence of the financial pressures South African households are

experiencing is that just over 50% are currently dipping into their savings just to make ends meet,

37% have fallen behind on paying household bills and 23% have cashed in an investment policy.”

SME WARRIOR ENTREPRENEUR ACADEMY

Shani Naidoo, director of SME Warrior (Pty) Ltd, launches the

SME Warrior Entrepreneur Academy in September 2020, an

online learning and development platform for entrepreneurs

and business owners. The academy consists of three schools:

School of Legal, School of Business, Financial Literacy and

Entrepreneurship and the School of People Performance and

Improvement Intervention.

“Our educational indoctrination system is at the root cause of so

many business failures and the demise of entrepreneurship as we

know it. We are being taught using old methods in a new world,

expecting to succeed with high expectations. Learning material

designed for the agile and purposeful entrepreneur of the future,

SME Warrior will change lives and businesses alike forever,” says

Naidoo. www.nemesisaccounting.co.za

Perfect, pure energy

“LPGas is an exceptional energy source, especially in areas

where there are electricity supply challenges. It’s a portable

energy solution which can alleviate energy poverty,” says LPGSA

Acting Managing Director Nirvan Brijlal. This clean-burning and

efficient fuel is primarily used for cooking, space and water

heating in South Africa and has over 1000 applications, but

importantly it also plays a role in helping to reduce indoor and

outdoor air pollution. “It is extremely important that you make

use of registered professionals to perform the installation and

maintenance of LPG appliances and cylinders,” adds Brijlal.

For more information on LPGas, visit www.lpgas.co.za

SA FACES A TWO-YEAR JOURNEY TO RECOVERY

Recovery from the coronavirus-induced economic and financial

meltdown could take some two years, according to Prescient

Investment Management’s research and baseline forecast. “The

world is grappling with the worst plunge in economic output in

living memory,” says Prescient Head of Asset Allocation, Bastian

Teichgreeber. “The coronavirus pandemic and the lockdowns to

contain it affect both supply and demand in the various sectors

of the economy in unusual and different ways.”

After making new all-time highs as late as mid-February 2020,

equity markets around the globe made headlines for the record

pace at which they fell shortly after as a result of the global

spread of the Covid-19 pandemic. The price declines have been

indiscriminate, with equities, listed property, bonds, credit,

preference shares, inflation-linked bonds (ILBs), income assets and

the rand selling off in lockstep. Correlations moved to highs

we have never seen before. During April and early May, however,

we saw a steep recovery, with markets posting record returns.

The question everyone is asking is: How long will it take to

return to the pre-corona GDP peak once the economy has hit

bottom? Our base case, says Teichgreeber, is a U-shaped recovery

in which losses incurred in the first two quarters of 2020 would be

recovered within two years. “This might sound pessimistic to some

and optimistic to others. The risks to our view are significant on

the up and the downside.”

6 | www.opportunityonline.co.za


PIC: spotongmag.co.za

R1-BILLION FOR TOWNSHIP AND RURAL ECONOMY

The Black Business Council (BBC) and Ubank Limited signed a historic partnership agreement in May

2020 to establish an R1-billion fund for township and rural economy revitalisation. The fund will be

made available to BBC members and other SMMEs to the value of R250-million per annum over the next

five years, targeted at supporting township and rural black business ventures, entrepreneurship and

start-up companies. The fund will focus mainly on the IT and digitalisation, manufacturing, agriculture

and agri-processing, retail, infrastructure and tourism sectors. www.blackbusinesscouncil.africa

DEMAND FOR HOME DELIVERY SET TO INCREASE

South African consumers are becoming more reliant on home

delivery services due to social distancing efforts. “Businesses will

have to gear up to provide home delivery, or beef up existing

fleets, as it is expected to play a crucial role in the coming months,”

says Derick de Vries, Head of Fleet Management at Standard Bank

Group (right).

“The new normal is digital, the events of the last month have

proved this. For businesses to remain viable going forward, they

will need an online extension of their business, where consumers

can view and purchase products, and a fleet of vehicles to carry

out deliveries. These systems, which some companies may already

have in place, should then be adapted for the current environment.

“The evolution of technology in the industry means that

fleet managers can access customised, in-depth information

on a regular, and in certain instances, real-time basis, via online

platforms,” explains De Vries. “These include daily, weekly and

monthly reports on fuel cost data, and the ability to use predictive

modelling for the outcome of variances to

their fleet and operational data.”

Standard Bank acquired a 40% stake in

Payment24 to support fleet owners with

digital technology solutions that work

to eliminate risk and inefficiencies. The

platform aims to eliminate the hassle of

monitoring and controlling fleet fuelling

transactions using real-time, cardless RFID,

mobile and cloud technologies.

Further to that, Standard Bank offers a

fleet management card, issued per vehicle

rather than driver, which offers convenience

in paying for, monitoring and controlling

vehicle running costs. This also helps

facilitate savings on diesel with several oil

company partnerships to choose from.

pull to come

info to come

pull to come

info to come

www.opportunityonline.co.za | 7


ENERGY

The evolving

politics of

We built the modern economy on a global logistical supply

chain that could not function without oil and its downstream

derivatives. This dependence on oil has enabled the broader

oil industry to be remarkably profitable. It has been one of

the world’s more important industrial sectors for much of

the past 100 years, writes MIKE TOWNSHEND.

And because of the scale of the oil industry, it

has always been closely entwined with politics.

Since its genesis in the late nineteenth century,

the oil industry has drawn more controversy

than most others. Oil has caused wars,

assassinations, man-made disasters, coups and still

affects every person in the world today.

A BRIEF HISTORY

Iraq’s 1990 invasion of Kuwait after an oil production

dispute dragged the US back into Middle Eastern

conflict. US efforts to secure its oil supply, principally

from major producer Saudi Arabia, has embroiled it in

regional conflict ever since. Ensuring Saudi stability in

the strife-torn region has demanded costly US political

and defence support.

More recently, elevated oil prices made new US oil

fracking production profitable and the US has doubled

its oil production over the past decade. The US has once

again become the largest oil producer in the world,

surpassing Saudi Arabia and Russia. The US is no

longer reliant on imports and it is now re-evaluating

its expensive and divisive Middle Eastern involvement.

In the meantime, China’s economy burgeoned

and the oil-dry country is now the world’s largest oil

importer. Simultaneously, Putin’s Russia is smarting at

its post-communism loss of geopolitical influence. Putin

has been cosying up to Chinese President Xi, realising

Russia and China

could work together to

achieve greater global

geopolitical authority.

THE CURRENT OIL IMBROGLIO

In late 2016, Russia and the

Organisation of the Petroleum

Exporting Countries (OPEC) worked together

to support oil prices from the relatively low levels

of mid-$40 per barrel. Prices recovered and a new,

extended OPEC oligopoly dubbed OPEC-Plus seemed to

have become entrenched.

When oil prices started falling from $65 at the

beginning of 2020, Putin conceived an opportunity to

decimate oil prices and thus strike at the booming US

shale oil industry while cementing Russia’s goodwill

with oil-importer, China. In early March, he chose not

to support the OPEC-Plus call for production cuts and

encouraged Russian oil companies to instead ramp up

production. The Saudis responded by increasing their

own production and the supply glut caused a further

weakening of prices.

The rapidly spreading Covid-19 pandemic was

concurrently decimating global oil demand. The

combination of slumping demand and rising supply saw

Brent crude prices collapse to $25 per barrel. Investors

should expect a six- to 18-month period, if not longer,

___ __

Oil demand is

normally correlated

with the global

economic cycle but

is now fraught with

uncertainties thrown

up by an entirely

new set of factors.

8 | www.opportunityonline.co.za


ENERGY

where oil prices are volatile and likely to languish close

to $40 per barrel.

GEOPOLITICAL RAMIFICATIONS

The shake-up of the oil sector will have a variety of

geopolitical ramifications. It is still too early to establish

how this will play out, but some macro consequences

are becoming clearer.

Firstly, OPEC’s influence should wane. As the energy

transition away from fossil fuels gains momentum and

the array of economically viable and less price-volatile

energy sources continues to emerge, oil’s dominant

position in the energy mix will decline. OPEC’s ability

to set prices and thus extract geopolitical bargaining

power will diminish. Conflict in the Middle Eastern

arena, however, could escalate. New power blocs

backed by Chinese or Russian interests will replace US

involvement and look to exploit Arab nations and assert

power in the region.

Secondly, Sino-Russian relations should deepen

on the back of this oil crisis. Their partnership is an

outcome of their shared dissatisfaction with the US –

both feel antipathy towards the US and its perceived

___ __ ___ __ _ _

Oil has caused wars,

assassinations,

man-made disasters,

coups and still affects

every person in

the world today

___ __ ___ __ _ _

meddling in their sovereignty and interests. Russia has

already become one of the biggest recipients of Chinese

investments under the Belt and Road initiative. The oil

war has complicated Russia’s prospects for economic

growth, but its alignment with China could deliver early

benefits as the latter’s economy recovers first from the

Covid-19 fallout.

THE UNCERTAIN PATH TO OIL PRICE RECOVERY

The oil price is a factor of demand and supply. On the

supply side, there is now significant excess capacity in

oil and related-product inventories due to the Covid-19

pandemic. This excess must be absorbed before product

prices can recover. At prices below $45 per barrel, oil

supply is largely in the hands of the OPEC-Plus oligopoly.

