Khanya Cold Chain Business Plan — Executive Summary

A multi-temperature cold store in Ekurhuleni: R108.39m funding, 4,500 pallet positions, R84.1m Year 5 revenue and an 18.2% project IRR.

Executive Summary

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1.1 The proposition
1.2 Why the timing works
1.3 The energy strategy is the business strategy
1.4 Financial summary
1.5 Funding requirement
1.6 The honest assessment
1.7 The recommendation

1.1 The proposition

Khanya Cold Chain proposes a 4 500-pallet multi-temperature cold store on a leased industrial shell in the Elandsfontein industrial node of Ekurhuleni, with a small refrigerated distribution fleet attached. It serves food manufacturers, protein importers, food service distributors and produce packhouses that need flexible, contract-grade cold storage without committing to a national third-party logistics provider.

The business is deliberately mid-sized. It is too small to compete with the national cold chain operators on price at scale, and large enough to offer the service breadth, blast freezing, temperature-controlled distribution, value-added handling, that the small independent stores cannot. That position is defensible only if the cost base is disciplined, and the single largest lever on that cost base is electricity.

R84.1m

Year 5 revenue

R26.8m

Year 5 EBITDA

31.9%

Year 5 EBITDA margin

18.2%

Project IRR

1.2 Why the timing works

Capacity is genuinely constrained. Prime A-grade logistics vacancy in South Africa’s strategic hubs is now reported below 1 per cent, and the shortage of flexible cold storage is most acute for customers who need contract-grade facilities without long-term national commitments.
The grid problem has changed shape. Load shedding has receded as the defining risk, Eskom’s energy availability factor reached about 65.85 per cent year-to-date to March 2026, with baseload units available more than 98 per cent of the time. The problem is now price, not supply: an 8.76 per cent increase for Eskom direct customers from 1 April 2026, roughly 9.01 per cent for municipal bulk purchasers from 1 July, and a further 8.83 per cent already approved for 2027/28.
That price shift favours a new entrant. An incumbent operating a twenty-year-old store with fixed-speed compressors and no time-of-use discipline faces the same tariff increases with none of the tools to absorb them. A greenfield operator specifying for load shifting, thermal storage and on-site generation starts with a structural cost advantage that widens every April.

1.3 The energy strategy is the business strategy

Eskom’s Megaflex tariff prices a unit drawn in a high-demand-season weekday peak block at 720.19 c/kWh and the same unit drawn overnight at 120.03 c/kWh, both excluding VAT. That is a six-fold spread on the same electron, and a frozen store is one of the few industrial loads that can genuinely arbitrage it: a −25°C chamber holding 2 600 pallets is a thermal battery that can be driven down overnight and allowed to drift within tolerance through the peak blocks.

Figure 1. What the energy strategy is worth. Load shifting alone removes about a fifth of the electricity bill; adding solar takes it to nearly half.

Combining time-of-use load shifting, a 700 kWp rooftop solar array and battery storage for demand management reduces the Year 3 electricity bill from R5 175 719 to R2 904 932, a saving of 44 per cent. Expressed against revenue, electricity falls from 11.0 per cent of cold store revenue to 6.2 per cent.

1.4 Financial summary

Figure 2. Revenue by segment with EBITDA margin.

R	Year 1	Year 2	Year 3	Year 4	Year 5
Pallet occupancy	46%	68%	79%	85%	88%
Cold store revenue	24 469 668	38 058 835	47 109 572	54 177 464	60 055 311
Distribution revenue	3 857 640	9 244 498	15 647 834	20 752 003	24 068 638
Total revenue	28 327 308	47 303 332	62 757 406	74 929 467	84 123 949
Electricity	(2 453 707)	(2 337 453)	(2 904 932)	(3 423 544)	(3 925 873)
Total operating costs	(26 908 709)	(35 196 711)	(43 700 486)	(51 014 532)	(57 304 135)
EBITDA	1 418 599	12 106 622	19 056 921	23 914 935	26 819 815
EBITDA margin	5.0%	25.6%	30.4%	31.9%	31.9%
Taxation	—	—	(154 939)	(409 695)	(572 992)
Profit / (loss) after tax	(18 467 711)	(3 691 369)	2 714 301	7 177 243	10 037 965
Debt service cover	0.22x	1.15x	1.81x	2.27x	2.55x

