CBI-electric

African Cables was the largest contributor to turnover within the CBI-electric group, with increased revenues driven largely by increased copper prices compared to the prior year. This achievement is particularly noteworthy considering that demand for cable in the domestic market has declined by a quarter on 2008 levels, and there remains considerable excess manufacturing capacity in the industry in South Africa.

Productivity improvement initiatives were implemented at the Vereeniging factory over the past three years. Although less pronounced than in previous years, cost reductions of approximately 10% were achieved during 2011. To maintain market share it is important that African Cables retains its position as a low-cost producer. We continue to adopt multifaceted strategies to compete against importers of cheap product.

African Cables holds ISO 9001, 14001 and OHSAS 18001 certifications. Our ISO auditors, who are accredited with the International Register of Certificated Auditors (IRCA), certified our safety, health and environmental performance as Five-Star.

Upgrading and replacing old technology and implementing energy efficient systems resulted in energy savings of 3 457 gigajoules during 2011. Overall, we have reduced energy consumption by more than 5% since 2008. During the year, 80% of the Vereeniging plant’s water was recycled, with some 816 kilolitres discharged into the Klip River. The plant rigorously monitors adherence to the 20 criteria outlined in the Klip River Water Quality Standard. A contracted SMME supplier undertakes most of the recycling of copper, steel, plastics and aluminium at the plant.

African Cables received Level 2 BBBEE status at the end of October. To date this is the highest rating achieved in the Reunert group.

In the past year we increased the investment in our services division, CBI-electric: Power Installations. We anticipate this division will continue to grow its contribution in the year ahead. Given the general shortage of skills – particularly technical skills – in South Africa and the rest of the continent - African Cables’ depth of intellectual capital holds the potential to realise significant opportunities to grow turnover and add value in our service offering.

African Cables’ prospects are largely linked to South Africa’s rate of gross fixed domestic investment. All indications are that the imperatives of job creation and service delivery will continue to drive growth of some 3% to 4% for the foreseeable future. However, the continued decline in South Africa’s manufacturing capacity remains cause for concern.

The business is likely to face increasing pressures in the periods ahead as rising labour and electricity costs and volatile raw material prices negatively impact the cost basis. Cost management will remain a core focus of the business and, coupled with the development of new markets and services, will mitigate the risk.