Turnover is to increase twofold

16th July 2004 By: zeena isaacs

Black economic empowerment steel-supply company Shosholoza Steel Supplies plans to double its turnover this year.

According to director Benny Jiyane, this increase can be attributed to organic growth, involving the acquisition of another steel-supply business, and strategic alliances with several other companies, which have created opportunities to participate in large South African projects.

“This acquisition has launched Shosholoza into a new league.

“It has provided the company with solid manu-facturing facilities, including a light fabrication shop and threading shop.

“In addition to this, the company still focuses on its core business of trading steel pipe, tube, sheet and plate,” Jiyane tells Engineering News.

He adds that the strategic alliances have also been beneficial as they have enabled the company to supply products that are not available locally, and to participate in large projects such as Sasol’s Project Turbo, the Department of Trade and Industry campus and other infrastructural development projects.

“To date, we have recorded a substantial turnover as a direct result of supplying products to three subcontractors for Project Turbo.

“These products, consisting mainly of boiler plates for use in high-pressure applications, are sourced from the UK and supplied to contractors that are responsible for supplying large vessels on the project.

“Moreover, we are confident that additional orders linked directly to Project Turbo will be received in the future,” says Jiyane.

He notes that alliances have been one of the company’s key target areas over the last year, and believes that it has been successful in this regard.

Another factor contributing to Shosholoza’s success in the last year is the restructuring that took place, in which Barloworld Robor’s shareholding was increased from 30% to 74%, with the remaining 26% owned by Jiyane and other staff members.

This increased shareholding by Barloworld Robor has had many spin-offs for the company, as it has eased concerns expressed by customers in dealing with an empowerment company through the security offered by Barloworld’s backing and product guarantees.

Jiyane says that the company is focused on increasing its presence in several new industries, including the mining, infrastructure, petrochemical and water industries this year.

“We are currently in the process of increasing our footprint in the South African mining industry by investigating possible partnerships with steel-supply companies active in the industry.

“This will assist us in gaining access to many large mining projects.

“We believe that our product offering is beneficial to the mining industry, especially with the large-scale growth scheduled to take place in the industry,” Jiyane explains.

He notes that the steel price hikes in the last 12 to 18 months have had a significant influence on the mining industry, resulting in many large projects being put on hold.

Another area that Shosholoza is targeting aggres-sively is infrastructural development, due to the large projects to improve road, rail and ports as set forward by the government, as well as infrastructure development scheduled to take place as a result of the Soccer World Cup, to be hosted in South Africa in 2010.

He emphasises the significance of this by stating that the steel industry will be a benefactor in these developments, since no infrastructural development can take place without steel, and that BEE is one of the areas targeted for these developments.

“We are currently considering the establishment of a Shosholoza branch in Richards Bay, Kwazulu-Natal. “The proposed branch, which is part of our expansion programme to position the company stra-tegically in places where infrastructural development is scheduled to take place, will enable us to cope with the demands of the Richards Bay port project.

“Further, it will eliminate any logistical and other problems that could be experienced while transporting products from Gauteng,” Jiyane explains. The company has also earmarked the Eastern Cape – around the Coega area – and Western Cape as other possible areas for further expansion.

One area of growth is the South African petro-chemical industry, in which he would like to form alliances with companies active in the industry.

“The product offering in the petrochemical industry is crucial, with many of these products manufactured abroad.

“Therefore, we would like to enter into strategic alliances with companies supplying the industry,” says Jiyane.

The company is currently involved with Sasol, PetroSA and is looking at Sapref, in Kwazulu-Natal. Water delivery is another area of growth, especially with government’s focus on delivering water in rural areas.

“We can fulfil a significant role in rural water delivery by replacing and repairing existing water systems, since our core business is supplying steel pipes,” Jiyane says.

One of the contentious issues in the local steel industry which Jiyane highlights is the lack of black economic empowerment (BEE) companies.

“I am disappointed that there has been little transformation in the industry in the last year.

“There is no quick fix to empowerment and, therefore, the industry associations need to in-volve themselves in these issues to ensure that trans-formation occurs.

“If these associations do not play a key role in promoting BEE, there will be little transformation,” says Jiyane.

He adds that one of the reasons for this lack of empowerment is that the steel industry is tough and the returns are not significant, and therefore many people are not interested in joining the industry.

However, potential empowerment partners should select specific areas of the industry to target, and areas that they understand and are familiar with.

“The primary producers are engaging in con-solidation and, therefore, there is no transformation; the secondary producers, distributors and merchants also do not participate in transformation; and the emerging companies are being squeezed out of the market due to pricing policies.

“We need to see the primary manufacturers do something to tackle BEE, and create the correct environment to implement transformation, says Jiyane.

He says that the company does not currently export products. However, exports to neighbouring states are on the agenda for the next five years, especially with the petrochemical projects in Angola and mining in the Democratic Republic of Congo and Zambia.

The main challenge facing the industry is skills development. Shosholoza is currently active in skills develop-ment, as it has implemented training programmes and is developing courses that will be accredited by the South African Qualifications Authority.

Looking ahead, Jiyane says the company would like to double its current turnover in the next year through further acquisitions and the benefits generated by participation in large infrastructural projects.

He is optimistic that the company will be able to achieve this.

“We are confident about the future, especially since we have become a recognised brand in the steel industry and are gaining more credibility each day,” says Jiyane.