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Local Changes Required to Exploit African Explosion – Mike Lomas SAISC Chairman

In order for the South African steel construction industry to be competitive in Africa – where the world’s next major economic growth spurt will occur - and especially the sub-Saharan region, there will have to be some important changes including the simplifying of border crossings in the SADEC region, infrastructure improvement around these borders and beyond, greater business innovation and the development of a ‘South Africa Inc.’ mentality within the local industry. This is the opinion of recently elected Chairman of the Southern African Institute of Steel Construction (SAISC), Mike Lomas.  

Lomas says that while South Africa is experiencing  slow growth in steel construction activity, the major opportunities will certainly be beyond our borders especially in sub Saharan Africa where mining and engineering projects have great potential because of the yet to be exploited mineral wealth of the region.

“We may not see the business activity levels of the boom of 2010 for a while yet but the dramatically growing GDPs of many key African countries is palpable and it is in these countries where our companies must be doing business,” Lomas says.

He adds that the local industry will be competing in Africa mainly with the other BRICS countries – i.e. Brazil, India and China – and to do so successfully will require both innovation and the use of our competitive advantages brought about by location and other factors.

“Our location in Africa is obviously a significant competitive advantage. But this will be neutralised if we do not make it easier to transport the fabricated steel to its various destinations. One of the first things that has to be done to facilitate this is to make it easier for trucks carrying the product to get through the borders.

“Currently the situation is untenable with trucks often having to wait for days before they are processed adding significant cost to the delivered price of the product. If South Africa wants to compete against the Chinese and others, it simply must reduce the cost of doing business and the border issue is crucial in this regard.

“Also, the road infrastructure around the border facilities and, of course, in the region as a whole should be improved as costs, through both time lost and physical damage to  vehicles and product, are currently exorbitant,” Lomas says.   

But, according to Lomas, it’s not only reducing cost that will make the difference but also the way we do business. “We will have to do things differently, more innovatively,” he says. “For example, when the Chinese get an order they make the steel and ship it to the customer. There’s no room for flexibility. But because of our locational advantage and because it’s perhaps part of our business culture to be more malleable we could offer more flexible, ‘tailor-made’ solutions to African clients making it considerably easier and more attractive for them to conduct business.

“Also, our innovation will have to extend to the renewable energy field, which is going to be crucial to doing business successfully in Africa and which will present South Africans with exceptional opportunities. The optimisation of OPEX through reduction in energy and water costs by, inter alia, putting the power source close to the end-users and introducing more energy and water efficient technologies is the way it will be done in an Africa that is not only vast but also has very poor infrastructure,” he says.

Lomas adds that another vital element to the local industry’s success in Africa will be its ability to work as a team. “We need to pool our knowledge while obviously still competing with one another.  South African EPCMs must work in partnership with local fabricators to supply projects in Africa and we must, where possible,  all share information about what is happening across the continent. Working as 'South Africa Inc.' using mutual cooperation to win and supply contracts will be good for everyone in the end,” Lomas says.

Turning to the potential of the local market, Lomas says that after the bloodbath of 2008 when the asset value of the world was literally halved, the South African steel construction industry is making a slow but steady comeback.  

“It is clear that South Africa’s financial disciplines were solid preventing a complete meltdown. Specifically in the steel construction industry, while there was a reduction in demand for steel products globally and in South Africa many projects were put on hold, we did not feel the full negative impact mainly as a result of the World Cup and the advent of major power stations.

“Certainly this difficult period demonstrated very clearly the extremely high level of expertise and competence in the local steel construction industry, which augurs well for a future filled with various opportunities.  The current unknown factor in terms of these opportunities is the government's planned expenditure on infrastructure and its willingness to act on it - although after President Zuma’s State of the Nation address on February 9th there is some cautious optimism in this regard,” Lomas concludes.

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