Newly appointed Scaw Metals CEO Markus Hannemann says that, while his first priority is to oversee an internal review and stabilisation programme at the 7 000-employee-strong steel products manufacturer, he already has his eye on a number niche expansion prospects.

Hannemann, whose appointment became effective on August 1, is a 25-year Scaw veteran, having joined the group on a Haggie Rand bursary while studying mechanical engineering at the former Rand Afrikaans University. Haggie Rand, which is a leading pro-ducer of specialised steel ropes, has sub-sequently been fully absorbed as Scaw’s wire rod products division.

In an interview with Engineering News, Hannemann indicated that the business is in need of stabilisation partly to deal with the effects of the prevailing poor steel market, and partly to overcome the destabilising consequences of a sale process that took three years to conclude.

Having declared the business to be noncore in 2009, Anglo American sold its 74% interest to South Africa’s State-owned Industrial Development Corporation (IDC) for R3.4-billion in 2012. The balance of the shares have been retained by a black economic-empower-ment consortium comprising Izingwe Holdings, Shanduka Resources and the Southern Palace Group of Companies, which hold 21%, and an employee share ownership scheme, which owns 5%.

Hannemann, who completed his schooling in the Johannesburg suburb of Alberton and concluded an artisan trade test while reading for his degree and working as a trainee engineer, believes his deep exposure to the group offers him the grounding required to oversee the stabilisation exercise.

This point has been emphasised by executive chairperson Ufikile Khumalo, who says the company and its employees will reap the benefits of Hannemann’s experience as it seeks to build a sustainable steel beneficiation business.

However, the Master of Business Administration graduate is also keen to position the company along a new growth trajectory through a R3.4-billion investment programme, which is planned for the coming three years.

Most of the investments will be directed towards value-added steel product opportunities associated with its current activities, but Hannemann does not discount the possibility of acquisitions.

Scaw is less enthused about any expansion of its primary steelmaking activities, with Hannemann indicating that the group’s value-added portfolio has been critical to its weathering of the recent steel market downturn.

With yearly sales of more than R5-billion, Scaw produces primary long-steel products from scrap, as well as grinding media for the mining industry, wire rod and chain for a range of sectors, including mining and oil and gas, cast products for railways and mining clients, and rolled products for the construction sector.

Overall, it produces some 750 000 t/y of steel products, of which about 250 000 t/y is classed as value-added, or beneficiated beyond the primary stage.

The IDC, which has a mandate to support the development of downstream manufacturing, is, thus, supportive of the Scaw’s intention to expand its position as a niche beneficiator of steel products both within South Africa and in the rest of Africa.

Announcements are likely to be made soon with regard to a R200-million grind-ing media investment in West Africa to service the mining sector in that territory, and a R100-million chain expansion in South Africa, which will supply into the European oil and gas market.

Also under investigation is a possible R1-billion cogeneration investment, which could convert waste heat and gases into power at the group’s Union Junction facility, in Ekurhuleni.

“Our growth plans are twofold and driven off expanding our footprint across the continent, while, at the same time, leveraging our local assets towards driving a smarter and more efficient steel beneficiation business,” Hannemann explains.

As to the prospect of a possible initial public offering as part of a future IDC exit strategy, Hannemann says it is premature to speculate and that, for now, the IDC remains a stable and long-term investor.