Turkish investor Yildirim pauses Africa plans on commodity slump

Turkish investor Robert Yuksel Yildirim says it’s getting harder for foreign companies like his Yildirim Holding AS to expand in Africa because of the collapse in commodity prices.

Many large-scale infrastructure and mining projects in sub-Saharan Africa require companies to commit to more than a decade of investing and financiers are reluctant to engage for longer than five to 10 years, Yildirim, who is chairman of the Istanbul-based company, said in an interview on March 21 in Abidjan, Ivory Coast’s commercial capital.

“The headwinds are putting a lot of pressure on the investor from outside the continent,” he said. “We want to go slow. We were really aggressive in mining sites, but now all the commodity prices are down.”

Economic growth in sub-Saharan Africa eased to the slowest pace since 1999 last year as prices for commodities including oil and copper collapsed because of a slowdown in demand from China, one of the largest consumers of the continent’s natural resources, according to the International Monetary Fund. Governments from Ghana to Nigeria and Kenya are turning to the IMF for assistance, including loans and standby credit lines, to ease investor concern.

The Bloomberg Commodity Index, a measure of investor returns on 22 raw materials, fell 20 percent in the past year. It’s recovered 10 percent since this year’s low on Jan. 20.

Yildirim Holding, a closely held family company that has port and mining operations from Scandinavia to Africa to central and South America, last year unveiled a $5 billion expansion plan as it seeks to become one of the top 10 global harbor operators by 2025, Yildirim said last year.

Yildirim Holding’s investments in ports are boosting profit, with volume growth as much as 10 percent in Turkey and about 5 percent elsewhere, Yildirim said.

“We are always looking for growth,” he said. “We just did a closing in Portugal. We added a terminal to our portfolio.”

Shipping Profit

The company’s tanker-shipping business is expected to contribute as much as $25 million to overall earnings this year, with about $10 million from its bulk business, Yildirim said. While ship rates have fallen, the company has no plans to sell assets, he said.

“Shipping is a business for us,” he said. “It is not an area to grow but also not an area to exit.”

Yildirim studied mining projects in Ghana for two years and made unsuccessful bids. In Ivory Coast, Yildirim entered a $60 million joint venture to establish a commuter-ferry service and has discussed participating in a rail project with the government. The company would prefer to redevelop a port or an existing mine than take on a new development, he said. So far, port projects haven’t included terms to operate them, which make them less lucrative, he said.

“The intention was to stay here for some time with reasonable projects,” Yildirim said. “Unfortunately it didn’t work so far. Everything has changed in the last year.”

-Bloomberg