Africa
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Also in this issue: Umbro p18 Khula Fleet Solutions p26 Karibu Homes p42
Adidas on the perks and challenges of localisation, sponsorship and collaboration
Africa
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P R O D U C T I O N Scott Jameson
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Also this issue: Umbro p33
Adidas on the perks and challenges of localisation, sponsorship and collaboration
Khula Fleet Solutions p33 Karibu Homes p33
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hese are exciting times for Essential Business. As you can see, this is the first issue of our new look magazine. We’re delighted with the results, which we think are all the better for showcasing the brightest and best of the continent’s talent.
At the same time, there’s been some truly positive news for African businesses. If all goes according to plan, Africa’s free trade zone agreement will transform the continent’s commercial landscape, as well as easing some its more frustrating visa and travel requirements. We look at the potential impact of a deal that has been years in the making on page 4. Meanwhile, we’ve also got some great featured companies this month. Adidas, Umbro and Kappa will need no introduction, and as the football season prepares to get underway in South Africa, it has been fascinating to discuss localisation, branding and the huge opportunities surrounding the African sportswear market. Finally, there’s a host of interesting stories from our other case studies, ranging from Khula Fleet’s rapid expansion to Atlas Copco’s bright future in Zambia and Karibu Home’s much-needed plans for affordable housing in Kenya. Enjoy, and we’ll see you next month!
Contents Africa’s Free Trade Zone boost 4 The recent FTZ deal signed in Cairo could change the face of trade across the continent. Essential Business takes a closer look.
The Internet of Things
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Stephen Apps discusses smart grids, the Internet of Things, and what this new technology can offer South Africa.
Khula Fleet Solutions
From a standing start, Darren Pillay has established one of South Africa’s leading fleet management firms. The journey though has not been without its risks.
Atlas Copco Adidas
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Zambia’s copper mining sector looks now to be on the up after a difficult few years. As ever, Atlas Copco will be leading the way.
Our lead feature this month focuses on Adidas, one of the world’s biggest sportswear brands. Category manager Adrian De Souza tells us more.
LMB
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In the 62 years since it was founded LMB has focused heavily on innovation, and there are no signs of it slowing down.
Umbro
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With the new football season about to begin in South Africa, we spoke to director Donovan Bell to find out about the company’s focus on local flavour.
Karibu Homes
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Established in 2012 is already well on its way to make big changes to Kenya’s affordable housing sector.
Kappa
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Continuing the sportswear theme, Essential Business looks at Kappa, another European giant at the forefront of the African market.
Kalinda Trading
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We find out how Kalinda has earned its reputation as the leading manufacturer of peanut butter in South Africa.
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Africa’s free trade zone breakthrough On June 10, the leaders of 26 African nations signed an initial deal to create a free trade zone (FTZ) stretching from Cape Town to Cairo. If successful, the impact could be wide-ranging and transformative.
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s many African citizens will know, the simple act of travelling between some countries on the continent can be no easy feat. Visa applications can be tortuous, while bizarrely, some air routes between southern and West Africa require a layover in Europe.
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These are just a few of the reasons why the news of the agreement in Egypt last month is so encouraging. This hypothetical list can also include the removal of a web of tariff s and customs, the potential increase in jobs and growth and the potential to integrate a host of fastgrowing economies.
Opening up
Under the proposal, the FTZ would combine three existing trade areas — the Common Market for Eastern and Southern Africa (COMESA), the South African Development Community (SADC) and the East African Community (EAC). The pact — known as The Tripartite Free Trade Area (TFTA) — covers a vast swathe of Africa. While Nigeria, the region’s recently crowned largest economy, is conspicuous by its absence, the inclusion of
OnTopic
heavyweights such as South Africa, Egypt, Angola and Kenya ensures that overall the FTZ covers roughly 60% of the continent’s economic output, and more than 600 million people. Unsurprisingly, the potential here is huge. Speaking to the BBC recently Calestous Juma, a professor at Harvard Kennedy School, predicted that as a result, trade within Africa will now increase to 30% from 12%. “The comparison with Europe is that 70% of their trade is within Europe,” he added. This view was echoed by Sindiso Ngweny, secretary general of the Common Market for Eastern and Southern Africa (COMESA), the largest of three trade areas to join the FTZ. Commenting on the announcement, he estimated that trade could be worth around US$3 trillion per year, up from current levels of US$1.3 trillion. “By having larger markets, it signals the possibility of being able to manufacture products at a scale that is cost-effective,” adds Juma. “For example, where you need large-scale investments like US$200 million to create a pharmaceutical factory, you couldn’t do that if you were only selling the products in one country.” “As soon as banks notice that they can lend to larger investors, say in manufacturing, that will
lead to the liberalisation of the financing sector, greater access to finance and more investors coming to Africa.”
Plugging the gap
“Those countries that stand to benefit most are those that have a better supply response capacity — those able to produce tradable goods to meet available demand,” Jason Kap Kirwok, senior director and head of TradeMark East Africa-East African Community (TMEA-EAC) Partnership Programme told Essential Business.
By having larger markets, it signals the possibility of being able to manufacture products at a scale that is cost-effective At the same time, he adds, “those able to better ease business and trade by reducing policy barriers and nontariff barriers” will also benefit. Currently, such countries include Mauritius, South Africa, Egypt, and possibly Kenya. The impact of this should be very visible. As we reported last month (Africa’s private investment boom), a recent study by Deloitte has shown
that investment in African infrastructure mega projects — those that cost more than US$50 million — stood at US$326billion last year, a rise of 46% from the year before. This, however, is well short of what is required, with the Asian Development Bank (ADB) estimating that around US$8 trillion is needed over the next decade for the continent to fulfill its potential. With this in mind, it seems fair to say that Beijing will benefit heavily from the new FTZ. China has been the continent’s largest trade partner for several years now, and we expect to see a host more investments across the minerals, mining, financial, construction and manufacturing sectors. Already, there are signs that Chinese firms are stepping up their interest in either entering or expanding their operations across Africa. Yet despite all this opportunity, the Cairo agreement remains very much a starting point. Each member’s parliament now needs to approve the deal, with 2017 hoped to be the deadline. Actually enforcing the tariff cuts could take five years or more.