At higher prices, higher-cost producers such as the US

onshore fracking industry can restart production.

Oil demand is normally correlated with the global

economic cycle but is now fraught with uncertainties

thrown up by an entirely new set of factors. These include

how quickly economies can rebound from lockdowns,

whether working from home becomes the new normal

and whether wary office workers avoid public transport

to favour self-driving. Bigger influences include the

timing and extent of the recovery in global travel and

tourism, the accelerating adoption of electric vehicles

and how the global logistics supply chain is affected

by de-globalisation, reshoring and the establishment of

new supply lines. Many of these decisions will be made

by politicians.

Uncertainty relating to supply and demand will,

therefore, result in a volatile period for oil prices and

oil-related investments. So, while an oil shock of this

nature offers investors rare buying opportunities, they

should proceed with caution.

___ __

Mike Townshend,

Fund Manager,

Foord Asset

Management

Foord Asset

Management is an

owner-managed

boutique built

on the principles

of investment

stewardship.

www.opportunityonline.co.za | 9


ENERGY

A perfect

storm

Negotiating African oil and M&A deals in these times of low oil and gas prices, currency fluctuations,

Covid-19, increased nationalism and added focus on ESG, is no easy task. Here are some considerations

from REBECCA MAJOR that may be top of mind in the current circumstances.

Despite the current economic, political and sanitary

climate, we are seeing, and expect to continue

to see, mergers and acquisitions in Africa’s

oil and gas industry, including in particular:

• Deals already agreed before Covid-19/the

drop in oil and gas prices;

• Sellers looking to sell to raise money; and

• Buyers with cash/available credit lines looking to

leverage opportunities.

Buyers and sellers have been checking the sale and

purchase agreements (SPAs) that they have already

signed and have been very carefully considering the

SPAs that they are about to sign.

TERMINATION PROVISIONS

SPAs often include provisions enabling one or other of

the parties to terminate the SPA between signing and

closing if certain circumstances arise. Generally, the

objective of the seller is to achieve as much certainty as

possible. Therefore, a seller will only accept very limited

rights for the buyer to terminate the SPA before closing.

On the other hand, the buyer will generally not want to

be bound into a deal that is not as good as was expected

when the SPA was signed.

MATERIAL ADVERSE CHANGE

This enables one or both of the parties to terminate the

SPA before closing if something significantly affects

the value of the target asset/company. Discussions

generally revolve around (i) what kind of event should

be covered: political crises in the country, significant

damage to the asset, significant fluctuations in oil and

gas prices; and (ii) whether there should be some kind

of materiality threshold: for example, a decrease of 10

to 25% in the value of the asset.

These kinds of provisions are generally fiercely

negotiated and may not be accepted at all. They relate

to the asset and not the financial position of the buyer

(or the seller) and will generally not relate to the state

of the oil and gas industry as a whole (for example a

decrease in oil and gas prices – although this may be a

point of negotiation).

___ __

International

investors may prefer

to support companies

financially rather

than buy them out,

because it makes

legal or business

sense to do so.

10 | www.opportunityonline.co.za


ENERGY

MATERIAL BREACH OF REPRESENTATIONS AND WARRANTIES

Representation and warranties generally do not include

any kind of comfort concerning oil and gas prices,

availability of reserves, production levels or political

issues. However, current circumstances might give rise

to breaches such as:

• breach of a warranty to ensure that there is no

event of default under any of the existing financing

arrangements: low oil prices and/or a suspension of

production may trigger events of default relating to

financial covenants;

• breach of material project contracts (for nonperformance,

non-payment); and

• the target is unable to pay debts as they fall due.

PRICE ADJUSTMENT

For many deals, the price for the asset/company is fixed

on a past date (a locked box date or retroactive effective

date). In this case, there is a risk of value fluctuations

____ __ ___ __ _ _

As African countries are

feeling economically

more fragile, some

will become more

protectionist in terms

of foreign investments

___ __ ___ __ _ _ _

between that date and the date of the actual closing

of the deal. This can be significant where oil and gas

prices or production have significantly decreased since

that date. The parties may still have to close at the

original price in these circumstances.

If on the other hand the price is calculated based on

the value at the closing date, then the parties may be

better protected against any sudden increase or decrease

in oil and gas prices or production levels. Deferred price

mechanisms based on future performance might also

be helpful. Parties may become being more creative

with pricing mechanisms in future deals, with both

parties looking to mitigate their risks.

FOREIGN CURRENCY

Some countries have found themselves

short of foreign currency, particularly those

countries that are dependent on exports of

goods (Ethiopia is an example) or oil and gas

revenues (such as Nigeria and Angola). This

means that African buyers have struggled

to be able to obtain the foreign currency

necessary to do deals. It has also meant that

foreign investors are concerned about their

investments becoming cash trapped in a

country. These issues have arisen on top

of the already existing issues around the

tightening of regulations in certain regions

(like the CEMAC region) concerning the

ability to maintain offshore bank accounts.

PARTNER RISK

Many foreign investments in Africa are through

joint ventures with local partners and/or with other

international investors either for legal reasons or for

business reasons, or a combination of both. Many foreign

companies are also dependent on local contractors

and suppliers.

Covid-19, combined with the oil and gas crisis, has not

only made target companies and projects more fragile

but has also made certain investors and contractors,

particularly smaller investors and contractors, more

fragile. In a company or project where the financial

stability of each of the stakeholders is important (for

example, an entity requiring shareholder funding

or dependent on shareholder services), this can be

a real issue. Foreign investors are therefore being

increasingly diligent both with new investments and

in relation to existing investments.

These circumstances may provide opportunities for

larger investors to acquire bigger stakes in companies

and projects. However, it may also require them to

acquire additional stakes to protect their investments

from the financial difficulties of their partners rather

than because they wanted a larger stake.

Where local partners or contractors have financial

difficulties, international investors may prefer to

support them financially rather than buy them out,

because it makes legal or business sense to do so.

___ __

Rebecca Major,

Partner, Herbert

Smith Freehills LLP

Herbert Smith

Freehills is one of the

world’s leading global

law firms, with

27 offices globally.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE ISSUES

Before Covid-19 and the oil price collapse, ESG was the

key point in the minds of most oil and gas companies

and should not be forgotten. Sellers looking for a

clean exit, or buyers looking to avoid having to take

on past issues, should negotiate pre- and post-closing

indemnities carefully on this basis.

NATIONAL SENTIMENT

As African countries are feeling economically more

fragile, some will become more protectionist in terms

of foreign investments (increasing tax rates, etc).

However, this is not universally the case and many

countries have realised that they need the support of

others either regionally or internationally.

• To hear more from

Herbert Smith

Freehills about

negotiating African

M&A deals, attend

the Finance Forum

at AOW 2020.

www.opportunityonline.co.za | 11


INTERVIEW

PASA exploring

South Africa’s

MANY PROSPECTS

Dr Phindile Masangane joins Petroleum Agency South Africa (PASA) as Chief Executive Officer at a time

when the country is developing a domestic gas market anchored on indigenous gas production. This is

something that she looks forward to and can draw on her experience to contribute towards achieving.

Please tell us about the history of Petroleum Agency SA.

Petroleum Agency SA (PASA) has its roots in the Petroleum Licensing

Unit of the then national oil company, Soekor (the predecessor of

PetroSA). In 1999, following the Norwegian model, it was decided that

regulation of the oil and gas upstream industry should be separated

from the national oil company, and the Agency was formed through a

ministerial directive.

The Agency has successfully attracted major explorers to South

Africa and facilitated the acquisition of many new large seismic surveys

and some exploratory drilling, through a period affected by legislative

issues and a major oil price crash. The company has grown from an

organisation of about 25 staff members to 85 today and is held in very

high regard by the local and international oil and gas industry that it

serves. Currently, the Agency is actively involved in shaping the new

stand-alone upstream legislation and in guiding government with its

decisions regarding the possible exploration for shale gas.

What is PASA’s core business function?

PASA has three main functions, as follows. The first is to attract

investment to South Africa’s oil and gas upstream industry, in other

words, investment into exploration and production of oil and gas in South

Africa. We have a team of geologists and geophysicists who interpret data

gathered through past exploration activity to determine prospectivity,

and use this to attract exploration companies to South Africa.

The second function of PASA is to regulate the upstream industry in terms

of the Mineral and Petroleum Resources Development Act, its regulations

and other applicable legislation. The Agency has staff responsible for

ensuring legal, technical and environmental compliance as organisations

enter into contracts with the state to explore for oil and gas.

The third function is to act as the national archive for all data and

information produced during oil and gas exploration and production

in South Africa and to curate and maintain this data for use and

distribution.

Other functions include advising the government on any issues

pertaining to oil and gas as well as carrying out any special

projects, as directed by the government.

What is PASA’s purpose in South Africa’s energy sector?

From the above, it is clear that the Agency is the regulator

for South Africa’s oil and gas upstream industry. However,

the Agency by no means sees its role as only reactive. On the

contrary, it is one that is proactive and the Agency’s purpose

is to facilitate and regulate oil and gas exploration to achieve

production of indigenous oil and gas. This will ensure energy

security and bolster economic growth, and play a strong role in

addressing the eradication of poverty in South Africa.

