NEWS ANALYSIS: Drought hits Calgro M3 housing plans

It is not only farmers, farm workers and their families who will feel the costs of the damaging drought

 SA’s economy is under fire from all sides, not least from political populists. As GDP growth groans under the weight of pricier debt and parlous employment and manufacturing statistics, a new negative economic indicator has surfaced in the form of the drought in the Western Cape.

 A primary effect of the water shortages has been on the province’s agricultural economy, one of the biggest contributors to GDP.

 While it is difficult to quantify the damage the drought has done, the harm to farming is catastrophic.

But it is not only farmers, farm workers and their families who will feel the costs. Calgro M3, a listed property developer, says it has significantly scaled down the construction of two big developments in Cape Town due to the city’s water restrictions. CEO Wikus Lategan says the company will try to ensure no jobs are lost due to the decision.

Calgro M3 employs 1,600 people on its Belhar and Scottsdene mass-housing developments. But the drought has reached critical proportions, to the extent that authorities have declared a disaster, Lategan says.

The construction work that has been affected in the Western Cape amounts to 25% of the total housing units under construction across the group. However, the projects have not ground to a complete halt as certain “dry works” are still being carried out.

Calgro M3’s actions will delay projects by an estimated three to four months. If good rains do fall in that time, Lategan says special measures will be taken to minimise time already lost.

Rainwater harvesting systems are included as standard in the final build in Calgro M3’s Western Cape developments. The company says as SA is a water-scarce nation every house in the country will gain from this.

But as the ANC’s policy conference heats up, it has become apparent the government is less concerned about GDP growth than it is about which faction next takes up the reins of state power.

Smart companies on the JSE have long ago diversified out of the domestic economy. Amid a drought in state infrastructure spending spanning a Biblical seven years, many big listed construction group have left the country for greener, more diversified engineering pastures across the world. This hedges their reliance on one of the world’s most volatile currencies. The really smart ones among them will have substantial offshore war chests in a mix of instruments.

Metair, a battery storage and automotive components manufacturer has long ago taken controlling shares in a Turkish lead-acid battery manufacturer and distributor in Turkey and the Middle East and the largest lead-acid battery manufacturer in Romania. The R2.6bn spent on these acquisitions also gave it complementary technology platforms and access to Europe’s vehicle markets.

Now, Metair has announced a much smaller “strategic” acquisition, buying up a 25% stake in German-based battery manufacturer and supplier Akkumulatorenfabrik Moll worth €7.4m.

Moll supplies European car manufacturers such as Audi, Daimler, Porsche, Skoda, Lamborghini as well as Volkswagen. The company has distribution networks across Europe and Asia.

Metair MD Theo Loock says this boosts his company’s globalisation strategy. Moll has links with Chaowei Power Holdings, a Chinese company listed on the Hong Kong Stock Exchange. Chaowei bought a stake in Moll in 2013 and has since developed start-stop batteries for supply in China. It is the biggest producer of lead-acid electric bicycle batteries in China. This opens up markets for electric two-wheeler, three-wheeler and four-wheeler vehicles there.

Moll’s 5% stake in Chaowei’s new automotive production facilities in that country provides Metair with “a small but very critical access point into the Chinese market, laying the platform for future technology transfer and co-operation”, Loock says.

By Mark Allix