Doubts
Given the volume of countries involved, this may seem to be optimistic. At the same time, some commentators have warned that further challenges look to be in
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the form of requests for revisions, with an easy passage in some nations under question. Yet, says Kirwok, these fears seem unfounded. Those that fail to meet the deadline face being ejected from the FTZ. Meanwhile, “signatories to the TFTA may not revise the agreement without adhering to established procedure,” he adds.
Already, there are signs that Chinese firms are stepping up their interest in either entering or expanding their operations across Africa There are safeguard measures too, which include “remedies where importation of certain products into its territory are judged to impact negatively its domestic industry. This application has to comply with WTO rules.” This should help smaller economies in the FTZ — such as Lesotho and Djibouti — which struggle to compete with countries such as South Africa, Kenya and Egypt that have large manufacturing sectors and produce numerous exportable goods.
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Further concerns have been raised over the possibility that bureaucracy may actually increase with the FTZ, a situation that will do little to encourage overseas investors. This latter point looks to be something of an exaggeration too. As it
stands, the legislation looks to be clear and concise, and the reception from the global community overwhelmingly positive. As a statement of intent for Africa as a whole, the FTZ it is a very powerful one indeed.
Expert
T H E I N T E R N E T O F T H I N G S – the beginning of creating Smart Cities and the Smart Environment
StephenApps — Senior Manager at Smart Grid SME, Accenture South Africa — discusses smart grids, the Internet of Things, and what this new technology can offer South Africa in terms of electricity distribution and management.
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Can we start with some background of your work in Smart Grids?
I started my career as a Telecommunications Technician, obtaining great experience of the challenges associated with installing and maintaining telecommunications networks. From this I graduated as an engineer and worked extensively in the UK on narrow band digital radio communications systems, command and control systems and end applications in real time for the military and emergency services. When I moved to South Africa, I found that this experience could be transferred into the utilities industry with a need for real-time
The security threats exposed by the IOT are significant. If this is not considered and addressed at initial specification, then the risks outweigh the benefits. Smart Grid solutions. I spent several years on ground breaking research projects determining the best approaches for a centrally controlled cost effective real time solution could be developed to manage demand and distributed generation but met the unique and challenging requirements for South Africa.
How can the Internet of Things help address electricity supply challenges?
There is a need to have tighter control, management and visibility of the Transmission and Distribution networks.
The environment is complex and varied, with disparate solutions. A shift to a more open machine-to-machine approach (standards) reduces many of the existing restraints. All field devices become a node in the overall network and can be accessed and control as situations dictate. It allows for a modular approach so for example, demand response devices can be rolled out ahead of smart metering. It allows for future proofing and the ability to flexibly add different nodes on to the network with minimal up front work and cheaper cost. It becomes the basis for the Smart City and Smart Environment, but moves away from complex proprietary solutions that are developed for a single purpose. Thus in the short term, a selection of alternate end devices can be taken depending on the difference environments and be integrated into the same infrastructure providing a holistic view of network status and performance.
Can you share examples of the successful implementation of this?
The Internet of Things is still in its early days as far as the electricity grid goes. Messaging and data integration shall be a hurdle, with much of the chosen protocols requiring a review.
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ExpertInterview
However, in 2008 in conjunction with Eskom, a 20,000 device trial was rolled out in Johannesburg to test these theories. This research was very successful and clearly demonstrated the increased performance and response that could be achieved taking this approach. Real time load limiting 2.5 min view at national control of all residences Extendable to any end node Fast rollout Almost 100% reliable comms Extensive customer information and tools Extremely secure Extensive GIS information and thus real time fault identiďŹ cation This project never moved out of research and thus the need for more commercialized solutions based on the lessons learnt from this initiative.
The Internet of Things has great potential to change the way we live — how big a threat could breakdown in security be in implementing this? The security threats exposed by the IOT are significant. If this is not considered and addressed at initial specification, then the risks outweigh the benefits.
Having worked much of my career on UK restricted and secret networks, I have a good understanding of the challenges and threats. There for any solution I would work on would need to meet the rigorous standards I expect whilst still maintaining ease of use. Nistir7628 and Fips200 are excellent documents to guide in the securing of the solutions, but these measures need to be included at the beginning rather than an overlay applied to the solution on completion. Many threats are physical or personnel related. As tight as the technology is and the measures put in place, the solutions can only ever be as safe as the employee-created environment. Thus physical security from shall need to be addressed and ensured. (For example, the sharing of passwords to unauthorized personnel).
The Internet of Things is still in its early days as far as the electricity grid goes. Messaging and data integration shall be a hurdle, with much of the chosen protocols requiring a review
What is your vision for the Internet of Things in the energy sphere?
The Internet of Things is the beginning of creating Smart Cities and the Smart Environment. The ability to access vast quantities of data and tie it together to get truly meaningful information. For example, knowledge of local residential PV generation coupled with small localized weather stations can provide an almost real time understanding to the system operator to the potential dramatic changes in demand that would be cause by cloud cover, allowing for proactive methods for balancing the grid.
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News F
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O D & BEVERAGES
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arlier this month, Unilever South Africa opened a R511 million expansion at its Indonsa factory in Durban. The site is now the group’s largest savoury factory — producing key brands such as Knorr, Robertsons and Aromat — with the upgrade increasing manufacturing capacity to 100,000t.
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his week kicked off with the news that work on a US$60 million hydroelectric power station in Burundi is about to begin. Located in Cibitote, the Kagu 006 plant will have an installed capacity of 12MW when complete.
Zambia has also announced that it will to cut royalties for underground mines below the recently revised 9% next week, putting an end to a nearly ninemonth standoff that has hit output and profits in Africa’s second largest copper producer. Over in Nigeria, president Muhammadu Buhari has E N E R G Y hit out at local governors Meanwhile, Djibouti’s & After they requested M I N I N G first wind farm is soon to assistance from the federal be established, and will government due to debts generate 60MW of wind of around US$3.3 billion. This power once complete. has raised fears that cash from the “The project has come country’s Excess Crude Account, at an appropriate time to the equivalent to a sovereign support Djibouti’s development wealth fund, will be needed for a ambitions and is also in line bail out. with the national strategy of “There are financial and achieving energy independence administrative instructions in while guaranteeing clean, every government parastatal cheap and accessible energy and agency. But all these were across country,” said Minister thrown to the dogs,” Buhari said. Ali Yacoub.