South Africa has committed to reducing its carbon footprint

and natural gas can play a role in this. South Africa is currently

heavily dependent on coal as a primary energy source and the

substitution of natural gas for some percentage of electricity

generation, as envisaged in the National Development Plan, could

assist with South Africa reaching its goals in terms of carbon

emissions. The Agency’s main role in this is to attract and

facilitate the activities of explorers for indigenous gas.

You have recently taken over the position as CEO of PASA – and you are

the first formally appointed female CEO. Can you please share with us

some of your ideas in terms of plans and strategies for growing and

improving PASA.

South Africa has a very good petroleum resource potential which

remains unexplored. Before 1994, we didn’t have international

oil companies in the country due to political sanctions. So all the

exploration activities for oil and gas in South Africa were undertaken

by the then state-owned company, Soekor (pre-cursor of PetroSA).

Oil and gas exploration is a highly capital intensive

and high-risk business that cannot be left to a national oil

12 | www.opportunityonline.co.za


INTERVIEW

company to do alone. In the democratic era, we

have attracted a number of international oil and gas

companies including the majors like Shell, Total and

ExxonMobil and have seen a number of our blocks

being licensed. Significant exploration activity in terms

of 2D and 3D seismic data collection has taken place

since then, mainly by international oil companies.

We are at the stage where we need to enter the next

phase in terms of exploration – that of significant

drilling activities. This is what we need: a move to

proving the resources we have. That would be the

game-changer for South Africa’s upstream oil and

gas industry. The recent discovery by Total and its JV

partners in Block 11B/12B (Brulpadda) is the first giant

step in that direction.

Offshore, there is currently ongoing exploration of

the prospects close to the Brulpadda discovery. Odfjell’s

Deepsea Stavanger oil rig is on its way to South Africa

from Norway, and should arrive around the 12th of

August. It will drill the Luiperd (more correctly the

Luiperdpadda) prospect which is the second of five

prospects in the group. There is an option to retain the

rig in South Africa for further drilling. The Brulpadda

well discovered light oil and gas condensate, but the

phase in the other prospects can only be determined

through drilling. Future development of the

discovery is highly dependent on the

success of this further drilling. Possible

development could see gas condensate

being piped to the PetroSA

facility in Mossel Bay, but these

decisions are ultimately up to the

operator, Total, and its partners.

My role is to work with industry

and the department to fast-track

these developments including

finalising the Upstream Resource

Development Bill. As we enter this

phase in our industrial development,

we want to ensure that it is an inclusive

and diversified industry in terms of race,

gender and participation of SMEs.

What would you consider to be PASA’s biggest

challenge/s ahead?

South Africa is playing catch-up

in terms of upstream oil and

gas development compared to

other countries in the region.

With the correct policies,

fiscus proposition and

domestic industry off-take

opportunities we can win.

PASA’s challenge is to ensure that both

international and local energy companies

see this value proposition with South Africa

and choose our country. In this low oil and

gas price environment, companies are

inclined to cut back on capital investments

and we need to partner with them to sustain

the momentum.

Upstream oil and gas industry is highly

capital intensive, high risk in the early

stages and requires highly specialised

skills. So local small and medium

companies tend to find it difficult to source

funding for participating in the industry.

Our challenge is that as a regulator acting

on behalf of the government and the people

of South Africa, we have to find solutions

to these challenges so that South African

companies can meaningfully participate in

this strategic industry.

What do you predict the company’s biggest

success will be in the future?

A vibrant upstream oil and gas industry

that contributes to the security of

energy supply of the country

and the economy having a

substantially reduced

dependence on

imported gas.

Dr Phindile Masangane,

CEO of PASA

DR PHINDILE C MASANGANE

PHD CHEMISTRY, MBA, BSC.

(MATHEMATICS & CHEMISTRY)

Dr Masangane was appointed as the

CEO of the South African upstream

oil and gas regulatory authority,

Petroleum Agency South Africa, in

May 2020.

Before then, Dr Masangane was

an executive at the South African

state-owned energy company, CEF

(SOC) Ltd, which is the holding

company of PASA. Dr Masangane

was responsible for clean, renewable

and alternative energy projects. In

partnership with private companies,

she led the development of energy

projects including the deal structuring,

project economic modelling and

financing on behalf of the CEF Group

of Companies.

Her responsibilities also include

supporting the national government

in developing energy policy and

regulations for diversifying the

country’s energy mix.

In 2019, Dr Masangane was Head

of Strategy for the CEF Group of

Companies where she led the

development of the Group’s longterm

strategic plan, Vision 2040+

as well as the Group’s gas strategy.

From 2010 to 2013, Dr Masangane

was a partner and director at KPMG,

responsible for the Energy Advisory

Division. In this capacity, she successfully

led the capital raising of

$2-billion for the Zimbabwe power

utility, ZESA/ZPC’s hydro and coal

power plants expansion programmes.


Gain your competitive

edge with Nemesis

Nemesis Accounting was born in 2005, with the objective to bring about an holistic approach to business

operations and business owner integration that ultimately flows into the sustainability of a business.

Opportunity magazine speaks to the owner of Nemesis Accounting, Shani Naidoo.

PROFILE

From 2010 onwards, Nemesis Accounting has grown steadily,

broadening its client base scope to international markets. Its

international clients included Ferrero Rocher, Hitachi Power

Europe (a Madupi Power Station project), Springer Germany

(publisher) and current KPMG international clients that operate

in South Africa. Nemesis continuously adapts to market requirements

so as to better service its clients.

Please elaborate on the services Nemesis Accounting provides.

Besides general accounting, tax and financial statement preparation,

we have a specialised service profile comprising of:

• Public officer services to international companies operating in SA

• Strategic Business Advisory Service

• Lean start-up business approach

• Financial literacy/management

• Financial statement reviews

• Business internal reviews and compliance

Shani, you are the founder of Nemesis Accounting. Please tell us about your

journey before you started the company.

After obtaining my CMA qualification, I started working in the

insurance and banking industry for the first four years of my journey.

In 1999, I had the opportunity to enter the accounting, compliance

and tax fields at an audit firm in Johannesburg. I was exposed to the

audit environment, tax compliance, SARS, and the execution of these

services. This was the beginning of a career that was to change so

much without me realising it at the time. After six years, I had to

resign for family reasons. It was towards the end of 2005 that I decided

to branch out and begin my career as a female entrepreneur.

Since 2005 to date, I have obtained a few more qualifications. Starting

with my CMA qualification, I moved on to acquire the following

additional qualifications: a registered FAP (financial accountant

in practice), CTP (certified tax practitioner), BRP (business rescue

practitioner), Internal Audit Certification, Master NLP Practitioner

(neuro linguistic programming) as well as a GCologist – GC Index

accredited facilitator and trainer (UK).

From 2005 to 2007, I served on the EXCO at Midrand Chamber of

Commerce as financial director/treasurer. I also hosted tax workshops

for small business through the Chamber.

In 2010, Nemesis Accounting was nominated as Small Business

Entrepreneur of the Year by the NSBC. I completed the internal

audit certificate programme at the University of Pretoria in 2014.

The following year marked a new venture as a director of Business

Acceleration Specialist (Pty) Ltd, teaching business sustainability

skills and development strategies for small business. I completed the

Advanced Business Rescue Practitioner qualification that was offered

by the Law Society and UNISA in 2018.

In August of 2018, Nemesis Accounting hosted its first Women’s Day

event at our offices in Kyalami, Business Woman of the Future. It was

a very transformational experience and well received. The next month

marked the birth of a new company, SME Warrior (Pty) Ltd. Geared

for entrepreneurs and business owners alike, this company’s focus

is training and development of SMEs using NLP and psycho-social

methodologies for the application and execution of the workshops and

training material. Start-ups hold a special place and we have special

course formulations tailored for them.

I qualified as an NLP practitioner in 2018 and in 2019, I completed

my Masters in Neuro Linguistic Programming. Being able to maximise

the potential of our brain functioning to be our absolute best in what

we do and how we live, is what brings the magic to the table in our

training and development.

In March 2019, together with Y-Connect, we presented the

interactive and activity-based Ignite Your Sales & What’s Your

Business Money Game workshop. A very new and different approach

to business and finance was showcased. NLP-based methodologies

were applied in the workshop.

Later that year, I embarked on studies with the GC Index in the UK

and qualified as a GCologist – facilitator and trainer. The GC Index is

a methodology and approach to maximising the highest-functioning

element in one’s composition as a person/worker/manager/CEO.

The profiling mechanism enables various levels of management to

transform their existing team and organisation dynamics to that of

game-changing executioner, ultimately improving the organisation’s

bottom line and the people involved too. This is an exceptional business

tool that I am using with my clients and will be using in SME Warrior

with the training and development workshops and programmes.

In January 2020, I was appointed as financial director at Safety

Boot Camp (Pty) Ltd – a company involved with evolved safety

training execution and implementation based on military and black

ops methodology. This type of safety training is not applied in South

African training situations. Safety Boot Camp focuses on mining,

engineering, coal and energy safety applications, which have a

14 | www.opportunityonline.co.za


of Legal, Business, Finance and Entrepreneurship and of People

Performance and Development.

Why should companies choose Nemesis Accounting?

We are geared for the South African SME. Having been through

the low end of starting a business to where we are now, puts us in

a synergistic position with South African businesses. Also, the fact

that we are using psycho-social methodologies in our problem-solving

applications with our clients has shown us that this is the way to go to

achieve impactful results. We serve an international client base and

have been since 2010. Our international clients are all referrals from

KPMG. We have intensive experience with the South African Reserve

Bank and international transacting. The nature of our game is problem

solving and advancement.

huge CSI impact in terms of social development and socio-economic

upliftment and sustainability. SME Warrior and Nemesis Accounting

are involved from a training and learning perspective for CSI and

socio-economic execution and development.

