Afrimat's diversification strategy has helped it weather the impact of Covid-19

CFO Pieter de Wit says that diversifying beyond construction has helped Afrimat to survive.

Afrimat’s strategy of diversifying beyond construction, strong balance sheet and cash flow generation has enabled the company to weather the impact of Covid-19 at a time when the construction industry is battling to survive. 

The company, which started off as a construction and building materials supplier, has grown to become a diversified company, adding commodities through its iron ore operations and industrial minerals with its steel, dolomite and lime products business. 

“Our approach to diversification is based on a set of principles which support our strengths and core competencies and these principles have been in place since the establishment of Afrimat,” says CFO Pieter de Wit. “Once a diversified revenue stream is entered into, it has to support cash generation and, in turn, this supports the balance sheet and reduces debt.” 

He says that this also means Afrimat spends time interrogating current and future decisions, with the support of information systems that are in place, and this has helped the company to put the diversification in place as well as to pivot quite quickly into product and client diversification.

Afrimat’s construction materials business did not have an income in April during the hard lockdown at alert level five. However, because of its bulk commodities segment, the company has been able to keep its staff employed during the crisis. 

“It has enabled us to pay our employees and suppliers during the lockdown and placed us in a position to retain our dividend policy.”

The company is also finalising a deal to acquire Unicorn Capital Partners, whose main business is an anthracite mine in Mpumalanga. Afrimat currently owns 27 percent of the company. 

South Africa’s construction industry has shown a decline of 4.7 percent in the first quarter of 2020, its seventh consecutive quarter of economic decline, according to Statistics SA. Several construction giants, like Basil Read and Group Five, have since gone into business rescue.