1.5 Funding requirement

The business requires R108 390 000, R89 800 000 of refrigeration plant, insulated envelope, solar, racking, fleet and equipment, and R18 590 000 of pre-opening cost and working capital. The equity subscription is R56 390 000, which is 52 per cent of the total and the figure that closes the requirement exactly. A standby revolving facility of R12 000 000 is required alongside, to fund the seasonal working capital swing and the small deficit the base case shows in Year 2.

1.6 The honest assessment

Seven findings matter more than anything else in this document.

1. Year 1 loses money and does not cover its debt service

At 46 per cent average occupancy the store produces EBITDA of R1 418 599 against debt service of R6 310 000, a cover ratio of 0.22 times, even with a twelve-month capital moratorium. Year 2 reaches 1.15 times, still below a typical 1.30 times covenant. The covenant is only comfortably met from Year 3. Any lender must be underwriting a two-year ramp, and must say so in the term sheet rather than discovering it in year two.

2. Occupancy, not electricity, is the dominant risk

This is the counter-intuitive finding and it should reshape where management attention goes. An eight-point move in occupancy swings Year 3 EBITDA by R8 498 791. A 20 per cent move in the electricity price, more than two years of Eskom increases arriving at once, swings it by R1 161 973, roughly a seventh as much. The energy strategy is what makes the margin possible; filling the building is what makes the business survive.

3. The distribution fleet earns roughly half the margin of the cold store

At maturity the cold store earns a 37.7 per cent EBITDA margin and the fleet 17.4 per cent. The fleet loses R469 533 in Year 1 at 68 per cent utilisation. It is included because customers will not sign storage contracts with an operator who cannot move the pallet, not because it is a good business in its own right. It should be judged as a customer-acquisition cost that happens to break even.

4. Return is adequate, not exciting, and depends heavily on the exit assumption

The project internal rate of return is 18.2 per cent and the return to equity 24.0 per cent, on an assumed exit at 7.0 times Year 5 EBITDA. At a 6 times exit the project return falls to 15.1 per cent and net present value at a 15 per cent hurdle is barely positive; at 5 times it falls to 11.7 per cent and turns negative. This is infrastructure-style return for infrastructure-style risk, and it is priced accordingly.

5. Capital intensity is the structural problem

R89 800 000 of capital expenditure across 4 500 pallet positions is R19 956 per position. Cumulative project free cash flow is still negative R55 869 209 at the end of Year 5 before any terminal value. The equity return is real but it is realised on exit or refinancing, not from distributions during the projection period.

6. The downside is a funding gap, not a wipeout

On thirteen points lower occupancy, 6 per cent lower tariffs and 14 per cent higher energy cost, the business still generates positive EBITDA from Year 2 and book equity never falls below R2 916 744. But the cash shortfall reaches R34 658 147, far beyond the R12 000 000 revolver. The realistic downside is a second equity call of roughly R25 000 000, at a valuation set by a lender rather than by the founders.

7. Ammonia is a regulatory and safety exposure, not a line item

An ammonia refrigeration plant of this size is a major hazard installation subject to specific regulatory obligations, mandatory risk assessment and emergency planning. The plan budgets for compliance and carries it in the risk register at Section 12.1, but a real venture should treat the regulatory approval timeline as a gating item in the construction programme, capable of delaying commissioning by months.

1.7 The recommendation

Proceed, subject to four conditions. First, anchor tenancy: at least 1 200 pallet positions contracted on multi-year terms before capital is drawn, because the Year 1 ramp is where this plan is most exposed. Second, a firm quotation for the refrigeration plant and the energy system, since together they are 44 per cent of capital expenditure. Third, written confirmation of the notified maximum demand available at the connection and of the applicable time-of-use tariff, because the entire energy thesis depends on it. Fourth, the standby revolver committed at first close, not sought when Year 2 needs it.

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