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Elsewhere, Nestlé is being criticised for neglecting to update the packaging of its Tex bars to reflect a change in product composition. A recent ruling by the Advertising Standards Authority (ASA) has deemed the wrappers misleading. After initially denying these claims, Nestlé admitted that the composition of Tex bars had indeed changed, and was “in line with [its] health and wellness strategy”.
News L
ast week, International Green Structures (IGS) and Countrywide Housing Company (CHC Ltd) broke ground for their new affordable housing project in Nigeria. The project — a 504 IGStructures community in Kano — is supported by HH Emir Muhammadu Sanusi II and is set to provide sustainable, green housing in the form of three-bedroom homes. CONSTRUCTION
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ubmissions are now open for SAPRO’s Best Recycled Plastic Product Of The Year Competition in South Africa. The competition celebrates products that are made from recycled material, and encourages brands to think of recycled plastic as a serious manufacturing material.
Meanwhile, in Cameroon, US engineering services firm Louis Berger has secured a five-year contract for construction works on a section of the Yaoundé-Douala highway. “The new 236 kilometres highway will lead to reduced travel time and will hopefully have a positive impact on the international transportation, because Cameroon is a key transit country for the landlocked countries of Central Africa,” said Jean-Pierre Dupacq, head of Africa operations at Louis Berger.
Manufacturers in Lagos have denounced the current manufacturing trend of labelling Nigerian products as “made in China” or “made MANUFACTURING in Asia” or occasionally “made in US”. Clothing, packaged food and footwear have allegedly been labelled this way in order to sidestep the local market’s perception that products manufactured in Nigeria are of sub-standard quality. “We hear of such things as shoes and bags made here in Aba, Nigeria being labelled as made-in-US just to attract the attention of Nigerian buyers,” said Frank Jacobs, President of the Manufacturers Association of Nigeria. “The consumers also share a part of the blame as they carry a poor perception about madein-Nigeria goods, and simply ignore them.”
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Adidas
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Sportswear
Winning t h e r a c e For over fifty years, German sportswear giant Adidas has been growing its presence in finds out South Africa. more localisation, sponsorship, and the relationship between the company and its head office in Germany.
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As one of the world’s leading brands, things rarely stand still at Adidas according to Category manager..., the company’s South African division is no exception. “I’ve been here for nineteen years so obviously there’s been a lot of change in that time. Sales have grown astronomically and the staff force is probably four times as big,” he continues. “We now have more offices to accommodate all the staff, so things have defi nitely moved with the times.” Globally, Adidas is the secondbiggest sportswear brand in the world, closely behind the multinational American corporation Nike. Since De Souza has worked for Adidas, the two firms have vied for the top position in South Africa, with the title being passed back and forth. “There’s a constant battle between Adidas and Nike. It’s a
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good challenge and it obviously keeps us on our toes, from a company point of view. It keeps us innovative. It keeps us looking after ourselves.” This focus, however, extends beyond the country’s borders. “We’re not solely South Africa. We have a few other countries we look after,” De Souza continues. “The key ones in Africa are Ghana and Nigeria, and we are also in Zimbabwe, Namibia, and surrounding
GENU
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countries. Other divisions, including Dubai and France, handle other countries in Africa.” Adidas SA falls under the Emerging Markets & Territories category, meaning that while the majority of branding and target discussions happen with head office in Germany, there is also frequent communication with the regional head office in Dubai. “But generally everything we do comes from Germany. Globally, there are brand campaigns that develop ads, and these trickle down into our area and support us,” De Souza says. “We do localise a few things, a few sporting codes that Germany isn’t involved in, but a lot of what we do comes from a global point of view that we then implement and localise.”
There’s a constant battle between Adidas and Nike. It’s a good challenge and it obviously keeps us on our toes, from a company point of view. It keeps us innovative
An example of this is the Orlando Pirates, one of South Africa’s oldest and most successful teams. “With the Orlando Pirates, there will be a global campaign that is passed onto us from Germany, and we localise that so the Orlando Pirates’ artwork looks like the global artwork. So we work in tandem with head office to
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Sportswear
keep things consistent across all territories,” says De Souza. In addition to an on-going contract with the Pirates, Adidas is also associated with Ajax Cape Town. While football is not the brand’s only focus, it is one of their priorities, alongside running and training. Ambassadors and sponsorship are heavily emphasised in these areas, too. “With running, we sponsor the Two Oceans Marathon, and we have contracts with various individuals. With training, we’ve got a relationship with Virgin Active. They’re our main training partner.”
I’ve been here for nineteen years so obviously there’s been a lot of change in that time. Sales have grown astronomically and the staff force is probably four times as big.
Virgin Active’s relationship with Adidas began back in 2008, when the sports brand began supplying apparel and footwear to staff at Virgin Active health clubs across South Africa. “When you have these assets who wear the product, the exposure helps boost the sales. Having the key individual under contract is obviously key from a business point of view,” he says. On a global level, Adidas is in collaboration with singer Pharrel Williams and footballer Lionel Messi. While none of this impacts Adidas SA directly, De Souza tells us he does notice an accumulated effect, particularly where product collaborations are concerned — such as the Messi15 football boots that were worn in Barcelona’s recent
victory in the Champions League final. These are set for global release later this year, Meanwhile, with the South African Premier Division starting in August, Adidas SA is keeping busy preparing for pre-season with new product lines and contracts. “For the rest of the year we’ll be focusing on our key assets, the Orlando Pirates,” De Souza explains. “Then there are also
running contract activations and some other football activations. We’ve got a full enterprise and jersey launch in July.” Later this year, Adidas will also be launching the new Revolution footwear range and the Saga line of football clothing. “We have various projects on the go across two or three across the sporting categories, so it’s all quite exciting,” he adds.
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Umbro
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. . .
Sportswear
With the new football season about to begin in South Africa, sports manufacturer Umbro is entering its busiest time of the year. We spoke to director Donovan Bell to find out how the company focus on local flavour is paying off.
