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Africa Key to Internationalisation Plans
Multotec CEO Thomas Holtz |
Multotec CEO Thomas Holtz tells Mining
Review Africa that the company had a choice. It could take
its key product lines and become a niche supplier across a
variety of industry sectors or could take the path it is now
on. This path is to concentrate exclusively on a single
sector, that of extractive metallurgy, and focus all its
efforts in establishing a global brand in this field.
Over the past few years, the company, once known mostly for
screening media, has expanded its range extensively to cover
process equipment, screening and flotation, solids and
liquids separation, rubber wear solutions, conveyor belt
fastenings, and wear resistant ceramic linings. Multotec
focuses on the mineral processing solutions it can provide
in commodities such as gold, coal, platinum, base metals,
iron ore, and mineral sands. These are sectors from which
its technical people come from and in which they have
experience and know-how.
Multotec, a privately owned group which has been in business
for 37 years, embarked on its internationalisation process
because it has limited opportunities for further growth in
South Africa where it holds a dominant position. “Of course
we must ensure we continue to support and sustain our base
in South Africa at the same time,” Holtz says.
He says that the internationalisation process, which entails
aggressively targeting international business and which
began in 2007, continues to be a work in progress. “There
are no shortcuts and there is no text book; one has to learn
through making mistakes. One of the key lessons is to listen
more to local businesspeople when they talk about the
culture in that particular part of the world and the local
obstacles to business.”
Africa, which is the primary growth target for the company,
is no exception and it is a market where the mineral sector
is showing signs of strong growth. “In spite of the well
known challenges, such as a lack of infrastructure and
skills and the perception of having high risk, it is a
region where our products are known and liked. Many of the
companies we deal with in Africa are blue chip groups, and
from our experience we have encountered more bad debts from
our dealings elsewhere,” Holtz says.
It does not mean the challenges in Multotec’s
internationalisation plans are trivial. While Holtz feels
the company has been able to attract the necessary skills,
it is based in Gauteng, far from the ports, and far from
major shipping lanes. There is also the volatility of the
South African rand to take into account. “A key issue to get
right is the supply chain logistics,” Holtz notes. “We are
looking at alternative supply lines and possibly at sourcing
out of India and China, as we have lost a few opportunities
due to pricing. However, we don’t aim to be the lowest cost
supplier. We sell on the basis that we have got an
appropriate product and technical know-how to provide back
up for it, and this comes at a premium.
“Multotec can provide a customised product, and when things
go wrong, as periodically happens at a mining operation, we
have a fast and effective product and service offering where
we can get a representative onto site quickly.”
The company also offers its Hawkeye product, which is an
internet enabled software system that assists it with
service and maintenance contracts. This tool assists
Multotec to offer efficient field service and maintenance.
“We can also aggregate field service teams across a number
of clients and keep shared stocks in specific equipment.”
Multotec also has begun to operate parts of a plant that
they have supplied. “In fact, a positive outcome – to our
consumable equipment sales – of our operational and
maintenance service is that we tend to extract more life and
value out of the equipment than the client may be able to,”
Holtz says wryly. Multotec does have cost per tonne
parameters built into certain contracts. “The model we use
varies; we tend to start out conservatively and as a
relationship evolves we evolve what we offer to the client.
Our philosophy is to under promise and over deliver.”
The company does use formulas based on well known indices to
hedge the prices of its own raw materials and those prices
are passed onto the client.
At this stage about 40% of Multotec’s turnover comes as a
result of business outside South Africa, with the rest of
Africa contributing the largest portion. This is followed in
sequence of significance by Australia, North America and
South America. “We have exported to 54 countries, but in
some cases that may only have been a single order.” At the
moment the company does not spend too much focus on
countries such as China and India, where it is represented
by agents, and to the CIS, as it does not want to spread
itself too thinly.
Multotec has established offices in Zimbabwe, Zambia and
Ghana. It serves Tanzania and the DRC from its office in
Zambia and serves Mozambique from South Africa. It has
separate arms in West Africa based in Ghana to service
French and English speaking countries. “However, there is
flexibility as the business as we have specialists in
screening, milling, cyclones, who provide a consulting type
of service and that we do from South Africa. The regional
offices act more as sales and service centres.”
The company does have an applied research element which
involves designing application specific solutions for
customers. “We have got ex-mining people and metallurgists
who can look at an application and find a solution
appropriate to that site.”
Multotec has what it calls its capital business where it
supplies new projects, and here its client base is the
engineering companies and the mining company head offices.
It is to ensure it gets business from the numerous
Australian based project companies that Multotec set up an
office in Australia. “Companies in Australia tend to go with
the suppliers they are familiar with and it is important for
us to be there, and also it is important for us to benchmark
ourselves according to our competitors there,” Holtz says.
The company also has what it terms as its consumable
business. This is not necessarily consumables as they are
viewed by the mining companies, but consumables in that they
are products that have a fairly short replacement cycle,
such as three years or less. This accounts for some 70% of
Multotec’s business. “For this business we deal with the end
users, and we offer service on site and maintenance
contracts. In every mining community where we are active, we
have got a regular presence on site and as we get more
business in an area this can mean having people on site on a
daily basis.”
The company has some 150 to 200 service personnel out of its
1,400 total staff complement. Multotec’s manufacturing base
remains in Gauteng, but it does manufacture in Australia and
South America and it has some Asian suppliers.
Holtz’s experience is that engineers do have their favourite
equipment types and brands, and Multotec offers a range of
products and solutions from which customers like to pick and
choose. However, Multotec is aiming at putting bundles
together and offering incentives to customers to buy these.
“Considering the levels of competition it is probably an
insurmountable challenge for any group to offer leading edge
products in all areas, and our choice was either to narrow
our focus or expand it. At the same time, as mentioned, we
don’t compete on price, but focus on the service offered and
the quality of what we provide and do. We provide customers
with peace of mind, for which they are willing to pay.”
Multotec’s policy has clearly paid off in the marketplace,
since after the bumper year of 2008 it only saw a decline in
income of 15% in 2009. “Our capital work continued as we
went in with a big order book, but that has been whittled
away. We take capital equipment work where we find it, and
we are cautiously optimistic about the future. Our
consumable business did not see a lag in the impact of the
downturn, but while commodity demand continues and plants
keep running there is business out there.”
Holtz says, “Downturns provide opportunity to target growth
in market share. We did that in the past in South Africa and
are now doing this in Africa.”
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