What has been the highlight of your career?

2010: Nomination for Small Business Entrepreneur of the Year

2018: Our first Women’s Day Event

2019: Qualifying as a GCologist – GC Index (UK) accredited facilitator

and trainer and Masters NLP practitioner

2020: The launch of SME Warrior Entreprenuer Academy. An online

platform of learning and development comprising of the Schools

What should we hope to see from Nemesis Accounting in the near future?

As we stand now, we are restructuring our service offerings to include

business advisory service as well. We have been working on this for

the last year and this will be one of our new features. We will be

offering this and additional customised offerings to small businesses.

What is your personal mission for Nemesis Accounting?

My purpose is to utilise all my qualifications and skills for the

benefit and upliftment of skills development and enhancement in a

forever-changing economy. The goal is to bring about life-changing

sustainability and transformation to businesses, business owners and

individuals in their personal capacities.

How has Covid-19 impacted your business?

At the onset of Covid-19, we already knew the biggest dip would be

the small business clients. Fortunately, due to our international client

base, this has cushioned the impact a bit. We are continuing and have

made slight changes to mitigate further effects.

PROFILE

THE COVID-19 NEW BUSINESS WOMAN OF THE FUTURE

SME Warrior will be hosting a virtual seminar looking at the

current/post Covid-19 pandemic business woman. The seminar

sets out to address the challenges that lie ahead for women in

business current and post-coronavirus pandemic. It will probe

what lies ahead for her, the new trajectory she will face, a new

way of thinking, new habits and the grounded intrinsic values

she will need.

Founder of SME Warrior and Director

at Nemesis Accounting, Shani Naidoo

feels that irrespective of the Covid-19

pandemic, the gains that have been

made so far in addressing inequalities

faced by women in business have

been quite reserved.

www.kearney.com

“Even before the coronavirus pandemic, women have always

been marginalized when it comes to the business world,” says

Naidoo. In 2017, Statistics South Africa found that despite

women making up just over half of the population, they remain

relatively unrepresented in positions of authority and power. The

same report by Stats SA found that out of the top 40 JSE-listed

companies, only one company had a female CEO.

Join us on 28 August 2020, as we talk about these inequalities

from the past, the challenges and who women will need

to become to surpass this now and continuing after the

Covid-19 pandemic. For any enquiries and to reserve your spot,

email info@smewarrior.biz or shani@nemesisaccounting.co.za.

Follow our social media platforms: LinkedIn: SME Warrior Za

Facebook: SME Warrior

Twitter: smewarriorza

Awaken the Warrior Within


The geographical coordinates to the new container terminal on reclaimed land at the Port of Walvis Bay.

A port on the southwestern part of Africa equipped with infra and super infrastructure

that gives clients fast, efficient and safe passage of cargo into and out of Africa.

We are NAMPORT; Africa’s express hub to international markets.


TRANSPORT

TECHNOLOGY:

transforming

railway

transportation

Railway transportation has a long history. Although the basic concept of low-friction

wheels on rails remains the same, the implementation has undergone significant

changes, buoyed by multiple technological interventions.

Technological innovations are expanding the

capabilities of railway systems and helping

to achieve faster speeds, greater capacity and

better safety to compete with other forms of

transportation. Technology has transformed the

way the industry works globally, fuelled by railway

operators’ eagerness to reap benefits by making their

operations more efficient, safe and profitable.

Technology has the potential to impact five key dimensions

of rail transportation (see figure below right).

TRAIN OPERATIONS EFFECTIVENESS

The effectiveness of train operations is best measured

through asset reliability, utilisation, and employee productivity.

Technology can help improve asset reliability

through sensor-based condition monitoring and datadriven

predictive maintenance. Decision support systems

can play a strong role in enhancing asset utilisation and

employee productivity.

___ __

BELOW

Technology has the

power to improve

five dimensions of

rail transportation.

Source:

Kearney analysis

SAFETY ENHANCEMENT

Technology can make train operations safer by detecting

flaws in the tracks, remote monitoring the tracks,

digitising and automating maintenance, and improving

basic processes such as welding and grinding.

Improvements in signalling and telecommunication,

crash safety of rolling stock, and surveillance of human

operations can reduce errors and lessen the impact

of accidents.

INFRASTRUCTURE UPGRADES

Mechanised construction can enhance the speed for

infrastructure upgrades (track laying and electrification)

while improving cost-effectiveness.

Organisation

capability

enhancement

Passenger

experience

improvement

Safety

enhancement

Technology

in railways

Train

operations

effectiveness

Infrastructure

upgrades

www.opportunityonline.co.za | 17


TRANSPORT

PASSENGER EXPERIENCE IMPROVEMENT

The passenger experience is formed at each step of the journey –

from planning a trip and booking a ticket to travelling to the railway

station, arriving at the station, and travelling on the train. Technology

can affect each stage of the experience. Seamless availability of

information for planning, omnichannel ticket booking, smart railway

stations, value-added services such as Wi-Fi and infotainment, and

accurate train tracking based on GPS are just a few examples of ways

that technology can enhance the passenger experience.

b) For signalling-related interventions, invest in the European Train

Control System (ETCS) level 2 for high-density routes to increase

network capacity and maintain the required safety standards.

c) For rolling stock, fast-track the switch of passenger rolling stock

to Linke Hofmann Busch (LHB) coaches to minimise fatalities.

d) Increase view of personnel with interior and exterior locomotivemounted

video surveillance to improve monitoring.

2 | INFRASTRUCTURE UPGRADES

Three recommendations can lead to faster and more robust infrastructure

upgrades:

a) Invest in track-laying machines for mechanisation of construction.

b) Increase the rate of electrification through machines such as the

self-propelled overhead electrification laying train (SPOLT).

c) Proliferate use of prefabrication for construction elements.

3 | TRAIN OPERATIONS EFFECTIVENESS

Four recommendations are designed to increase asset availability

and utilisation:

a) Invest in technologies such as complete train scanners

for improved diagnostics and maintenance.

b) Use operations optimisation tools for better management and

performance of trains, rakes, locomotives and crews.

c) Digitise processes to enhance work quality and lower costs,

thereby reducing reliance on labour-intensive processes.

d) Use distributed power to improve the efficiency of train operations

with coordinated acceleration and deceleration.

ORGANISATIONAL CAPABILITY ENHANCEMENT

Technology can have a powerful impact on an organisation’s capability

through effective training and assisting in decision-making. With the

introduction of virtual reality (VR) and gamification that can simulate

real-life scenarios, training has been revolutionised. IT dashboards

and management information systems have been used extensively

across industries to enable data-driven decision-making.

In a recent joint report by the Federation of Indian Chambers of

Commerce and Industry (FICCI) and American global consulting

firm, Kearney, they aimed to analyse the technology solutions

and best practices used by global rail systems to understand how

Indian Railways can improve the effectiveness of its operations.

These solutions and practices can also be used in a South African

context. The solutions are structured across the five dimensions

mentioned above. Following are some of the study’s key insights

and recommendations across these dimensions:

4 | PASSENGER EXPERIENCE IMPROVEMENT

To retain the passengers that the railway carries, enhancing the

passenger experience will be crucial:

a) Establish smart railway stations by implementing access control

at entry points, provide accurate real-time information, and put

interactive solutions in place.

b) Upgrade the ticketing experience with seamless integration

across platforms and open-loop smart cards.

c) Enhance the train experience with services such as infotainment

and app-based systems.

5 | ORGANISATIONAL CAPABILITY ENHANCEMENT

Two recommendations aim to enhance capability and improve

management reporting:

a) Use training simulators and virtual reality training systems

to improve personnel capabilities.

b) Enhance decision-making by improving information management

with management reporting dashboards.

1 | SAFETY ENHANCEMENT

Four recommendations focus on achieving zero fatalities:

a) For track-related interventions, introduce B-scan ultrasonic rail

flaw detection (both non-stop and stop-and-verify systems) and

track inspection with automated high-speed test trains.

Implementing these technology solutions will be essential for rail

transport in South Africa to get closer to the world-class standard for

train operations. However, selecting and implementing technology

as well as obtaining the optimum economic benefits will require

adopting innovative procurement models.

www.kearney.com

18 | www.opportunityonline.co.za


SeaRail is a logistics company that operates a 3.6-hectare Dry Port

facility in Walvis Bay, Namibia, located within the boundaries of

the Port of Walvis Bay (known as Namport).

ONE-STOP SHOP | SeaRail offers an integrated portfolio of services

that position it as a one-stop shop for various logistics needs.

The aim is to provide clients with total logistics solutions.

CONNECTIVITY | Corridors leading to and from the port are safe

and have well-maintained roads.

OUR VISION | To be the leading provider of transport and logistics

solutions for importers and exporters globally.

OUR MISSION | Providing efficient, safe and cost-effective port

and logistics services to our customers.