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ince its beginnings in Manchester back in 1924, Umbro has been steadily building its name as a leading manufacturer of sporting goods. This reputation has spread around the globe, including to South Africa, where the brand has been maintaining an active presence for the past two decades. “The Umbro model is a licensed model,” explains Bell. The license to distribute in South Africa as been active for 25 years. Umbro is 91 years old, so for a third of that time, Umbro have been active here. Under the current license holder, we have been operational for the past 7 years.” Bell joined Umbro in 2011 after a sixteen-year career in the financial services industry. Since then, he has seen the company evolve and adapt, taking on new sponsorship deals and establishing its position at the core of the South African football scene. In 2013, Nike sold Umbro to Iconix Brand Group for $225 million (R2.7 billion rand), which according to Bell, afforded the regional branches a little more freedom to add local flavour to their products and image. “On a local level we’ve grown a lot in terms of staff number, as the business has grown itself,” he tells us. “The key to Umbro’s longevity is the fact that we’re allowed to tailor the brand locally, but still stay in line and adhere to the corporate image and branding guidelines.” Umbro’s preferred strategy for breaking into local markets is to partner with a prominent club from the area, and use that link to gain exposure and increase brand awareness within the fan base and local community. “We target quite aggressively to sign local teams to wear the brand,” he explains. “For example, locally we have Maritzburg United and AmaTuks — and it’s those sorts of popular teams that speak to the local market. We make sure we do that in every country we are represented in. So in Botswana, in Zimbabwe,
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in Zambia, teams are wearing Umbro products manufactured specifically for them.” While the products may be manufactured for the local market, they are not entirely different to those used by the European teams. “The Premier League for example is a higher profile, so it’s aspirational,” says Bell. “Most of the teams in Africa see what they’re wearing in Europe, and want to look like them.” With football season about to start in South Africa, Umbro has recently announced their latest signings. In addition to European clubs like PSV Eindhoven and West Ham United, several African clubs have signed sponsorship deals with Umbro.
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We’ve also got our brand ambassadors, which is a big focus for us. A brand ambassador is always a footballer, and is always wearing our boots. We’ve got some of the best players in the country, like Sifiso Myeni at Orlando Pirates and Cuthbert Malajila at Mamelodi Sundowns, wearing our products
“We’ve recently welcomed Free State Stars Football Club, back into the fold. They’ve been away from us for two or three seasons, but they’ve come back,” he says. “We’ve also re-signed a team called Township Rollers in Botswana. That’s the biggest team in Botswana. They’ve got a huge following.” With a population of only 2.5 million people to South Africa’s 50 million, the market in Botswana may not be large, but, Bell says, “having the largest profile team there still means a lot to our brand.” In Africa, Umbro works strictly within the football industry, but as not all countries have their seasons at the same time, the company is busy all year round. The brand has licensing for all
Sportswear
We target quite aggressively to sign local teams to wear the brand. We make sure we do that in every country we are represented in of Southern Africa and some of the West and East African countries, all of which come under Umbro South Africa. “In South Africa we run August to May like our European counterparts, but for example in Zambia, their season starts in about February and finishes in October,” he says. “We’re a football-focused business. When other brands go off to cricket, rugby and basketball, we stay focused on football.”
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boots. We’ve got some of the best players in the country, like Sifiso Myeni at Orlando Pirates and Cuthbert Malajila at Mamelodi Sundowns, wearing our products.” “If the young folks see that those footballers are wearing our products, it becomes aspirational and drives a request at retail, which is a rapidly growing market for us at Umbro.” “So it’s quite crazy at the moment, getting ready for the new season. On top of that, we’re also looking to expand further into Africa and partner with even more teams. That way we can drive the demand for our products and our brand at retail.”
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With South Africa’s pre-season starting in the next couple of weeks, Umbro is under a lot of pressure to deliver their sponsor teams’ new clothing in time. “The club administrators are eager to get their products. They like to prepare early so the products are there when the teams arrive,” explains Bell. “We’ve also got our brand ambassadors, which is a big focus for us. A brand ambassador is always a footballer, and is always wearing our
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Kappa
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Sportswear
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ince arriving in South Africa, Kappa has continued to grow its reputation as a dependable sportswear brand with a particular interest in the country’s football scene. Kappa SA is a major name in sports sponsorship, and supplies kits for some of South Africa’s leading clubs such as Bloemfontein Celtic, SuperSport United FC, Bitvest Wits and AmaZulu FC.
Sponsorship
Sometime in the next month, Kappa is expected to unveil its partnerships for the coming season. Over the past few years, perhaps the company’s most recognisable ties have been with Pretoria’s SuperSport. “When we partnered with SuperSport United we saw Founded in Italy in 1967, a chance to sportswear brand Kappa is reach grassroot now involved in a multitude of football and to get our sports disciplines across the globe, brand closer including football, rally, sailing to a younger takes a and fencing. community and not just closer look at the South African to see Kappa arm of the company being worn on and its involvement in the the TV by the professionals,” sporting industry. Kappa SA’s brand director Ricky Joseph said in an interview with ForwardZone, a specialist football consultancy.
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“We wanted to see youngsters getting involved with our brand and enjoying it. We also wanted to give back to the community and to help SuperSport find great talent and help the country progress.” SuperSport’s youth academy is widely considered to be one of the best in the country, making the club a great fit considering Kappa’s on-going investment in the youth development sector of South African football.
This investment in aspiring footballers is further evidenced by the new Junior Kappa Academy, which provides under-elevens with the opportunity to train on weekends with retired South African goalkeeper Andre Arendse. Launched in March this year, the Kappa Academy is currently limited to Johannesburg, with plans to expand into other regions in 2016.
Innovation
Kappa SA also sponsors events at the Kappa Park, a state-ofthe-art sports facility in Kyalami. Owned by Africa United, Kappa Park Kyalami is home to the five-a-side Football Fives club, and provides opportunities for local
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teams to compete in corporate and social leagues. Kappa Park took only two months to build, and was completed just last month, in time for the Football United tournament in which 16 local teams are registered to participate. The winning team will walk away with R5000, with the second-place team taking home a range of Kappa sportswear.
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“The idea is to give residents an opportunity to be involved in sports by improving sports facilities,” said Wayne Cilliers of Africa United, speaking to Midrand Reporter.
The launch party was wellattended by a host of footballers and celebrities, including players from BV Wits, Bloemfontein, AmaZulu, and SuperSport United.
