Lonrho seek to reassert its African connection
Lonrho, the conglomerate once led by Tiny Rowland, and which was nearly wound up four years ago, is seeking to restore some of the wealth and power it enjoyed during its heyday in the 1980s.
It is building an African business empire of plantations, airlines, ports and agribusiness, and has raised £25 million with two share placings in the past fortnight.
The money will be used to buy out the minority interests in two Lonrho businesses — Rollex, the South African fresh produce distributor, which supplies Marks & Spencer and Tesco in Britain, and Kwikbuild, a construction company that makes prefabricated buildings.
David Lenigas, chairman of Lonrho, has said that he wants to increase the size of the group quickly, doubling its revenues every year, by transforming it into a leading African food exporter, taking fresh produce from company-owned farms in Angola to supermarket shelves in South Africa, Europe and the United States. He said: “Africa has land, water and cheap labour; it will be the bread basket of the world.”
The company broke even with £40 million in turnover in the half-year to June, but Mr Lenigas said it was now making quarterly profits before interest and tax of £9 million on £30 million in revenues. He said: “Our mandate is to bring Lonrho back, creating a strong company in the African services sector. We want to bring it back to £1 billion in revenues within three to four years. Then we will be a significant business in Africa.”
Mr Lenigas, who took command at Lonrho in 2005, and Geoffrey White, his chief executive, see infrastructure as the key to rebuilding a Lonrho empire.
Instead of investing in resources or mining, Lonrho is piggybacking on the oil and minerals boom in sub-Saharan Africa. The company owns a majority share in Luba Freeport, a logistics and supply base in Equatorial Guinea, used by the oil multinationals for their West African drilling campaigns.
Lonrho also owns Fly540, an airline that runs domestic services in Kenya and which Mr Lenigas hopes to take into Angola and then into Ghana. The key to Lonrho’s rapid expansion will be food: a farming, processing and exporting business integrated through Rollex.
The logistics company owns a processing plant at Johannesburg airport. A fleet of refrigerated trucks bring produce from Zambia, Zimbabwe, Malawi and the Democratic Republic of Congo (DRC) to Johannesburg, where fresh fruit, vegetables and flowers are processed, washed and bagged, then airfreighted to Europe. The company will begin to export produce to the United States next year.
Lonrho moved into food production in January, acquiring 99-year leases on 25,000 hectares of paddy fields in Angola. Talks on a further 25,000 hectares on the shores of Lake Malawi are under way with the Malawi Government and in Mali, Lonrho hopes to secure 100,000 hectares to grow crops.
Mr Lenigas is keen to expand into farming to reduce supply risk. To keep volumes growing, the company must secure new sources of produce and the ideal balance, Mr Lenigas said, would be to source 40 per cent of its food supplies from company-owned farms, buying the rest from independent farmers. By sourcing food from a wide geographic canvas, from Mali to Zimbabwe, Mr Lenigas hopes to reduce the risk of supply interruptions from droughts and crop failures.
The three river systems that flow north in the DRC make Angola ideal for growing food, Mr Lenigas said. Lonrho will employ farm workers to grow the crops, mainly vegetables and fruit, rather than commodity crops such as grain. Additional processing plants will be built in Angola, Mali, Malawi and and Zimbabwe.
Fly540, the regional airline, is already being closely watched by international carriers. There have been general talks with potential partners, such as BA and Emirates.
A deal is probably three to four years away as the airline develops a sub-Saharan Africa route network. However, eventually, it will need a link to a big carrier.
“We can only take it so far,” Mr Lenigas said. “At some point, we will need a partner to hook it into long-haul routes.”