South African Business 2016 edition

OVERVIEW Chemicals and

OVERVIEW Chemicals and pharmaceuticals Sasol and Aspen are world leaders in their fields. The coal-to-oil plant at Sasol in the northern Free State was established in the 1960s and its success led to the development of many related chemical and fertiliser production facilities. Sasol One, the Sasolburg plant, now produces chemicals while Sasol’s two other plants in Mpumalanga make fuel. The chemical industry as a whole contributes 5% to national gross domestic product. About 60% of earnings are derived from exports. The newest investment by Sasol in the Free State town will be a new ethylene purification unit at Sasol Polymers plant at a cost of R1.9-billion. At full capacity, the plant will produce 48 000 tons per year. Omnia and Kynoch (fertiliser), Karbochem (rubber and carbochemical), Safripol (plastics) and Afrox are among the other major companies operating out of Sasolburg. Omnia’s R1.4-billion nitric acid plant was inaugurated in May 2012, increasing the group’s capacity in this commodity by 40%. ChemCity is a 100% owned subsidiary of Sasol Chemical Industries. The focus is on fine and specialised-chemical and related sectors of the chemical industry. It acts as an incubator for black empowerment and small business development. Access is provided to infrastructure, utilities and a broad range of professional services. At the Sasol complex in Secunda (Mpumalanga), a range of products for fertilisers, explosives and polymers is manufactured. Sasol Solvents operates 12 plants. The by-products of the sugar and forestry processing plants of KwaZulu-Natal benefit the chemicals sector. Illovo Sugar manufactures downstream products such furfural, furfuryl, alcohol, diacetyl and ethyl alcohol. AECI is one of South Africa’s biggest groups in the sector. The two principal divisions are AEL Mining Services (with a large factory site at Modderfontein near Johannesburg) and Chemical Services, which has 20 separate companies. Sasol Chemical Industries makes about 60% of South Africa’s polypropylene. Safripol, which is also based in Sasolburg, is South Africa’s only other producer. More than half of Sasol’s production of 625 000 tons is exported. Foskor is the country’s only vertically integrated phosphates producer. It has a mining operation in Limpopo province (at Phalaborwa) from which it sends raw materials to its acids division in Richards Bay in KwaZulu-Natal. Sulphuric acid, phosphoric acid and phosphatebased granular fertilisers are manufactured there. The Chemical and Allied Industries Association (CAIA) has 162 member companies. CAIA works to improve efficiency, productivity and competitiveness in the chemical sector. This includes looking at how South Africa can start producing higher-value chemicals and how the country can improve its export profile. Another area of research is how to turn mineral feedstock into useful inorganic chemicals. Pharmaceuticals Pharmaceuticals are manufactured primarily in Gauteng and the Eastern Cape. Although there are more than 200 pharmaceutical firms in the country, large companies tend to dominate the field. Aspen Pharmacare (with about 34% of the market), Adcock Ingram (25%) and Cipla Medpro are among the biggest companies. Aspen SA, Africa’s biggest manufacturer of generic drugs, has manufacturing capacity in the Eastern Cape and Gauteng. The Port Elizabeth facility produces about 10 billion tablets per year. The company has a market capitalisation of R80-billion and successful operations in South America and Australia. British firm GlaxoSmithKline is a 19% shareholder in Aspen. The group headquarters of Aspen are located in La Lucia Ridge, north of Durban. SOUTH AFRICAN BUSINESS 2016 96

Engineering Transnet’s R300-billion spending plan is boosting the sector. OVERVIEW South Africa has several companies that offer a wide range of engineering disciplines and are active internationally. National Government’s ambitious infrastructure plans are sure to provide a lot of work in the sector, despite concerns about delays. Transnet is set to spend R300-billion across its several divisions, all of which will call on the skills of Transnet Engineering (TE). By way of example, TE is building 90 new locomotives at its Koedoespoort facility in Pretoria. TE’s new business unit, Port Equipment Maintenance, is a signal of the company’s wider focus. There are 13 000 TE employees at 132 depots and six factories around South Africa. There has been considerable interest in the South African engineering sector from foreign companies. The largest vertically integrated companies are able to cope with large and complex projects. These include Murray & Roberts, WBHO, WSP Group Africa, Group Five, Grinaker-LTA, Basil Read and Stefanutti Stocks. WBHO and Murray & Roberts are among local companies pursuing foreign projects. Business Report announced that Aveng Engineering’s mining subsidiary, Aveng Moolmans, concluded a five-year extension of its contract in the Northern Cape withTshipi Borwa open-pit manganese mine. The second cycle contract extension, which was effective from 1 September 2015, was obtained following an open tender process. Aveng Mining managing director Stuart White, said that Aveng Moolmans was delighted to continue its working relationship at the Tshipi Borwa project. Growth sectors include energy (with two massive new power plants under construction), water (large dams and supply infrastructure) and public housing. Basil Read is building a R1.8-billion housing project north-west of Johannesburg, Malibongwe Ridge. Transnet Pipelines recently completed and operates a 3 800km network of underground, high-pressure petroleum and gas pipelines throughout the eastern parts of South Africa, as well as the infrastructure and property associated with them. This astounding network of underground pipelines includes the refined product network, crude oil, Avtur (jet) and gas. The infrastructure includes five intake points, 13 delivery stations, workshops, maintenance depots and 23 pump stations, all of which are positioned along the routes. One impressive feature of the network is the tank farm at Tarlton, a storage and distribution facility that has a capacity of approximately 30 million litres. This facility is mainly used for cross-border deliveries in Botswana, but it also features a refractionator which is used to process intermixture in order to optimise operations and adhere to stringent fuel specifications. Petroleum products are transported for a number of major clients inlcuding BP, Chevron, Engen, Sasol, Shell and Total. Transnet Pipelines also facilitates new entrants into the pipeline network, including Vuyo, PetroSA, Afric Oil and Khulaco. In addition, methane rich gas produced by Sasol is also transported from Secunda in Mpumalanga to KwaZulu-Natal, where it is used by industries as an alternative energy source. 97 SOUTH AFRICAN BUSINESS 2016