Reputation
These included veteran BV Wits goalkeeper Moeneeb Josephs, who praised the project in an interview with KickOff.com.
In October last year, Kappa launched the first soccer concept store in South Africa. Located at Woodmead Valuemart, the Kappa Concept Store is a revolutionary, experienced-focused retail environment designed to create an engaging shopping experience for South African football enthusiasts. The store features a “history wall” showcasing football kits of the past, and a large indoor soccer field which is used to host — among other things — the Junior Kappa Academy events.
“The nice thing is that supporters can now come and get our kits, they’re quality kits, and you can see the brand and class in the products,” he added. “Kappa has always been a classy brand. If you look at the teams that have worn it over the years – quality designs, and quality brands around the world.
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Khula
w w w . k h u l a f l e e t . c o . z a
I
n 2012, Darren Pillay left a secure and lucrative job at Bidvest Bank to start his own fleet management firm. Having worked in various capacities at Viamax Fleet Solutions (most notably at an in-house fleet services provider to Transnet), McCarthy Fleet Solutions and then Bidvest Bank — Pillay got to experience the organisation from several different perspectives, and gain an intimate understanding of the company’s workings that would later prove invaluable. “All in all I worked in the fleet industry for sixteen years. By virtue of that, I built up very strong relationships, and more importantly, got to understand the world of Transnet,” he says.
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f o r wa r d After just three years in business, South African fleet management firm Khula Fleet Solutions is already proving its worth against more established competitors. spoke to managing director and founder, Darren Pillay, to find out how his initial gamble is paying off.
Automotive
From humble beginnings as a fleet clerk, Pillay climbed his way up the ranks in a relatively short space of time, and when the business was sold to Bidvest in 2007, he worked for a while as sales and marketing director before taking on the role of operations director. “When Transnet decided in 2012 they were going to market for the fleet tender, I saw an opportunity, but there was no guarantee of any business or any degree of success. I backed and believed in myself and stood by my convictions,” he adds.
When Transnet decided in 2012 they were going to market for the fleet tender, I saw an opportunity, but there was no guarantee of any business or any degree of success. I backed and believed in myself and stood by my convictions
“I had a very good career ahead of me that was very progressive and financially lucrative, so in that regard, there was no animosity or anything to say that I needed to change my environment. And I put all of that at risk, including my family. I put my entire life on the line.” Pillay took the decision to resign, and while he was held to his notice period, was given no restriction on trade. “I literally finished the Friday and started Khula Fleet Solutions on
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the Monday. Fortunately I have a very loving and supportive wife who stood by me, and that certainly made the weight on my shoulders lighter.” Khula Fleet Solutions ran for around six months before Pillay could afford to employ people. He used this time to build a solid foundation for the business, ensuring that all contracts, procedures and policies were in place before tapping a network of industry contacts and clients for business. “We spent time getting the governance and framework of the organisation sorted, so that if we were to be successful in our tender, we would at least not be starting that process at the last minute,” explains Pillay. “And then Transnet called us in and said ‘Okay, we want to engage with you now, can you do this deal?’ and that was really the springboard of Khula Fleet Solutions. It literally took us from 0 to 100kmh overnight.”
For a completely unknown entity to be awarded the Transnet tender is no small feat. “Everyone was wondering who we were and where we’d come from. It was a springboard for the business and a steppingstone towards the ultimate goal. And the ultimate goal for us is
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Everyone was wondering who we were and where we’d come from. It was a springboard for the business and a steppingstone towards the ultimate goal
NP200
NP300
NP300
Patrol Pickup
NAVARA
NV350
NV200
NISSAN
Innovation that excites Shift your business forward FOR MORE THAN SEVEN DECADES,
Nissan has provided an impressive range of light commercial vehicles (LCVs) for the South African market. Each vehicle exhibits Nissan’s legendary toughness and reliability, and upholds the brand philosophy to supply safe, innovative and reliable vehicles for commercial customers. This commitment makes Nissan commercial vehicles a great business partner and a sound investment for companies large and small. Today, Nissan offers the most comprehensive LCV range available. South Africa’s favourite half-ton bakkie Launched in 1971, when it was known as the Datsun 1200 pickup, the Nissan NP200 has become a legend. The Nissan NP200 addresses the needs of business users and private motorists looking for a practical vehicle with the niceties a passenger vehicle offers. National sales figures in 2014 show that it has the number one market share of the half-ton pickup market. A versatile workhorse The Nissan NP300 Hardbody, a proudly South African product, is testament to the strength and might of the Nissan badge and
its motto: ‘Proud Heritage. Proven Capability’. The vehicle is for consumers who require a tailored bakkie that can be customised and adapted to suit their exact needs. Always up to the challenge The Nissan Navara is a tough capable bakkie that has the looks and all the comfort and safety features you would expect from a top-of-the-range SUV. It has a large quick release handle on the tailgate and features Nissan’s unique utili-track cargo system that has five channels (three in the bed and two on the sides which accepts a variety of accessories, including racks, dividers and trays) allowing loads of various shapes or sizes to be loaded and transported securely. • Available in a 2.5 dCi King cab and Double cab in both 4x4 and 4x2 models, and the powerful 3.0 V9X dCi 4x4. Rugged pickup that’s a cut above The Nissan Patrol Pickup is tough, powerful, and heavy-duty. It offers the same bold and attractive cab styling of the Patrol SUV, and is loved by farmers and fleet owners who have found it to be a durable and reliable no-nonsense load-carrier and tow vehicle with excellent off-road capability.
• Available in 3,0 litre diesel engine. Spacious and smart Compact, economical and stylish, and developed around function and driver, the Nissan NV200 panel van means business. Its appearance belies the extraordinary space of the cargo area, the largest in its category, and it can accommodate two standard pallets with ease. • Available in 1,5 dCi and 1,6 petrol engines. Compact and easy to move The Nissan NV200 Combi is compact and easy to manoeuvre out of tight spots. Stylish and comfortable, its interior is spacious and can seat up to seven people. Its low cost of ownership and impressively economical engines make it suitable for business and pleasure. • Available in 1,5 dCi and 1,6 petrol engines. Generously spaced and fuel efficient With an exceptionally generous cargo area, the Nissan NV350 panel van is built to carry your business to the next level. It has a wide body, high roof that can carry cargo up to 3,25m long, with an interior width of 1,73m
and a height of 1,64m. The NV350 offers class leading fuel efficiency. • Available in 2,5 petrol and 2.5 dCi engines.
