SWARTLAND
SWARTLAND
New Doors Opening
for Veteran Swartland Business PRODUCTION: David Napier
Building materials supply business, Swartland has been a stalwart in South African industry for almost 70 years. by utilising a diversification strategy, the company has managed to continue growing where others have found difficulty. Enterprise Africa speaks to Jurie (Chairman), James (CFO), and Hans (CEO) Hanekom, the brothers and management team at Swartland to find out more about future growth.
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In July 2018, the Hanekom brothers at the helm of the Swartland building materials supply business, told Enterprise Africa that a diversification strategy was helping to cement the company among the top names in the industry. Today, that strategy continues and Swartland is delighting its customers by offering an ever-increasing product range, distributed around the country with maximum efficiency. Founded in 1951 as a small DIY store in the town of Moorreesburg by Oupa Hanekom, diversification has been at the heart of the company’s growth for more than 68 years. In May, Swartland completed the
acquisition of Hydro Doors and Gates, a steel garage door manufacturer; and by the end of the year, Swartland will begin production at a new polystyrene factory in the Western Cape, marking further expansion into two new markets. CEO Hans Hanekom puts the company’s ongoing success down to its willingness to change and adapt. “It’s purely down to our diversification,” he says. “If we didn’t have additional products in additional product categories, and we just went with our traditional products, we would be in line with everyone else. We haven’t posted wild profit figures, but we have done better the building industry and the SA economy as a whole because of
the fact that we have diversified and our new products have plugged holes left by the economy. “Five years ago, if we had stuck with what we were doing and not invested in diversification, we would be telling a very different story now. We would be no different to any other player in the SA building industry.” Previously, he spoke about the business moving through a transition, becoming more of a distribution group rather than being recognised as solely a manufacturing company. This evolution continues as the ambitious Swartland continues to seek out growth opportunities. “Our strategy will most definitely
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INDUSTRY FOCUS: BUILDING
continue,” explains Chairman, Jurie Hanekom. “We have a distribution model that has to be put under pressure. When one range slows, we need to fill with other products to ensure we are busy at all times. Diversification works for us, provided it is in our current channels. Certainly, we will be making more acquisitions in the future.” CFO, James Hanekom details more about the recent growth strategies that are already looking very promising. CONSTANT DIVERSIFICATION “Swartland was a wooden window and door business and took the leap into aluminium windows and doors. That went really well and sustained the business when wooden products
declined. We then diversified into other products which were not as big as our leap into aluminium in terms of turnover and size of business, but we added different products and different substrates to our basket offering and, where we were declining with old products, the new products carried us. In terms of the South African business cycle - there has been a massive decline in the construction industry in general – even a steady performance is an improvement versus the rest,” he says. “We concluded the purchase of Hydro Doors and Gates on May 13. That is a garage door business and that is a significant jump for the turnover of the business. It is again a diversification as we have never been in garage doors and we have never worked with steel
as a substrate. We think that, if done properly, this business has massive potential. We are wanting to at least double, if not treble, that business from where we purchased it.” Since completing the acquisition in May, Swartland has examined its new subsidiary forensically and stripped out costs where necessary to ensure an efficient operation. The product range has been streamlined, raw material suppliers have been filtered, and all costs have been scrutinized to create a proficient and effective set-up. “We will be ready to officially start pushing for increased market share from September 1. The purchase of that business is a significant leap on our side, not only because it takes us into new channels but also new
// THE OTHER SUB-SAHARAN COUNTRIES ARE DEFINITELY ON OUR RADAR //
Clockwise from top left: CFO - James Hannekom / Chairman - Jurie Hannekom/ 2nd Generation leader - Oom Jurgens Hannekom / CEO - Hans Hannekom
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SWARTLAND
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substrates,” says James. Away from steel and aluminium, Swartland is also looking to expand its presence in the polystyrene market. A popular material for insulation, roofing, sound proofing, boarding, and much more, Swartland sees big potential for this versatile product. “Our next big leap is with our new EPS (Expanded Polystyrene) factory,” says Jurie. “It is used as a building material, and there is one company which has a monopoly on the market in South Africa. As of March 2020, we hope to enter that market and become an alternative to what is out there right now. The factory will open at the end of November this year and this is again an entry into new channels and expansion into a substrate we have never worked with.” The factory will open, on a new
site, in Atlantis – where Swartland already has a presence. “We purchased a company called Skyward uPVC which manufacturers PVC windows and doors but we are not yet convinced that the SA market is ready for PVC windows and doors. However, the property where that business was situated is large and we will put the EPS factory on site there,” details Jurie. Atlantis, now officially recognised as a Special Economic Zone, is an area that offers certain tax benefits for businesses - especially in the energy efficiency space. In the future, this could become a powerhouse region of the Western Cape. “We are expanding in Atlantis, we are spending a lot of money on the new plant, and we are expecting good things,” says James.
