South African Market Begins Rebound

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Like many around the world, South Africa’s base oil and lubricants markets were buffeted by an economic lockdown imposed to contain the spread of COVID-19, but they have started to rebound, an industry insider said during an online conference last month.

“The base oil business and lubricants market has seen a downturn in South Africa during the initial phases of the lockdown,” Seelan Gobalsamy, group CEO for Omnia Holdings Ltd. Umongo Petroleum, said Oct. 13 during the ICIS African & Middle Eastern Base Oils & Lubricants Virtual Conference. “That has come back. Even though we’ve seen certain essential services and businesses continue during the lockdown, there has been a slowdown in demand.”

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Johannesburg, South Africa Omnia Holdings Ltd. is a diversified chemicals group that owns a wide variety of companies. Its business units include Umongo Petroleum, which distributes lubricant additives, base oils, greases, compounded lubricants, process oils and a variety of specialties.

Omnia Group’s wide variety of businesses are generally all considered essential services. “So whether its primary chemicals in Protea Chemicals used for cleaning, detergents, water treatment; whether the fuels, the base oils, and the lubricants in Umongo; the fertilizer in our agriculture business or explosives in our mining business – all of these businesses have been essential and have traded through the lockdown,” Gobalsamy said.

He noted that South Africa’s economy already faced challenges entering the COVID-19 pandemic, including high unemployment, low growth rates and issues affecting investor confidence, such as corruption and political uncertainty. He did say the government deserves credit for its response to the crisis.

“What we saw was the South African government taking a very robust stance against the pandemic,” he said. “We were going into an early lockdown, and a very, very strong lockdown. Which was really good for lives, but I think it had a devastating impact on the economy and livelihoods of our nation.

“What we saw was the lockdown resulted in a decrease in demand, initially, but where we are today is that the lockdown has been relaxed, and demand is coming back. And the business sector is coming together.”

According to Gobalsamy, the country still faces a number of structural issues. “Our state-owned enterprises need to be restructured and to operate more efficiently,” he said. “Our government is flat out trying to curb corruption issues and to deal with issues of the past, ensuring funds are deployed adequately. We’ve seen a major downturn generally in the financial services sector, with stresses on capital, stresses on debt.” However, South Africa’s banking sector remains strong, he added.

In general, Gobalsamy said, South African leaders and businesses have been very entrepreneurial and very agile, showing the ability to come through some very difficult times over the past several years. “I’m confident as we come out of the pandemic, businesses with strong balance sheets, businesses with agile management teams will actually deliver value in the coming years,” he added.

According to Gobalsamy, businesses that have gone into the pandemic with strong balance sheets and strong cash positions have proven to be incredibly resilient through the pandemic.

“What we’ve done at Omnia is we were in the fortunate position of having restructured our balance sheet last year,” he said. “That allows us go to into the pandemic in a strong position. We’ve had a team that have been fairly agile, gone through a lot of change and restructuring.” This allowed the company to adapt its supply chains and change strategies to fit to changing situations during the pandemic. This included stepping in with local supply if competitors in an area were unable to deliver product, he added.

He said the country has a number of businesses with strong balance sheets, prudent management teams and “great” governance structures. “We see a number of companies coming back through the pandemic, and actually restoring value they generate,” he said. “It’s important during a time like this to support and invest in your people.”

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Africa    Region    South Africa