BUSINESS
entrants into the mining and construction
industries to secure funding. Under similar
constraints, banks and traditional financing
institutions are holding on to their purses,
which has a substantial effect on distributors
and resellers of capital equipment,” says
Fennell. The result is that Original Equipment
Manufacturers (OEMs) and distributors are
being called on more and more to assist
with financing solutions.
But the battered economy has not only
brought misery and despair. It has forced
many companies to reduce cost, think
innovatively and devise alternative strategies
like, for example, product and geographic
diversification. Bringing in a new product to
fill a niche goes a long way to differentiate
a company in a tough and competitive
market. However, on the other hand, it also
opens the market for less costly products.
If a contractor has only one big project on
the order book, for instance, and they need
three pieces of equipment, it becomes
a toss-up between price and quality, or
shopping around for good quality second-
hand equipment. This all puts pressure on
new equipment sellers.
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Opportunities in a tough
environment
Despite the murky water, Fennell believes
that a tough environment creates
opportunities as well. “Companies have
time to do introspection and to think smartly
and come up with innovative ideas to attract
customers. By slashing costs, the company
becomes leaner and leaner. If external
growth is not there, you start looking at
internal efficiencies, and efficiencies in
supply chains and logistics, which will serve
them well when the business environment
improves again.
To offset the dearth of projects in
South Africa, many companies have
gone searching for growth elsewhere on
the continent. In fact, most OEMs and
distributors have had a presence in Africa
for some time now. West and East Africa
are becoming more attractive and there
are certainly countries in Africa that have
shown exceptionally high growth, and which
presents opportunities for plant equipment
suppliers. Kenya, Tanzania and Uganda
are all growing rapidly. Kenya is driving
infrastructure development with road, rail
and port projects providing the backbone of
an expanding economy.
In addition, countries in both West and
East Africa are bringing oil and gas project
online, which bodes well for the future of
these economies. “The forecasted growth in
most countries in East Africa is much higher
than South Africa’s. The projected growth
for the entire Southern African region is low.
We are losing out on opportunities and we
are not making it any easier,” says Fennell.
“What is interesting though, is that most
companies are divorcing their South African
assets from their assets in the rest of
Africa,” he adds.
Amid all the challenges and concerns,
Fennell maintains that there is plenty of
opportunity for companies to improve
efficiencies and service delivery, and to bring
about internal improvements. “We need
policy certainty. Government needs to make
tough decisions. They have to cut costs, put
growth strategies in place and make sure
the money is spent where it should be. I
don’t think we have hit the bottom yet. We
need to realise that and be prepared,” says
Fennell.
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