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R100m investment shows confidence in SA not lost

Cape Town - A Danish investment of R100m shows there are still international investors who have confidence in SA, Tjaart van der Walt, director of AVK Holding Southern Africa, told Fin24.

This investment is a majority stake in South Africa’s Premier Valves Group (PVG) acquired by AVK, an international valve manufacturer.

The investment will see AVK SA become compliant with the department of trade and industry's new Designation Law, which requires state owned entities to buy locally manufactured products with a 70% local content.

PVG supplied many of the valves in SA’s major power stations and water infrastructure projects.

The dti’s designation of valves for local content forced PVG to downsize and import valves to survive.

As part of the investment PVG’s existing factory in Alrode, Johannesburg, will be upgraded and probably create 80 new jobs.

AVK will also set up a modern resilient seal valve (RSV) manufacturing unit at the Alrode plant.

AVK’s holding company is in Denmark and the company has been active in SA for the past 18 years, mainly as importers of valves. AVK has 30 factories worldwide.

“Over the past ten years we investigated the possibility of establishing a factory to service Africa. We were looking for an available acquisition and the dti requirements speeded up the process,” said Van der Walt.

“Currently we import 36 000 valves per year. When we manufacture locally, we could manufacture 80 000 units per year. Then we could look at the broader Southern African market to also export there.”

He said a next phase could be to establish a high tech advanced green local foundry as well. This would be an even bigger investment of between R300m and R500m and will only be considered further down the line.

“Naturally the strikes in South Africa did put a bit of a damper on negotiations, but the Danish decided that the positives still outweigh the negatives in SA. For instance, the availability of raw material locally and the country’s geographic location,” said Van der Walt.

“The manufacturing process is fairly mechanised and offers lots of training opportunities. They look at SA as a platform for the rest of Africa.”

He said AVK’s investment will fund the creation of a new international standard for local production capacity in support of the dti’s designation policy, creating new employment opportunities through the value chain.

"Increased local production as a result of AVK’s investment is anticipated to have a, “sales value of up to R400m per year, being the value of import substitution plus additional exports delivered through AVK’s international sales network,” said Van der Walt.  

Peter Thomson, managing director of PVG for the past 10 years, will remain as managing director of PVG. He will also be a director of AVK Holding Southern Africa.

- Fin24
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