EXPORT SUCCESS A key element of the Swartland business has been its ability to showcase South African manufacturing to an international audience and build export channels into Europe and the USA. After Jurie Hanekom became involved in the family business in 1988, exports became an increasingly important part of the company’s strategy. Export revenue is a welcome addition to the company’s performance and is something that not all competitors can boast. “We have maintained our numbers in those parts of the world,” says Hans. “That has continued, and we are extremely happy with that part of the business. It is difficult as you are competing on the world stage. To make significant inroads is difficult with our current product range, but there may be opportunities to expand with new
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INDUSTRY FOCUS: BUILDING
products. We certainly have plans to expand our footprint in those areas and we are looking at whether that will be with current or new product offerings.” Previously, the company’s core product range included aluminium windows and doors, wooden products, insulation boards, showers, awnings, PVC products, and polystyrene products. While not all are currently exported, Swartland is always looking at potential for growth. “All of our product ranges have continued, and all are growing. We continue to do well, and we are happy with where we are,” says Hans. Apart from Europe and the USA, Swartland exports to markets across sub-Saharan Africa. Business in these regional markets is important, and these geographies contain quickly growing economies with growing construction
sectors. Because of this, Swartland is watching closely on their progress. “The other sub-Saharan countries are definitely on our radar,” details Jurie. “We are always trying to grow our presence
Swartland Advert.pdf 1 2019/08/22 03:10:23 PM
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in Namibia, we are actively looking for growth in Botswana, we are hungry for growth in Mozambique, we are getting nice enquiries from Kenya, and we are starting to investigate Rwanda.” Last year, following the change in political leadership in Zimbabwe, expansion had been pencilled in for that country, just across the border. But now, without material growth, Zimbabwe has become less-attractive. “At the time, there was a lot of positivity with the change in political leadership. Six months later, the situation remains the same and the currency issues are well-documented. Right now, unless there is a significant change, it’s not a market that we are interested in at all,” says Jurie. Swartland’s extensive and perfectlyhoned distribution operation helps the company to move into markets across southern Africa. While manufacturing will always remain important to the sustainability and ongoing success of Swartland, distribution is where the owners see growth coming from. “The hardest thing about South Africa, believe it or not, is the ability to distribute nationally,” says Hans. “On a map, South Africa looks like an easy place to deliver to, but there are intricacies involved in getting to all the small towns – it’s incredibly difficult. That is why we have spent a lot of money on distribution centres around
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The new EPS factory we are putting up is a manufacturing plant, but the reason we are going into that market is because we have a delivery system that can support it. In order for us to continue to grow, we will have to expand our distribution business even further.” And growth is certainly on the cards. While the management team is well-aware of the challenging economic conditions that surround both the country and the industry, by sticking to its strategy of diversification, Swartland will continue to grow. “We are not delusional,” admits James. “The South African economy is under pressure, the building industry is under pressure, and we are just doing what we think it takes to survive. We are fighting for every Rand and we believe we have a good strategy going forward. We are not swimming in our
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own pool – we are with the rest of the industry and we know that conditions are not great. We have developed a model that is different, and we ensure that we spread our risk across multiple product categories and channels – that is the key. “We are always positive,” says Hans. “We would not be investing in new factories, expansion, and new businesses if we didn’t think South Africa had a chance. Money talks – we are putting up plants and employing people, and that speaks volumes,” he concludes.
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ENTERPRISE AFRICA
SEPT EMBER 2019
