Fishing giant Sea Harvest – a household brand in South Africa – was recently listed on the Johannesburg Stock Exchange (JSE) after showing significant growth over the past two years through organic growth and well-timed acquisitions. We interview CEO Felix Ratheb (Part I) about the reasons behind the company’s growth and its recipe for success.
Click on the video below to watch the interview.
Sea Harvest is one of the leading seafood brands with a 36.7% retail market share in South Africa and has grown to be one of the largest employer and biggest economic driver on the West Coast.
Q: Fishing is a notoriously challenging industry. However, Sea Harvest has enjoyed incredible success. What’s Sea Harvest’s secret for prosperity?
FR: You cannot achieve anything without having the right people in place. The reality is that we’ve got a very strong management team and employees with a very clear vision and well-thought-out strategy.
Q: How has your acquisition of Australian fishing company, Mareterram contributed to your success?
FR: Firstly, we acquired a vessel from Germany that was operating in Greenland. We immediately saw a spike in our margin. We also started investing significantly in our facilities and factories and we became more and more efficient. Then we grew from an acquisition point of view by making a move to Australia. We’ve been operating in that market for a long time and we understood and knew it well. It’s been a mixture of organic and acquisitive growth to get to the point needed in order to list the company and move closer to achieving the vision that we’ve set for ourselves as a business.
Q: How does Sea Harvest contribute to the communities in which it operates?
FR: We are the single largest employer in the Saldanha Bay municipality with a staff complement of around 2 500 full-time staff. We are committed to providing jobs in the area, but having said that, we’re also very reliant on the pool of people we employ.
There are many challenges in the area, but, through the Sea Harvest Foundation, we’ve invested a lot in putting up social centres, counseling people with substance abuse issues or providing support for families where there are cases of abuse. We’re also in the process of building additional classrooms at a school in Saldanha Bay.
The school will cater for 60 to 100 Grade R and pre-grade R students; 50% of children whose parents work for Sea Harvest will be accommodated and the other half will be from the surrounding communities.
This has been a public-private partnership between Sea Harvest and the Department of Education. We’ve also provided bursaries and spent in excess of R60-million for over 12 000 training programmes in the last few years.
Q: Under your leadership, the company attained group market capitalisation of R3.14-billion. What does the JSE listing mean to Sea Harvest Group?
FR: Our view at the time was that we needed a total of R400-million to be listed on the JSE. That was the driving force for the business. When I took over, it was probably half of that and it took us three years to get to that point.
To deliver our vision as a globally diverse fishing company, we exhausted all avenues of capital and we were highly geared in terms of third-party and bank debt including debt from shareholders who invested over R700-million in the business. We knew that if we were going to grow, we couldn’t afford to have this huge interest component that required regular service.
Our goal was to build a great business that’s sustainable and take it to market, thus opening up avenues for growth. We effectively eradicated all company debt and were left with a kitty of between R200–300 million that we used to invest back into our business.
We’re looking at investing in our fleet, which will sustain our margin – a margin that’s very healthy at the moment. We also have a pipeline of acquisitions.
Q: What processes do you have in place to ensure the sustainability of our oceans?
FR: That’s a very good question. Even ENGOs are starting to appreciate that the fishing industry is probably one of the biggest allies in terms of sustainability. That’s because industry players are the ones that make investments.
A vessel can cost up to R300–R400 million and when you have a fleet of 20 vessels, you won’t make that investment if there’s no fish in the ocean. We have the biggest interest in ensuring that the resource is there. We train all our skippers and we comply 100% with the Marine Living Resources Act. Not only that but we police it ourselves.
In fact, we were the first Hake fishery on the planet to be certified by the Marine stewardship Council (MSC) in 2005 – it’s the gold standard for certification in terms of ocean sustainability. We were recertified in 2010 and again in 2015. I must congratulate the Department of Agriculture, Forestry and Fisheries (DAFF) for also making this happen. In the end, it’s about how industry can make a difference; it’s not company specific.
We worked well with government in that regard. At one stage, we voluntarily came forward and requested a stipulation in our permits that required us to ring-fence our fishing grounds. We voluntarily said let’s have capping horsepower, essentially capping our effort if the fish weren’t there.
We are doing the right things in terms of sustainability. The science here is excellent and world-class. The fishing industry in South Africa, in particular Hake, is well managed and sustainable.
The most productive way of getting food is making sure we have oceans with resources that are sustainable, giving us healthy food for future generations. Fish is the last hunted protein. In my opinion, fish is a resource that will be in huge demand going forward.
Q: What future growth plans does Sea Harvest have in the pipeline?
FR: As with any business, you first have to look within. We still have lots of improvement processes to implement. I have to remind my team sometimes that it’s only been two months since the listing. They’re like a sprinter out of the starting blocks who wants to run around the world in record time. There are a few projects that we’d like to see through. The first place we look at is organic growth. We have a very strong corporate finance team within our business right now, which is an area we’ve invested in. It’s all good and well to make acquisitions, but I think it’s more important to integrate them and have the bandwidth of management to get them right.
Q: Advice for companies or foreign investors wanting to invest in South Africa?
FR: Whether you’re a local or foreign investor, you need to get your head around understanding your management team. I believe that you can have a great business with the wrong people and then it will only go one way.
Any investor needs to understand who they are putting their money behind. For local investors, the advantage of investing in a company like ours is that a large portion of our revenue is derived from offshore (60% of our revenue is in hard and strong currencies like the Euro and Australian Dollar).
For foreign investors, the benefit is that operating margins in South Africa are very strong compared to anywhere else in the world.
We are currently showing solid growth here in terms of our food businesses. We also have 15-year fishing rights in SA, which you don’t find anywhere else in the world.
For foreign investors, there are good margins, a nice Rand hedge and exposure to emerging markets.