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FIFI PETERS: We take the focus off the interest rate decision, the Reserve Bank Monetary Policy Committee [MPC] decision for now, just to catch up with Omnia, a chemicals and fertiliser group listed on the JSE, following a recent announcement the company made – in fact yesterday – about a joint venture it is getting into with one of its existing partners, MNK, which is the second-largest explosive company over in Indonesia.
To tell us more about this deal and what it will mean for shareholders of Omnia, I’m joined by the CEO, Seelan Gobalsamy.
Seelan, thanks so much for giving us your time this evening. Talk to us more about what it is you have up your sleeve here, and why this is possibly a good fit for the group.
SEELAN GOBALSAMY: Great. Thanks Fifi, and good evening to you and your listeners. Thanks for having me again. I guess what we do know is that Omnia has a chemicals business, agriculture business, and also an explosives business. What we said a few years ago was that we would like to expand our agriculture and mining business internationally.
From a mining perspective we earmarked three geographies: Canada, Indonesia and Australia. And today we announced that we’ve crystallised and sealed our joint venture with MNK.
MNK is the second-largest explosives company in Indonesia. We’ve been working with them for five years now, so it demonstrates the commitment from each side.
We’ve agreed to put our two businesses together and grow the single business together over the next few years and decades. We believe it’s a great market for us. It expands our opportunities in that region, and we’ve really got a great partner that that we’ve secured.
FIFI PETERS: This is a share deal – or will there be some money involved on the table?
SEELAN GOBALSAMY: There will be. We both will own shares in the new venture, and we will both put our businesses into the new venture. So it’s business and shares. MNK will put their customers into the venture and we will do the same.
FIFI PETERS: In terms of funding your expansion going forward from here, we’ve just heard that the cost of capital is on the rise. Money is a lot more expensive now, particularly after this MPC decision, Seelan. Just your comment on the rising cost of capital and how as a company you’re looking [to] doing business in a prudent way in this environment?
SEELAN GOBALSAMY: I guess what we’ve been focusing on is building a strong balance sheet, and over the last few years we’ve been systematically focusing on our core agriculture and mining, and increasing the performance of our business.
Obviously our local business faces certain headwinds with electricity, with the rail infrastructure, with port infrastructure, and that does weigh upon us.
However, we work differently, and we attempt to do our little bit to help ease the burden of that on ourselves and on the communities we operate in.
But I guess the overall focus is to expand globally and expand in certain selected markets where we can add value and make a profit.
From a capital perspective we’ve planned for these expansions and they fit very neatly into our capital budget. They are all timed over a period. So there isn’t a strain on our structure or infrastructure due to this investment. It’s been orderly and systematically planned over the last few years.
FIFI PETERS: Okay. But just a parting shot on the interest rate decision today. Does it make your life easier or harder?
Read: Sarb hikes repo rate by 50bps
SEELAN GOBALSAMY: Well, yes, if we think firstly about consumers – we employ a number of people across the country, across the continent and across the world – clearly the ones in South Africa will find the decision fairly tough if you’ve got debt and other things you need to pay off.
I guess overall the bank’s doing the right thing to make sure that we stick to our policies, and we stick to our processes.
So from that perspective, I think we will continue to do what we have to do to grow agriculture and mining, and hopefully make the tough decisions that the Reserve Bank has to make in future a little bit easier; if we all keep doing what we need to do – and deliver.
FIFI PETERS: I like the emphasis on delivery talk, and action essentially. Seelan, thanks so much for your time, sir. We’ll leave it there.
Seelan Gobalsamy, the CEO at Omnia, has been talking about the latest venture the company is up to there. It’s part of a plan that has been in the pipeline to expand into markets that offer more opportunity, Indonesia being highlighted as one.
