African business hedge against volatile local market

A significant portion of steel supplier Tradecore Steel’s business stems from the Southern African Development Community (SADC) region, although the company does business in Kenya and Ghana as well.

Tradecore Steel director Anthony Hoare says this has been the strategy pursued since the inception of the company as a hedge against local market challenges.

“It provides us with a dependable revenue stream that is independent of South African market fluctuations, while providing exposure to certain sectors that are not available in South Africa,” he tells Engineering News.

Hoare highlights, for example, copper mining as a lucrative and growing sector outside of South Africa.

With electric vehicle demand on the rise, copper and other critical minerals are in high demand, spurring large-scale investments in new mines and related infrastructure in countries such as Zambia and the Democratic Republic of Congo, all of which need copious amounts of steel.

A significant portion of infrastructure investment is funded by offshore investors – with China being one of the most prominent players – and much of this is channelled into mining projects, especially critical minerals, such as cobalt, lithium and copper, he notes.

Hoare explains that the thousands of jobs created by the mining sector in Africa has led to a burgeoning middle class. Coupled with swift population growth and rapid urbanisation, Africa’s growing demand for infrastructure has opened up a wealth of opportunities for steel suppliers such as Tradecore Steel.

He notes that the gross domestic product (GDP) of most of the SADC countries has plateaued in the past few years, after enjoying a period of rapid growth in the early twenty-first century. Nonetheless, he describes the state of demand as “nice and steady”.

“Despite GDP growth rates having slowed in most SADC countries, the demand for steel still far exceeds that of South Africa, which has suffered a huge decrease in demand over the past four to five years.”

Prior to the outbreak of Covid-19, there was significant growth in the wholesale and retail sectors across Africa – attributable to urbanisation and the infrastructure boom, Hoare adds.

However, since the outbreak, this has slowed significantly, owing to the negative impact of the pandemic on the retail sector. However, a rapid rise in demand from the mining sector has taken its place, owing to global demand for battery metals and other positive commodity price fluctuations.

Hoare believes that the recovery of the African retail and wholesale sectors will depend on the success of the Covid-19 vaccination rollout and uptake across Africa.

“Africa will continue to have waves of outbreaks and consequent lockdowns until vaccinations are taken up by the majority of the population. Such rolling lockdowns will wreak havoc on Africa’s ability to recover economically,” he concludes.