OUR SERVICES

Project cargo handling & storage | Bonded facilities

Freight forwarding logistics | Customs brokerage

Container & breakbulk handling | Cartage & transportation

Ro-Ro vehicle handling

| Reefer plug-in points

General & specialised storage and warehousing

Value added services

• De-stuffing & stuffing containers

• On-site customs/vet inspections

PROFILE

ADDRESS Corner 5th Road & 5th Street,

Lagoon, Walvis Bay, Namibia

TELEPHONE +264 64 203434

EMAIL info@searail.com.na

WEBSITE www.searail.com.na

FACEBOOK @SeaRailBots


• mechanised sleeper replacement,

• railway construction and rehabilitation, ballast

tamping, regulating and screening,

• overhead maintenance,

• rail profile rectification,

• rail flaw detection,

• drain cleaning,

The root • rail signaling

future

& OHTE, and

Your all-African solution to upgrading the rail network

• smart rail.

in Sub-Saharan Africa

Operating from Kimberley in the Northern Cape, Rail

Contact details

2 Rail has been in the industry for close to a decade. Rail

Tel: +2711 898 6800; Mail: info@lenningsrail.africa

2 Rail manufacturers pre-stressed PY and P2 concrete

railway sleepers in compliance with SABS ISO 9001-

2000 standards. The sleepers are manufactured under

technical license from Rail One. Rail 2 Rail is one of the

biggest manufacturers of concrete sleepers in South

Africa. With the capacity to produce 400 000 sleepers

per annum, which are transported via a rail siding all

of African mobility

across South Africa, Rail 2 Rail, powered by Mathupha

Capital, is the only majority black owned supplier of

concrete sleepers in South Africa.

Contact details

Tel: +2787 330 2221; Mail: info@rail2rail.co.za

Mathupha Capital is a 100% black-owned rail infrastructure solutions provider founded in Johannesburg,

South Africa. The name Mathupha Capital was derived from the need to stay relevant and represent the market

we compete in as an investment company, hence the modern take to the African name in the term “Capital”.

PROFILE

Mathupha represents our roots. This is our Chairman’s

family’s clan name and it speaks to our lineage. It

represents where we come from and who fuelled the drive

to create such a successful company. We believe that our

foundation and where we come from propels us to be the

best that we can be. Honouring our heritage daily clears the path for

us to reach even greater heights.

Mathupha Capital’s ultimate vision is to be the leading turnkey

rail solution provider on the African continent. This is no easy task

but we are confident in our ability to reach this ultimate goal. We are

the future of African mobility.

Mathupha Capital is the holding company and

100% owner of Rail 2 Rail and Lennings Rail.

We also believe in not only creating a future that

benefits us and the industry, but we also believe in

a future that benefits the country and continent at

large and its communities, hence the establishment

of the Mathupha Foundation.

Rail 2 Rail operates from Kimberley in the

Northern Cape and has been in the industry for

close to a decade.

Rail 2 Rail is the second largest manufacturer

of concrete sleepers in South Africa and is the

only majority black-owned supplier of concrete

sleepers in South Africa with a capacity to produce

over 400 000 sleepers per annum. Rail 2 Rail

manufacturers pre-stressed concrete PY and P2

railway sleepers in compliance with SABS ISO 9001-2000 standards.

These sleepers are manufactured under technical license from Rail

One, a leading supplier of innovative track systems for passenger,

freight, and heavy-haul transport based in Germany.

Lennings Rail operates from Boksburg in Gauteng and is the

oldest mechanised track construction and maintenance business

in Africa with roots dating back to 1931 and focuses on turnkey

mechanised railway development, construction, rehabilitation and

maintenance of track infrastructure work systems.

Lennings Rail is highly differentiated in this industry because

of its in-house engineering capabilities that can repair and build

machinery components on-site using mostly local

suppliers, thereby optimising downtime on occupations.

Our service offering under this subsidiary includes

mechanised sleeper replacement, railway construction

and rehabilitation, ballast tamping, regulating and

screening, OHTE maintenance, rail profile rectification

(grinding), rail flaw detection (rail breaks) and drain

cleaning.

Lennings Rail also has capabilities in rail signalling

and OHTE (incl. substations) as well as smart rail. Through

this subsidiary, we are passionate about migrating

into the digital environment by offering turnkey rail

infrastructure automation, rail signalling, metering and

monitoring, telecoms, theft and vandalism prevention,

automatic fare collection and maintenance.

Through Lennings Rail we have projects

spanning South Africa and other African countries

such as Mozambique and Namibia, amongst others.

The Mathupha Foundation is the corporate

social investment arm of the group and its

subsidiaries, and its primary goal is to build a truly

liberated and successful South Africa by providing

and supporting every member of the family to be

functional and independent. The foundation is

founded upon four key pillars; supporting the girl

child, boy child, entrepreneurs and also focusing

on rural development.

As an organisation, we believe that we have to

be the change we want to see in the world, be it

through our subsidiaries or the foundation.

20 | www.opportunityonline.co.za


TOGETHER

WE CAN

PROFILE

Tshepo Kgare (Railway Safety Regulator: ACEO)

shares her first-hand insight into what the RSR

is doing to keep their teams, clients, suppliers

and the public safe and on track for a brighter

South African economic future, while making

significant strides into empowering women

and keeping them safe at work.

South Africa is at a crossroad and need the intervention

of industry roleplayers, including members of society.

Since the lockdown, the rate of theft and vandalism of

infrastructure has escalated exponentially. During the

same time, there has also been a rise in gender-based

violence where women cruelly lost their lives.

While we lament the death of women who are often killed by

people they know, we should be mindful that female workers,

particularly female train drivers, are often victims of crime

while executing their duties.

The general corporate response to affirmative action in the

railways has created a highly visible but often vulnerable

female workforce. However, if we are to attract more female

train drivers and bright young female engineers to the rail

sector, we will have to ensure that they are not deterred by the

prevailing external forces.

“Let’s ensure

we protect our

rail workers.”


South African women have become increasingly

prominent in sectors that were previously dominated

by men. However, the representation of female

engineers in the rail sector is still disproportionate.

“I am passionate about young women taking up

careers in science, technology, engineering and

maths (STEM) sectors,” says Tshepo Kgare, RSR

ACEO. The railways offer exciting career paths

such as railway inspectors, human factor specialists

and Overhead Track Equipment (OHTE) specialists

among others.

The Association of South African Women in

Science and Engineering, under the helm of the

University of Cape Town states that South Africa

has a critical shortage of trained technological

professionals to the degree that there was only 49

scientist and engineers involved in research 40

years back.

The RSR views the empowerment of women in

science and engineering as a business imperative

to build an inclusive community. The Regulator

follows equitable employment and skills development

practices, nevertheless have to acknowledge that the

sector is still miles from levelling the playing field.

____ __ ___ __ _ _

“I am passionate about

young women taking

up careers in science,

technology, engineering

and maths (STEM)

sectors.” – Tshepo Kgare

_____ __ ___ __ _ _

According to the ACEO, Tshepo Kgare, we have to be

the change we want to see.

“We need to encourage girls to push the boundaries

and to reach fearlessly for what they want. Together we

can disrupt the collective barriers that impede women

from entering the rail sector,” said Kgare.

LET US CONTINUE TO PROTECT OUR RAIL ICONS

Covid-19 has proven to be a disruption not only to the

economy and health system, but to all facets of life. To

this effect, rail is no exception. The nationwide lockdown

resulted in most rail operators suspending their

operations, while those who remained to operate did so

under strict regulations and restrictions.

As the country moved to Alert Level 4 of the lockdown

in May, the Minister of Transport, Honourable

Fikile Mbalula issued directives to address, prevent and

combat the spread of Covid-19 in the rail operations.

As custodians of rail safety, the RSR played a central

role in ensuring that rail operators comprehend and

comply with the directives.

At the heart of the directives was an entreaty to operators

to demonstrate the health and safety measures

put in place to ensure that their operations are compliant

to the prescribed regulations. This encompassed,

inter alia, the protection of rail workers.

To accentuate on the clarion call to protect rail

workers, the RSR launched the Siyabavikela Campaign

at the beginning of June. The campaign which focusses

on protecting rail workers aims to heighten awareness

and reinforce the compliance that is required from

operators as far as social distancing and personal protective

equipment is concerned.

The campaign has been received very well by rail

operators who responded by sharing photos of rail

employees wearing masks, maintaining social distancing

and sanitizing their hands among other things.

These responses, coupled with the Covid-19 response

plans received from operators, as well as Covid-19

reports and updates, gives the Regulator comfort

that the industry is on the right track. In the words of

President Cyril Ramaphosa, “The task of dealing with

the coronavirus pandemic is like running a marathon

and not a sprint.”

The World Health Organisation has also cautioned

that the coronavirus pandemic will be with us for quite

some time. In light of this, the ball is in the court of

all rail stakeholders to ensure that we fight with the

pandemic and continue to protect our rail icons!

___ __

The RSR is a

government agency

established in terms

of the National

Railway Safety

Regulator Act,

No 16 of 2002 (as

amended) to oversee

and enforce safety

compliance by all

railway operators

in South Africa,

including those

of neighbouring

states whose

rail operations enter

South Africa.

PROFILE


TECHNOLOGY

Are you missing out

on the TRUE

AI?

potential of

Artificial Intelligence is top of mind, but is its impact understood?

Research suggests that the short-term impacts are vastly

overstated and the longer-term implications remain unexplored.

