Johann Rupert’s right-hand man warns of fuel shortages in South Africa

Billionaire Johann Rupert’s Remgro is one of the few South African companies directly exposed to the ongoing conflict in the Middle East through Mediclinic’s extensive operations in the country. 

However, it is not the main concern of its CEO, Jannie Durand, who is more worried about the potential impact of the conflict on South Africa, with fuel shortages on the cards for the country.

The rest of Remgro’s business, while not directly exposed to the conflict in the Middle East as Mediclinic is, will suffer from the indirect effects on oil prices and inflation. 

Durand even warned that South Africa will face fuel shortages that could disrupt business operations in the country. 

These impacts have the potential to be severe, particularly if the war lasts for a prolonged period, with South Africa on track for the largest petrol and diesel price increases on record. 

Much of Remgro’s operations are also in emerging markets, which are substantially more vulnerable to the indirect effects of the war as investors pull money out of these markets to search for safe havens. 

This results in weakening currencies, increased costs of importing goods, and will exaggerate the inflationary shock, potentially ending up with more severe interest rate hikes. 

“At the moment, it is starting to keep us up at night, regarding what goes on in the Middle East. It is lasting longer than I thought it would,” Durand said. 

“I don’t think anybody knows when it is going to end, not even the President of the United States, to be quite frank. So, it is becoming more of a concern.” 

Durand explained that the longer the war lasts, the bigger the impact will be on the global economy and particularly on emerging markets, such as South Africa. 

“I think we can already see what is happening in South Africa. People are scrambling a bit. We are going to have some fuel shortages,” Durand said. 

“As you are aware, 50% of the fuel we use comes from that region in one way or another that we import. So, it is a significant amount, and you cannot just get supplies from other areas.”

“We also only have one operating refinery to supply Gauteng, so that is a problem as well if you have to refine oil to get fuel products.” 

“It will have an impact, not just on our companies, but on South Africa more broadly. That is what I am more worried about.” 

Durand said that South Africans are not in a great place to weather the storm, with households under pressure and not able to absorb rapidly rising costs. 

“People are not in a great position. If higher food prices and inflation comes to bear, we can go back to some of the COVID days, which would not be great,” Durand said. 

Middle East headache

Remgro owns 50% of Manta Bidco, the holding entity that owns Mediclinic, alongside the Mediterranean Shipping Company. 

Founded in South Africa in the 1980s, Mediclinic has grown with Remgro’s backing into a multinational private healthcare giant. 

This expansion has seen Mediclinic open up 50 hospitals in South Africa and become the largest private healthcare provider in Switzerland. 

The company has more recently expanded into the Middle East to become a leading healthcare provider in the United Arab Emirates (UAE), with most of its operations being in Dubai and Abu Dhabi. 

Mediclinic operates seven hospitals, one day-case clinic and 28 outpatient clinics in the region. 

The UAE’s image of a peaceful, stable nation has been damaged significantly by Iranian attacks on the country. Apart from this reputational damage, it has disrupted the operations of businesses across the region. 

Mediclinic has not been spared, with Remgro CEO Jannie Durand explaining the impact on the company’s operations in the region following Remgro’s annual results in late March. 

“Unfortunately, a couple of weeks ago, I would have been able to say to you that I was not worried at all about the Middle East operations,” Durand told 702. 

“It was such a strong performer. There was strong demand for its services, and it was the best operator in the Middle East from a South African company.” 

However, the US-Israeli war on Iran has changed this equation drastically, with the region’s reputation for stability being damaged. 

“Things have changed. I must give kudos to our management team over there. Under difficult circumstances, things are not going so badly. They are working closely with the government and are keeping the hospitals open,” Durand said. 

Durand explained that, so far, the major impact has been a decline in the number of patients travelling into Dubai or Abu Dhabi for treatment. 

While a substantial and lucrative part of the business, considering the events in the Middle East, it is not the worst outcome, Durand said.