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to have a long-term relationship with Transnet,” says Pillay. This goal was achieved just last year, when Khula Fleet Solutions secured a five-year contract to serve as Transnet in two regions, supplying around 3000 units over that period. “It’s given us longevity and sustainability. We started capacitating the business to the extent that we were able to attract people because we’ve got a contract, business is growing, and if people are driving they
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of Khula Fleet staff were previously unemployed, and 63% are young people can of course create a career in the business by developing themselves. And that’s’ something that is very important to me — creating opportunities, and hiring people who were previously disadvantaged.” 59% of Khula Fleet staff were previously unemployed, and 63% are young people, 92% of staff are people of HDI background.
“I think it’s important to bring an element of young black talent into the industry. And at least 61% of the staff are female, of which 86% are black. It was one of my personal goals and objectives to achieve that,” he tells us. Differentiating themselves from the rest of the market is another business goal for Khula Fleet Solutions. This innovative thinking and use of technology is what helped land Khula a 400 million Rand funding facility just this month.
Automotive
“For a company that’s been around for three years, and is a standalone business, it’s certainly something that’s a milestone and not just in the fleet industry. We’re going to buy vehicles with that money. We’ll lease them out and make a return on that — it’s what we do best.”
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On a final note, Pillay stresses that it would be “remiss of me to mention the hard work and efforts of each individual” that has contributed to the company’s success since its inception. Instead, he says that “the journey to success has been a collaborated effort by all”.
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AtlasCopco w w w . a t l a s c o p c o . s e
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Mining
Established in Sweden in 1873, Atlas Copco is a world-leading provider of industrial and mining equipment. spoke to Daniel Banister, Regional General Manager of the Zambian branch, about the company and its leading position in the copper mining sector.
A
s the second largest copper industry in Africa, Zambia produced 730,000 tonnes in 2014. While this was a fall of 30,000 tonnes from the previous year, largely due to prices driven down by a slowing Chinese economy, this still represents a vital part of the country’s exports. Combined with cobalt mining, Zambia’s copper production fuels around half of Zambia’s economy, yet contributes only 30% of the government’s tax revenue. In an attempt to combat economic downturn and close up the budget deficit, Zambia’s government scrapped corporate taxes in October but demanded instead a large increase in royalties — 20% of revenue for open-pit mines, and 8% for underground mines. As is to be expected, this caused a lot of friction between Zambia’s Chamber of Mines and the key players in the copper mining industry. However, this week, the government is preparing to roll back these changes in a hope to prevent further losses to both profits and production. Having been present in the country since 1949, Atlas Copco Zambia has seen the climate change quite substantially over the years.
“We have gone through many challenges, not only in Zambia, but globally, and we have learned from those experiences. Being flexible and having the ability to adapt quickly when these business cycles arrive is why we are still here,” says Banister. “Focusing on what our customers require and providing an innovative solution is critical.” It’s not just the mines that have been affected by the tax hikes. Companies like Atlas Copco that supply the industry with products and services have also been affected.
“The future looks bright, we have the products and organisation in place to make a difference to our customers total cost of ownership, which is beneficial to operators across the industry “CAPEX from the mines has dropped significantly since 2013 which has an impact on all of us. Having said this, we are a flexible organisation and quick to adapt to the current business climate,” Banister tells us. “We continue to invest in areas that we see beneficial for the group and which add value
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to our customers. It has also presented us with an opportunity to look internally at our own processes and address what is needed to be more efficient.” Now that the mining industry has reached an agreement with Zambia’s government over the taxing situation, things are looking up. The new compromise — which will see corporate income tax reinstated and royalties slashed — will come into effect from 1st July, after a nine-month standoff. But with the government still owing almost $800 million in value-added tax refunds, the relationship between Zambia’s mining industry and its government is far from perfect.
“Being flexible and having the ability to adapt quickly when these business cycles arrive is why we are still here
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Daniel Banister, Regional General Manager, the Zambian branch of Atlas Copco
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“In essence the government has agreed that the timing of a new tax structure is not good, based on the current global copper price, and they have agreed to revert back to a two tier tax system,” explains Banister. It’s possible that, after the dust has settled, these tax changes will help forward Zambia’s drive for economic development.
I do believe that with the right policy and stability in the policy-making Zambia is an attractive country for foreign direct investment (FDI). Diversity will also be crucial in Zambia’s economic development”
“I do believe that with the right policy and stability in the policy-making Zambia is an attractive country for foreign direct investment (FDI). Diversity will also be crucial in Zambia’s economic development,” he says.
discuss new ideas for the future with our clients,” he tells us.
“The future looks bright, we have the products and organisation in place to make a difference to our customers total cost of ownership which is beneficial to operators across the industry.”
“Our focus remains fixed on providing our customers with a lasting solution for their
Meanwhile, Atlas Copco Zambia recently exhibited in this year’s CBM-TEC — the Copperbelt Mining trade expo and conference — where they showcased new product development with existing and potential customers. “We have and will continue to exhibit at CBM-TEC as I firmly believe that we have an opportunity to network and
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This customer-centric approach to business appears to be integral to Atlas Copco’s success, and is something of an ongoing priority for the firm.
Mining
sustainable productivity,” says Banister. “We will continue to focus on competence development when required to ensure we have a strong technical team. It is incredible how quick the first half of the year has passed us by, as an organisation, we are excited for what the second half will bring and fully prepared.”
email: production@essentialbusinessmag.com
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LMB
w w w . m b t a u t o m o t i v e . c o . z a
Getting
into gear L
MB Euroseals specialises in the manufacturing of brake and clutch components. Since its relocation to South Africa two decades ago, the brand has developed a strong reputation in the automotive aftermarket and is now beginning to expand overseas. “I’ve been working for the company for 5 years. In that time, things have progressed massively,” says Doug Marinkovic, LMB’s chief operating officer. “We’re now selling to international markets. We’ve secured these contracts by selling the best products at the best price.”
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In 1995, family-run automotive parts manufacturer LMB Euroseals relocated from Europe to South Africa. In the 62 years since it was founded, the company has displayed an impressive talent for innovation, and has continued to evolve to meet the demands of its market.