We see this same misapplied focus in enterprises where efforts either target

micro-sized use cases with disproportionate expectations of returns or

oversized, abstract dystopian concepts like replacing large chunks of

the workforce. The structural implications are often unexplored. For

example, with the adoption of smartphones and mobile broadband, the

effect on the quality of phone voice connections is insignificant compared with

the effect of Artificial Intelligence (AI) on industry value chains and the creation

of new ones like the sharing economy, with disruptors such as Uber and Airbnb.

A similar wave of structural change is likely with the widespread adoption of

AI – embedded AI. Embedded AI refers to the deep intertwining and widespread

adoption of AI in every step of the value chain (think Internet). Here’s what

organisations can expect from a world of embedded AI.

would be continually tested against claims, which

could reimagine the “actuarial” model upon which

DISRUPTING INDUSTRY VALUE CHAINS

the insurance industry is based. Insurance premiums

Embedding AI in the organisation has the potential to disrupt entire business measured in cents, anyone?

models, much the way Amazon is using digital technology to upend retail.

For example, consider the impact these changes could have on the insurance RECONFIGURING CURRENT OPERATIONS

industry. Dynamically mining consumer preference and behaviour data could The multitude of micro use cases of AI being considered

lead to faster, more accurate and personalised risk profiles. These profiles today is premised on wildly unrealistic expectations of

www.kearney.com

4 FACTS

EVERY MANAGER

SHOULD KNOW

ABOUT AI

FACT 1: THE AI BOOM IS SUSTAINABLE AND SHOULD NOT BE IGNORED

For the first time, machine-learning algorithms are beating humans in tasks such as image

recognition and voice-to-text translation, and complex games such as Go. This AI boom is

fuelled by a convergence of three factors: a breakthrough in deep-learning algorithms, the

proliferation of big data (structured data) to train these algorithms and an exponential

speedup in processing power for machine-learning hardware, such as the graphics processing

unit (GPU) chipsets that cut down a machine’s training time from months to days and hours.

24 | www.opportunityonline.co.za


TECHNOLOGY

impact. The true value of embedding AI in current

operations is reconfiguration, not optimisation.

For example, leveraging chatbots for customer service

is a limited and narrow use case – still useful, but not

game-changing. Embedding a suite of AI capabilities

in the customer journey: behaviour analysis to predict

issues/calls, dynamically routing queries based on

customer context and mood, instantaneous solutions

and “rebates”, and, yes, traditional chatbots, can upend

customer service as we know it. Can you imagine a call

centre without any employees, a call routing

system without any prompts, or

perhaps proactive information sent

to the customer before they make

a call? When you think about it,

the answer is, of course, yes.

AI: EVERYWHERE,

EVERYONE, EVERY TIME

AI has the potential to improve

the lives and efficiencies

of the workers in this new

organisational structure. It would

require companies to treat and

train AI as a fundamental aspect

of the business, available beyond

isolated pockets of expertise. When

companies enable every employee to

utilise a suite of AI tools, those employees will

be empowered to make the best possible decisions

with the latest information. Embedded AI systems

deliver data and information, freeing workers up to

look at the bigger picture. This enterprise AI suite

could transform knowledge workers’ jobs in the

same way that Microsoft Office transformed the

way we communicate.

LAYING THE GROUNDWORK

AI’s capabilities will surge in the future as we continue

to develop exponential technologies, including

augmented reality, virtual reality, nanotechnology and

digital biology. To reach this stage of innovation, we

must start with a solid foundation.

So go ahead and build your micro-solutions that improve operations and enhance

your operations now – they will provide good lessons, but perhaps not billions of

rands, in efficiency. But as you invest in near-term efficiencies, spare a thought

or two about the bigger picture: How do I embed AI in my business to deliver

structural change?

Consider the following when deciding where to use AI for enterprise automation:

•One-time costs. Assess the initial capital outlay for a new AI solution, such

as developing an algorithm and acquiring training data. Open-source access to

algorithms and pay-as-you-go “AI as a service” platforms can lower the fixed-cost

hurdles, but access to training data can be either an expensive bottleneck or a

powerful source of differentiation.

• Switching costs. Evaluate the costs associated with displacing the existing

solution with an AI solution, including technical hurdles such as the ability to open

the AI algorithm’s black box to trace and explain decisions and human obstacles

such as political and cultural resistance to change.

• Ecosystem requirements. Determine if an integrated solution will require any

complementary technologies. For example, an AI solution that must be integrated

with innovative IoT sensors and emerging robotics technology will be more

complex to adopt.

• System externality hurdles. Consider the extent to which the AI solution

could negatively affect third parties that did not choose to use the new technology,

bearing in mind that the value of the solution will increase as more users adopt it.

AI automation is rapidly becoming a reality across organisations and value

chains. Now is the time for forward-thinking business leaders to adopt a

disciplined, portfolio-based approach to develop machine-learning capabilities,

data and partnerships to remain relevant.

FACT 4: ADOPTING AI IS ABOUT MORE THAN TECHNICAL FEASIBILITY

Some AI applications will be adopted faster than others, even though the technical

requirements are comparable. Broader solutions can ensure that a company’s portfolio

of AI initiatives can unlock value in the near term while also paving the

way for long-term aspirations.

FACT 3: AI IS READY FOR DEPLOYMENT ON SELECT ACTIVITIES

The Japanese insurer Fukoko plans to use AI to replace more than two dozen

human agents who process claims, and Goldman Sachs used machine learning

to transform its 600-person trader unit into a much leaner 200-person team

between 2000 and 2016. However, not all organisational activities are suitable

for AI automation under today’s narrow paradigm.

FACT 2: AI IS BEING USED ACROSS ORGANISATIONS BUT WITH A LIMITED SCOPE

So what will AI be able to do for enterprise automation in the next five to seven years? Most experts

say companies will adopt narrow AI, or supervised machine learning that is focused on one task. AI

algorithms will be able to use training data to learn how to automate a task, but once the task is

mastered, the solution will be narrow, and in most cases, the machine will not be able to generalise

that learning to perform other tasks. Widespread use of broad, human-like general intelligence, in

other words, unsupervised and context-aware, could be decades away.

The true value of

embedding AI in

current operations

is reconfiguration,

not optimisation

www.opportunityonline.co.za | 25


PROCUREMENT

Becoming

risk-savvy

POST-PANDEMIC PROCUREMENT

POST-PANDEMIC PROCUREMENT

Procurement is at the heart of Covid-19 crisis management and has taken an active

role in mitigating the immediate impact of the pandemic. Now, as companies brace

for the crisis’ long-term impact, a clear shift in mindset is needed.

Since the Covid-19 pandemic began battering

the world, procurement professionals of almost

every company have been rethinking their

supply risk management capabilities. Most are

grappling with little else today, as they try to

figure out how best to cope with the current and lasting

effects of the crisis.

How, and what, are they doing?

To find out, international management consultancy,

Kearney, recently conducted a global procurement

survey on the impact of the pandemic. In the survey,

Kearney asked procurement professionals how well

prepared they were for the pandemic at its onslaught,

procurement’s reactions to the immediate crisis, the role

procurement has played in bracing their companies for

the crisis’ longer-term impact, and how their mindset

about broader risk management strategies has changed.

Here’s what was learned:

___ __ ____ _ _

The pandemic crisis

has put a dramatic

emphasis on the

need for a balanced

scorecard approach to

measure the full impact

of procurement

___ __ ___ _

PLAYING AN ACTIVE ROLE

Procurement is at the heart of most global companies’

crisis management efforts and plays an active role for

more than 70% of respondents. In these companies,

procurement is regarded as a peer with the other

organisational functions. It has a seat at the table and a

substantial voice in managing the Covid-19 crisis.

As the interface between the company and its

suppliers, procurement is in a unique position to

understand who the most vulnerable partners in

the supply chain are and take the right measures to

protect those most at risk. In about 30% of the companies

– especially those in smaller revenue brackets –

procurement has taken on a primary leadership role

and coordinates the cross-functional teams in day-today

crisis management and operations.

Some companies, though, are slower in getting their

herd over water than their competitors as the Covid-19

pandemic has exposed major weaknesses in their

supply chains – in particular around S&OP processes,

inventory control, and stock keeping unit (SKU)

complexity – which are compounding day-to-day crisis

management efforts.

Nevertheless, about 60% of companies have moved

beyond survival mode and started to look beyond the

crisis’ immediate impact.

They are operating in the current environment and

starting to plan and adapt for the post-recovery new

normal by assessing the impact of the crisis on their

broader risk management approach and adapting

category strategies based on scenario analysis for

the new normal. Procurement has a significant role to

play here.

___ __

Today, only 34% of

companies have a

well-defined supply

risk management

strategy explicitly

linked to their

core procurement

activities and

dynamically

refreshed based on

external situation

and internal

demand changes

(see figure, right).

www.kearney.com

26 | www.opportunityonline.co.za


PROCUREMENT

BRACING FOR THE LONG TERM

A clear call to action is resounding throughout most

companies – a call urging procurement to do much

more to improve risk management strategies and

capabilities in the next 12 months. Almost 90% of survey

respondents believe the C-suite is fully expecting – and

is committed – to fundamental improvements in supply

risk management capabilities. They are convinced that

much needs to be done in the coming year – and that

they must start now.

DEVELOPING A BETTER SUPPLY RISK MANAGEMENT STRATEGY

Most companies today have a supply risk management

strategy. But for many, the strategy is basic at best and

far from robust, and the current crisis dramatically

surfaced many pain points. They recognise that the

strategy needs to become much more comprehensive,

explicit and dynamic.

