Omnia ramps up buying of rail wagons as infrastructure crumbles

Fertiliser and explosives group Omnia has flagged SA’s crumbling infrastructure as the No 2 risk to its business, higher than the misfiring economy, climate change and cyber security.

The group, valued at just under R10bn on the JSE, listed in its 2023 annual report released on Friday the volatile macroeconomic environment as the No 1 risk to the business — the same as 2022.

The company, run by Seelan Gobalsamy, listed “critical infrastructure failure” as the No 2 risk to the group which employs more than 4,000 people.

The country’s infrastructure shortcomings did not feature in Omnia’s top 10 business risks in 2022.

The group said deteriorating road, rail, port, water and electricity infrastructure affects the “normal operating rhythm” of the organisation and the bottom line.

To mitigate this risk, the company is expanding rolling stock and storage capacity. The 70-year old company also said there was a continuing review of on-road transport strategy to strengthen capability.

It said it was also implementing multiple sourcing options to prevent reliance on concentration of supply and investing in solar power generation and water storage capacity.

“We are making further investments this year as we continue to strengthen our supply chain through the purchase of additional ammonia rail wagons. This means we can transport and process ammonia products with increased independence relative to our competitors,” said chair Tina Eboka in the report.

“Our investments in renewable energy have been critical in supporting our business continuity — maintaining security of supply to our customers, creating jobs for our communities and reducing our affect on the planet.”

CEO Gobalsamy echoed Eboka’s sentiments. “Strong cash generation enabled us to continue to achieve our financial priorities, as we focused on investing in our business to ensure safe and reliable operations and prioritised higher-return, lower-risk, and faster-payback projects. Investments include the purchase of 20 more ammonia rail wagons, a reverse osmosis water treatment plant and renewable energy projects,” he said.

The group, founded in SA in 1953, lists low economic growth at position seven on its list of risks facing the entity.

Omnia has a physical presence in 26 countries and a distribution network involving more than 40 countries around the world. 

Omnia, like many SA businesses, has had to contend with Transnet’s inefficiencies which have hurt the country’s exports. The economy and business efficiencies are also curtailed by rolling power cuts, which have been the norm since 2007.

The country’s water infrastructure, from water supply to treatment, storage, resources and management, has also been deteriorating.

“In SA, we faced continued infrastructure decline which impacted our operations and the broader economy. Ongoing disruptions to the electricity supply, deteriorating rail and road infrastructure as well as water supply issues have made it difficult for businesses, especially within the manufacturing and mining sectors, to operate effectively,” the company said.

Omnia’s annual report also shows that the group is looking at double-digit profit growth, particularly in the agriculture business in the next three years. It said it will achieve this by expanding its existing markets and unlocking new geographical markets in India, Southeast Asia and the Middle East.

The group is also seeking new distribution partnerships in markets such as the US, Europe, China and South America.

khumalok@businesslive.co.za