Automotive
The company was recently an exhibitor at Automechanika Johannesburg 2015, a leading international trade fair for the automotive industry. Other exhibitors included Aveng Trident Steel, Bosch, and DB Schenker. “The show was quite successful,” adds Marinkovic. “The majority of visitors were from the retail sector, shops etc., which was very good. We got to introduce new customers to the brand, and demonstrate new products, new developments and so forth to all our old customers as well.”
We’re now selling to international markets. We’ve secured these contracts by selling the best products at the best price LMB’s eagerness to build strong relationships — not just with its client base, but with its stockists and suppliers — is just one factor in the firm’s success. While most of the company’s materials are procured locally in South Africa, some are imported from international companies. “As long as the material meets specification, it’s fine,” says Marinkovic. “In addition to looking for the seal applications, we have production purposes for different materials. For example, we need some materials for high
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temperature applications, some for low temperature applications, others for economy applications, and so forth.” While the quality testing process is both thorough and stringent, it’s also relatively simple, and allows LMB Euroseals to guarantee the high quality, reliable products that its customer base has come to expect. “We have our own laboratory to make sure all our products are up to standard. We test when the product is being designed, we test samples from every batch, and additionally we test things like seals individually after production as well. Each one of them is actually hand-checked here by our employees,” he explains.
We are always looking to expand, and we are always looking for new distributors
“Pretty much every single piece is hand-checked to make sure there are no defects. The moulding processes are quite advanced, and we have some of the most advanced machinery
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on the market. We are constantly developing new moulds, new techniques, and pretty much every item that comes out of that is first tested before it’s deemed safe for use.” While the quality standards for international markets are moreor-less the same as those for the local market, the manufacturing specifications can change quite significantly. According to Marinkovic, it “takes a lot of research — a lot of buying and testing on research vehicles, and so on.”
Automotive
This willingness to try and test new products and methods is central to LMB Euroseals’ ongoing success. “It’s mostly a case of research and keeping up with what’s being developed currently,” Marinkovic tells us. “So let’s say we find an application that does not meet its specification. What we’ll do is try to strengthen and simplify it so we can make it perform better. Essentially, that’s our research programme.”
While LMB does currently have a product undergoing such a development process, the details are classified. Something Marinkovic can tell us about, however, is the single mass flywheel replacement kit that the brand recently launched for Nissan Navara. “The kit is made to replace the original dual mass application in vehicles, and so far it’s proven very good. The market is proving very receptive to that,” he tells us. “Next, we’re thinking of expanding further into Europe, because
we are quite confident we can compete there.” Considering the international success LMB is enjoying already, this seems like the logical next step. “We have some customers in Europe already, but we are always looking for more. We were at Frankfurt last year, so we got quite a lot of feedback over there,” he says. “We are always looking to expand, and we are always looking for new distributors and proven companies that like to deal in high quality products.”
CLUTCH & BRAKE FITMENT HYDRAULICS | CLUTCH & BRAKE | ENGINEERING | WORKSHOP
email: production@essentialbusinessmag.com
Visit us online at www.cluth-and-brake.co.za Tel: 011 792 1458/9 | Cell: 078 829 5994 Fax: 011 791 0331 | Email: david@cbf.co.za
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KaribuHomes w w w . k a r i b u h o m e s . c o m
Building FUTURES As a Kenyan developer dedicated to providing affordable housing in Nairobi, Karibu Homes is currently constructing Phase 1 of its pilot project, Riverview, on the banks of the Athi spoke to co-founder and River. developer Nick Johnson to find out more about the company’s position in the property development industry.
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Property
E
stablished in 2012, Karibu Homes — with “karibu” meaning “welcome” in Swahili — is already well on its way to make big changes to Kenya’s affordable housing sector. With lower margins than the lucrative high-end developments, affordable family homes have been widely neglected by the majority of commercial developers in the region, yet demand is only increasing. With 50% of the country’s population aged 18 or under, an everincreasing number of young adults are reaching working age and flocking to urban areas in search of employment. “Demand for property is stratospherically high, because traditionally less than 10% of the urban population could afford to buy the housing stock that was in the market. Kenya has seen very rapid rises in land values and consequently in home prices, and all that’s done is brought home ownership further and further out of the reach of ordinary families. The gap between supply and demand is estimated about 150,000 units a year for the foreseeable future,” explains Johnson. “Most developers make better margins on higher end properties than they would on more affordable homes, so that’s where the activity’s
been focused. All the demand is further down the income spectrum — and that’s where Karibu Homes is.” In 2008, Nick Johnson and Irfan Keshavjee met on a residential advanced management programme at their alma mater, Oxford University. Here, at the world’s leading centre on social enterprise, they were encouraged to think about creating meaningful businesses with real social impact. As part of that, Johnson explains, he began talking with Keshavjee about the situation in Kenya.
The gap between supply and demand is estimated about 200,000 units a year for the foreseeable future “Kenya had just experienced significant upheaval with the post-election crisis. There were thousands of people who’d been killed, and on his analysis, Irfan felt there were underlying causes that were to do with desperation and that they had nothing to lose,” says Johnson. “He believed that home ownership could help address some of those issues, in that if you’ve got a roof that you own over your head, you’re no longer
so desperate, and you do have something to lose.” Karibu Homes’ efforts are currently focused in Nairobi, where a large portion of the population lives in single story slums. Kibera, the largest of these slums, has a greater population density than Manhattan. After spending some time here to understand the situation and how it worked, they approached a range of experts in the field about devising a solution to the problem. “If we could provide housing that was accessible to people who were living in slums, or on the periphery of slums, that couldn’t extract themselves from them because there was no affordable
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product on the market, then we thought that would be an interesting opportunity because there was a massive demand for it. So that’s where we started,” says Johnson. “There’s no point providing houses for people who can’t actually afford them, and there’s no value in providing free housing. People who it’s given to don’t value it, and what they tend to do is make a sensible economic decision, which is to stay put and just rent out the property. And that doesn’t resolve anything.” The first phase of the Riverview development is to be completed in March next year, bringing 281 new units onto the market. When complete, Riverview will be a
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1,000 mixed-use estate just 1km from Mombasa Road, and will feature a range of amenities, including a health clinic, nursery school, and community centre.