It must, for example, be explicitly linked to what’s

happening externally in the market and internally

within the company, so it can be dynamically adjusted

to address these changes. It must be comprehensive in

measuring the impact on total value at risk, including

other value dimensions such as cash, growth, innovation

and enterprise agility. And it must be implemented and

dynamically refreshed – not just developed and then

disregarded. These are difficult tasks.

Today, only 34% of companies have a well-defined

supply risk management strategy explicitly linked

to their core procurement activities and dynamically

refreshed based on external situation and internal

demand changes (see figure below). With Covid-19

battering their operations, though, other companies

are looking closely at reworking their strategies. A

year from now, another 22% expect to have a robust

supply risk management strategy in place, giving more

than half of all companies a sound footing on which to

prepare for what’s ahead.

A company’s industry, of course, can affect which

supply risk management approaches it chooses to

use, which it uses on an ad hoc basis, and which

it uses systematically. All finance institutions in

the survey, as would be expected, apply financial

risk management. But today 57% of respondents

regardless of industry apply this approach to

managing their supply risk. More and more

companies now realise that to defend against a

catastrophe such as Covid-19, they must use the full

array of risk management approaches – and they

must apply these approaches systematically, not on

an as-needed basis.

CHANGING THE MINDSET TO SUCCEED

AFTER THE PANDEMIC

Many companies view cost reduction as the key

– and, often, the only – value delivered by the

procurement function. They operate with a strict

cost competitiveness mindset. The pandemic crisis

has put a dramatic emphasis on the need for a

balanced scorecard approach to measure the full

impact of procurement.

So, in addition to applying the full array of supply

risk management approaches available, companies

that see procurement’s potential benefits also

measure the impact of these approaches across

all the dimensions in value creation. This does

not mean that the pressure on competitive costs

is going away, and many organisations are taking

steps today to update their category management

strategies (for example, in commodities in light

of the recent oil price movements, or in indirects

where consolidation and demand management

opportunities exist in some areas). But as the survey

shows, a large percentage of companies today give

a high amount of consideration to each of the

following value-creation dimensions:

86% | CASH (working capital and terms

of payment )

86% | RELIABILITY (service levels, quality, etc)

79% | TOTAL COST

76% | GROWTH (speed to market, innovation)

72% | AGILITY (end-to-end cycle time and

reaction to emerging customer needs)

These companies know that to successfully

look beyond cost savings and to the

additional benefits procurement can

create, they cannot operate with the same

mindset focused on “cost competitiveness”

and are starting to shift their mindset to

“risk competitiveness”. In essence, they

are becoming risk savvy.

PROCUREMENT

CHECKLIST

• What stage are you

in today?

1. Survive

(focus is on ensuring

business continuity)

2. Operate

(operating in the period

of high uncertainty)

3. Adapt

(preparing for what

is coming next)

• What are the key

weaknesses the

pandemic crisis has

exposed about your

supply chain?

• What specific actions

are you taking today

to take care of the

most vulnerable of

your suppliers?

• How robust are your

supply risk management

strategies

and capabilities?

• Is the mindset in your

organisation focused

on “cost competitiveness”

or “risk competitiveness”?

• What actions are

you taking today

to be prepared for

post-recovery?

www.opportunityonline.co.za | 27


SUPPLY CHAIN

NEW ORDER

of magnitude

COVID-19 TEST OF SUPPLY CHAIN

RESILIENCE

2019 saw US companies actively adapting to what then felt like a major disruption – the US-China

trade war. Specifically, US companies sharply reduced imports of manufactured goods from China.

The shift was sizable, but there was still a sense that manufacturing imports might revert to old

patterns once the trade war ends. Then everything changed.

2020 dawned with the disruption of a new order

of magnitude: Covid-19. At time of writing, the

full extent of the societal and economic trauma

the coronavirus pandemic may cause is still

unknown. But it will be historic. In multiple

countries, social and economic activity is essentially

frozen. Governments as dissimilar as the US, Russia

and Italy are currently scrambling (and struggling) to

construct a coherent and effective response. The outlook

is daunting.

The lessons we must learn from Covid-19 are

as momentous as they are harsh. While the trade

war triggered some notable tinkering, the massive

operational disruption wrought by the coronavirus

pandemic will compel companies to fundamentally

rethink their sourcing strategies.

DOMESTIC OUTLOOK

Might such a strategic redistribution spur a dynamic

resurgence of US domestic manufacturing? It seems

unlikely. The limitations that held US manufacturing

to flat growth in 2019, even as the trade war put Chinese

manufacturing at a decided disadvantage, will continue

to work against a US manufacturing revival. There is

still a pronounced shortage of skilled manufacturing

labour, and the long-promised productivity boom via

automation has yet to be realised. Yes, companies will

be more inclined to look at new sourcing options, but

they will still want to place most of their eggs in costcompetitive

baskets.

The more likely outcome will be an accelerated

scattering. Companies that began distributing their

import supply risk in response to the stresses of the

trade war will double down on that strategy in response

to the much more severe disruptions caused by Covid-19.

In that sense, the trade war may have been a blessing

in disguise. Unanticipated shifts in US trade policy and

the resulting retaliatory exchange with China prompted

companies that had long relied on Chinese suppliers to

start rethinking old assumptions about where and how

to source.

More broadly, by confronting US companies with

costly disruptions that were largely beyond their

control, the trade war triggered at least a partial

awakening to the intrinsic vulnerabilities of modern

global supply chains.

Events in 2020 cast the trade war as a mere precursor

to the far greater economic and operational

disruptions being wrought by the coronavirus. What

we are experiencing now demands a more profound

reckoning. Covid-19 should cause companies to fundamentally

rethink the criteria they use to shape their

supply chains.

COST, RISK AND RESILIENCE

Three decades ago, many US producers began

manufacturing and sourcing in China for one

reason: cost. The US-China trade war brought a

second dimension more fully into the equation – risk

– as tariffs and the threat of disrupted China imports

prompted companies to weigh surety of supply more

fully alongside costs. Covid-19 brings the third

dimension more fully into the mix, and arguably to the

fore – resilience.

___ __

Recent events

illustrate, with

distressing clarity,

that events frequently

unfold in ways that

were impossible for

anyone to foresee,

shattering the

assumptions that

shaped supply

chain strategies.

28 | www.opportunityonline.co.za


SUPPLY CHAIN

www.kearney.com

The current crisis is exposing vulnerabilities that

cannot be addressed with short-term fixes and minor

tinkering. Many companies quickly ran out of any

inventory they were able to stockpile ahead of the

Covid-19 outbreak. Some with heavy dependence on

China found they had few alternatives that could help

see them through the drought.

We have subsequently learned that the disruption of

supply from core manufacturing regions of China was

just the beginning of the havoc to be wrought by the

coronavirus. Recent events illustrate, with distressing

clarity, that events frequently unfold in ways that

were impossible for anyone to foresee, shattering the

assumptions that shaped supply chain strategies.

The answer? Companies need to place more value on

resilience by building supply chains that can nimbly

sense and pivot in response to unexpected demands

and disruptions. This is the key to operating profitably

in the face of ongoing disruptions.

___ __ ___ __ _ _

The current crisis is

exposing vulnerabilities

that cannot be

addressed with

short-term fixes

and minor tinkering

___ __ ___ __ _ _

Many supply chain leaders have transitioned from

the uncertainty by adopting new ways of working to

stabilise their business. Now it’s time to begin thinking

strategically about how to position operational networks

for life beyond the pandemic by designing a supply

chain that is both resilient and agile, can withstand

risks to both demand and supply, and can quickly

respond to shocks.

The first step is to conduct a rigorous review of the

impact Covid-19 is having on demand and the corresponding

performance of the supply chain. This will

require drilling down to the specifics of how the

pandemic has already affected demand and how

demand might change in the future.

To build a framework for a post-pandemic review,

considering these impacts of the coronavirus outbreak

is a good start:

• Demand has shifted

The demand for many products saw a rapid increase;

others saw a rapid decline. Some are no longer a

priority and may be gone for good.

• Customer behaviours have changed

Internet purchasing is skyrocketing in

some industries, and brick-and-mortar

retail may never be the same.

• There are new customers

People have reprioritised their wants

versus their needs, and it has affected

what they buy and who they buy it from.

• Portfolios are back to the drawing board

Certain stock keeping units (SKUs) are

no longer important, and in other cases,

product needs in a post-Covid world are

being rapidly redesigned.

Similarly, the impacts on supply will

also require a post-pandemic review:

• Supply chains were disrupted during the pandemic

The Covid-19 outbreak caused major shifts – from

transitioning supply planners so they can work from

home and finding alternative sources for suppliers

that are under lockdown to keeping employees safe

and manufacturing capacity available.

• Some supply areas performed well, others struggled

New best practices were learned and will be capitalised

on, and risky practices will be eliminated.

• Structural elements exacerbated supply issues

Global supply chains will be questioned as geographies

experienced the pandemic in phases and

suppliers, manufacturers and distributors were cut

off from one another.

• Technology is essential

Responding during a crisis requires real-time data

about where materials and products are as well as the

status, location and health of employees in plants and

warehouses. It also requires control towers that can

orchestrate operations from end to end.

Historically, operations strategy focused on balancing

cost reduction and investments to improve availability

performance and lead times. The business risk was

important, but it was typically addressed with relatively

simple approaches, such as maintaining safety stock at

distribution centres or establishing one-off secondary

supplier relationships. Responding to a global crisis was

rarely part of the picture.