The purpose of the project is to establish that our business model works, and assuming we can do that, then we’ll be looking to scale up to be doing tens of thousands of homes
“The purpose of the project is to establish that our business model works, and assuming we can do that, then we’ll be looking to scale up to be doing tens of thousands of homes,” says Johnson. “Shelter Africa are our debt providing partners on this project. They’re a pan-African bank that specialises in real estate development. In particular, they have a mission to deliver affordable housing, so it’s a very good partnership. They’re providing financing, but that’s always much more involved than people might otherwise think.”
Property
HOUSING DEVELOPMENTS
DEVELOPMENTS
HOTEL & LEISURE DEVELOPMENTS
MEDICAL AND HEALTH DEVELOPMENTS
While the current focus for Karibu Homes is Nairobi, this is likely to change if the Riverview development is a success. “We say we’ll focus on East Africa, but the practical reality of it is that our focus at the moment is Nairobi. Nairobi is the dominant city in East Africa, and it’s where the greatest demand lies, so that’s where we are right now,” Johnson explains. “But over time, we’d like that to expand.” Prices at Riverview start at KES 1.6m (under USD 15k) for a one bedroomed home to KES 3.7m (under USD 34k) for a 3 bedroomed home. Further details can be found at www.karibuhomes.com.
EDUCATIONAL DEVELOPMENTS HOUSING DEVELOPMENTS OFFICE FIT-OUTS HOTEL & LEISURE DEVELOPMENTS
COMMERCIAL AND INDUSTRIAL SOCIAL AND CULTURAL DEVELOPMENTS MEDICAL AND HEALTH DEVELOPMENTS
Tandem and Stark Ltd is an independent Kenyan firm providing quality Cost Engineering and Cost Consultancy Services within the construction industry. Over the period of its establishment, we have been able to provide our services to clients across East and Central Africa in the commercial and industrial sector, financial institutions, domestic housing as well as in the hospitality and leisure industry. Our wealth of our experience covers a wide variety of projects ranging from building and engineering support, fitting out & maintenance works.
Contact www.tandemandstark.com
T: +254 (0) 20 2318992 / 2055945 F: +254 (0) 20 2055945 E: info@tandemandstark.net
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Kalinda Trading w w w . k a l i n d a t r a d i n g . c o . z a
Since its beginnings in 2002, Kalinda Trading has been earning a reputation as the leading manufacturer of peanut butter in South Africa. spoke to CEO Wouter Roux to find out more about the company and its position in the industry.
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Food&Drink
S
outh Africa produces between 80,000 and 250,000 tons of groundnuts each year, with the majority of production taking place in Northern Cape, North West and Free State Provinces. These peanuts — primarily of a Spanish variety known as Natal Common — can be recognised by their uniform round shape and white skin, qualities that make them a popular choice for use in spreads and butters as well as in the coating industry. Each year, 4000 tons of groundnuts make their way to Kalinda Trading, a blancher and manufacturer owned by peanut producer Safrinut. Based in Centurion, Kalinda Trading began in 2002 as a modest trade warehouse, but expanded to a factory in 2004. “Safrinut supply Kalinda with raw material for manufacturing, but they also supply to their own client base,” explains Roux. “Safrinut specialises in the purchase and sale of peanuts in bulk. They buy locally but also import from countries like Argentina, Brazil and China. Essentially, this means they are in a great position to supply Kalinda and meet our requirements.” After receiving the product, Kalinda then blanches the peanuts for customers, as well as for use in the manufacturing of
its own products like Monkey Nut Peanut Butter and Monkey Nut loose peanuts. While local production of groundnuts has diminished substantially over the past decade, the South African demand for peanut products has remained relatively consistent. Kalinda’s relationship with Safrinut and its suppliers allows business to continue running smoothly.
Our suppliers are a key part of our success, and we do work very closely with them. We concentrate on a relatively small number of suppliers locally who we trust and who have the same value systems as ourselves.
concentrate on a relatively small number of suppliers locally who we trust and who have the same value systems as ourselves,” explains Roux. These value systems include high quality and safety standards. Meeting stringent health and safety requirements is a major part of Kalinda’s operation, and staff are trained to HACCP standards to ensure all peanuts are handled in a safe and hygienic manner at all points in the manufacturing process. Staff wear protective clothing and make sanitising hands and cleaning machinery a serious priority.
“Our largest market is locally, but we do supply to some clients abroad, most of which are in neighbouring countries,” says Roux. “Our suppliers are a key part of our success, and we do work very closely with them. We
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Before any roasting, blanching or even sifting takes place, all groundnuts are inspected, treated and tested both internally and externally for Aflatoxins, salmonella, mycotoxins, and for any other health hazards. Any necessary treatment is then performed, and the peanuts are put into storage for transportation to different processing sections. Quality tests are also carried out simultaneously during the different stages of production
We have already expanded our manufacturing plant to provide other services – like selection and cleaning – to meet the demands of the marketplace to ensure the end product is of the high quality that customers have come to expect from Kalinda products. “Our product range consists of peanut butter and flavoured peanuts packed in a large variety of sizes and
volumes,” says Roux, referring to the Monkey Nut brand. These bags of peanuts come in a wide variety of flavours — including peanuts and raisins; salted peanuts; peri peri peanuts; salt and vinegar peanuts; wasabi; and fruit chutney. Monkey Nut peanut butter is sold in buckets and jars that range from 250g to 5kg. “Our latest product, namely the peanut butter sachets, are sold in 20g and 40g,” says Roux. These peanut butter sachets are designed for people on the move, and can easily
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Food&Drink
be stashed in lunch boxes, bags, or even coat pockets for a quick and wholesome snack at any time. Kalinda has also recently partnered up with confectionary brand Richester Sweets to develop a new product — peanut butter chocolate eclairs, made using Monkey Nut peanut butter. Over the next year, Kalinda Trading has plans to continue
South Africa produces between 80,000 and
expanding and adding value to its operations.
250,000 tons of groundnuts each year
“We have already expanded our manufacturing plant to provide other services — like selection and cleaning — to meet the demands of the marketplace,” says Roux. “And by doing this, we’re also adding value to Kalinda’s own operations and requirements.”
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