As the world advances towards recovery, a supply

chain strategy will need to evolve to incorporate the

lessons learned during this pandemic. That means

moving away from a narrow focus on cost and

availability to a more comprehensive perspective that

incorporates risk and resilience factors. Supply chain

organisations that are designed to manage the right

risks in the right way will ultimately beat out the

competition when the next crisis inevitably strikes.

___ __

Now it’s time to begin

thinking strategically

about how to position

operational networks

for life beyond

the pandemic by

designing a supply

chain that is both

resilient and agile,

can withstand risks

to both demand

and supply, and can

quickly respond

to shocks.

www.opportunityonline.co.za | 29


E-COMMERCE

ovid-19

nd its impact on

-commerce

The pandemic has pushed e-commerce and supply chain issues to the top of the CEO agenda – opening

a window of opportunity for businesses to capitalise on the rapidly expanding online market.

Covid-19 has triggered exponential growth

in e-commerce and spurred many smaller

retailers to get in the game by establishing

their online offerings. If this shift becomes the

new normal, now is the time to rapidly define

omnichannel and supply chain strategies and ensure

the right structures are in place to support it.

As consumers become accustomed to the luxuries

of online shopping, this channel is likely to become

their preferred way of shopping once the pandemic is

over. To win in this new normal, retailers will need to

consider both the immediate and long-term implications

of consumers’ changing behaviours.

SHORT TERM

Establish a competitive e-commerce offering by

focusing on three areas:

Business planning and response

The Covid-19 outbreak has highlighted the importance

of being adaptable and responsive. During this

time, traditional demand triggers are not as relevant,

so new behaviour signals will need to be monitored by

tracking leading indicators. This will require a twofold

approach: qualitatively assessing government

and media messaging and quantitively tracking

customer data. Also, leading businesses have a welldocumented

response plan to triggers so they can act

quickly and decisively.

E-commerce channel strategy

Consumers of all ages have been forced to rapidly adapt

their purchasing behaviours. In the short term, focus

on establishing or streamlining your online offerings,

either through an existing website or a business-toconsumer

marketplace. To drive efficiency, limit the

initial offering to core products to maximise profits by

minimising the effort required to establish a product

range. Effectively managing inventories and narrowing

the window of time from purchase to shipping will also

keep customers happy.

Delivery services

Forward-thinking businesses understand the capacity

of their delivery partners and manage costs and

customer expectations accordingly. To improve delivery

speed and service quality, examine your delivery

service agreements and consider whether alternate

or additional delivery partners are needed. To create

___ __

Effectively managing

inventories and

narrowing the

window of time

from purchase to

shipping will keep

customers happy.

www.kearney.com

30 | www.opportunityonline.co.za


E-COMMERCE

a customer-centric and economically sustainable

delivery service, consider two aspects: consumers’ price

sensitivity and delivery options such as same day, next

day, or a specific delivery window.

LONG TERM

In the mid to long term, focus on two areas:

Refine the omnichannel strategy

The online competition will continue to grow as

consumers are now accustomed to buying online

and more businesses are embracing e-commerce. In

light of these shifts, consider the best way to manage

your omnichannel strategy. Most businesses either

sell their products solely on their websites or they

use a combination of brick-and-mortar marketplaces

and websites. The most effective approach is to adopt

a tailored product-range strategy, which can be

implemented in one of two ways:

•Offer a differentiated range of products

Because consumers typically buy different types

of products online than they do in stores, develop

an online offering that focuses on the products

that people tend to buy online. For example, online

shoppers often buy bulky items that they can easily

review online, such as kitchen aids and gaming

consoles, rather than items they want to hold before

they buy, such as a tennis racket.

• Sell different products on different sites

To ensure a clear distinction between product

quality and to maintain profit margins on premium

products, consider selling different product ranges

on different sites. For example, sell premium

products on your website, and sell standard products

on marketplaces such as Amazon.

Optimise last-mile delivery

Recent events have strained supply chains and revealed

that businesses with resilient and agile supply chains

are best suited to adapt to unpredictability. In light of

the events of the past 12 months and the acceleration

of e-commerce, consider the level of outsourcing

versus the strategic investment required to build lastmile

capabilities. Most companies rely on third-party

logistics providers. However, a self-managed supply

chain allows businesses to control services, quickly

switch or onboard suppliers, and increase security.

The grocery category is moving toward ultra-fast

delivery, defined as less than two hours from click to

delivery. Consumers continue to signal that they prefer

ultra-fast over in-store shopping or slower deliveries,

and the Covid-19 e-commerce surge presents shippers

and logistics providers with significant headwinds.

There’s a non-linear relationship between cost and

lead time for last-mile delivery. Lastmile

costs now play an elevated role in

ensuring future financial viability and

sustainable growth.

As a shipper or logistics provider, if

you want to play in the last-mile space,

you will need to tackle the complex

balance between needs and cost. The

good news is that your customers, your

products and your needs – not the

prescribed chase of the giants – are

what will truly determine how much

you should spend on your last mile.

The needs-based segmentation can appear overwhelming,

but it can be centred around some important

dimensions. Three such dimensions are consumer

centricity and sustainability; reliability and control; and

flexibility and resilience.

___ __ ___ __ _ _

During this time,

traditional demand

triggers are not as

relevant, so new

behaviour signals

will need to be

monitored by tracking

leading indicators

___ __ ___ __ _ _

Consumer centricity and sustainability

As e-commerce accelerates and large players increase

their influence, you must start obsessing over how

you are going to provide consumers with unparalleled

service. Two areas are crucial:

• Seamless experience

New e-commerce consumers expect a seamless

experience across channels. You must design and

implement a continuous experience across all digital

(website, mobile application, alerts, etc) and physical

touchpoints throughout the customer journey.

• End-to-end visibility

It’s not merely about delivering at hyper-speed

and on time. Consumers today want end-to-end

visibility into the delivery process through nearreal-time

notifications and pictures upon delivery.

This visibility is essential to best-in-class customer

experience. You must develop the technological

capabilities to provide it.

___ __

As a shipper or

logistics provider, if

you want to play in

the last-mile space,

you will need to

tackle the complex

balance between

needs and cost.

The needs-based

segmentation can

appear overwhelming,

but it can be

centred around

some important

dimensions. Three

such dimensions are

consumer centricity

and sustainability;

reliability and

control; and flexibility

and resilience.

www.opportunityonline.co.za | 31


E-COMMERCE

Reliability and control

The Covid-19 pandemic emphasised the value of

meeting service-level key performance indicators

(KPIs) such as on-time deliveries and first-time

delivery success. Covid-19 represented a reliability

test for delivery networks: could their capacity and

cost structures withstand such peaks?

• On-time delivery

You can no longer talk vaguely about “shipping

in three to five business days”. As you design

your last-mile delivery strategy, you need to

align your network design with achievable

on-time delivery targets. That’s the only way

to consistently meet customer expectations.

• First-time delivery success

The faster you move into e-commerce, the

more important it is for you to minimise your

delivery quality defects – customer-reported

damages, missing packages, incorrect items, or

incorrect delivery locations. Such defects not only

disappoint customers but are also exceptionally

costly. They typically result in customer service

contacts, promotions, reverse logistics, or loss of

future business. To meet rising expectations and

minimise your cost-to-serve, you must succeed in

first-time delivery.

• Experimentation to flex

During the Covid-19 crisis, large players

experimented with ways to flex their capacity,

expanded their ability to deliver a wide variety

of products at hyper-speed, and learned how to

reprioritise deliveries. Most of their solutions used

crowdsourcing, some existing in-house and others

coming from third-party transportation providers.

• Diversification to reduce risk

However, when you depend solely on a crowdsourced

last-mile delivery solution, you increase operational

risk; you should also seek to diversify your volumes

across third-party transportation providers.

It all boils down to cost per package

Large players keep pursuing faster delivery options,

which makes it tempting to assume that all categories

and product segments must be delivered within two

days, or faster. But if you use this as a blanket strategy,

your costs will soar. Stop chasing this prescribed

strategy; instead, perform a needs-based segmentation

across your products (eg groceries, apparel, furniture)

and customers (eg metro/rural, subscriber).

___ __

During the Covid-19

crisis, large players

experimented with

ways to flex their

capacity, expanded

their ability to deliver

a wide variety of

products at hyperspeed,

and learned

how to reprioritise

deliveries. Most of

their solutions used

crowdsourcing, some

existing in-house

and others coming

from third-party

transportation

providers.

Flexibility and resilience

If you have to respond to an unpredicted large-scale

event by retroactively remodelling your last-mile

network, that’s costly. Instead, you can ask upfront

about how network flexibility and resilience could

control unexpected costs.

• Large and responsive supply base

The biggest benefit of crowdsourced delivery

solutions is that a large and responsive supply base

can flexibly respond to spikes in demand while

minimising costs during lulls.

Different segments of your product-customer

portfolio have different delivery needs (eg one-two

hours for urban groceries, same-day for urban apparel,

five days for rural furniture). Pay particular attention to

the segments requiring two-day, same-day or ultra-fast

delivery speeds, because the implications of increasing

your delivery footprint vary. A well-executed needsbased

segmentation can reduce last-mile costs by

20-30% while improving service where it counts by

10-20% and identifying the right carrier and technology

partners for execution.

32 | www.opportunityonline.co.za


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