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The risks and rewards of operating in Africa

Home Transport & Logistics Exports & Imports The risks and rewards of operating in Africa

THE risk of nationalisation, deadly insurgencies and poor access to remote sites are just some of the challenges facing companies operating in Africa.

That’s according to Marc Kleiner, Managing Director of crane and hoist manufacturer Condra. Headquartered in South Africa, the company is known for its high-lift installations across the continent’s western, central and southern regions.

Kleiner predicts that African sales for his company’s products will continue in parallel with cyclical, Chinese-driven demand for minerals and other commodities. However, he points out that a risk facing exporters into Africa is the temptation to nationalise.

“There is an understandable desire for any government to assert dominance over foreign-owned interests, especially a productive mine. But government ownership of assets can result in inefficiencies, and they risk moral hazard. Generally, I would say that any company investigating an African country as a potential market should factor into that consideration the likelihood of nationalisation.”

Turning to other challenges, Kleiner said he would like to see improved access to remote mines. He pointed to a recent crane order from Cameroon, where the road giving access cannot be negotiated by abnormal-load vehicles. The only way to deliver this crane will be to design it for containerisation, splicing girders almost 30 metres in length for bolting together on site at the mine.

“It’s quite common for us to do this, but it does increase the price,” he said.

In South Africa, Condra’s two factories are busy with local contracts as well as orders from beyond the country’s borders. Eight coil-handling cranes for a new vehicle plant are under manufacture, together with a ninth and tenth for an automotive rubber factory.

“Africa could do better by taking more pride in the fact that it is Africa and not Europe. By this I mean that customers requesting the latest electronic refinements in use abroad should recognise that these are often poorly suited to the power outages and fluctuations that are typically African. That said, we continue to give the customer the machine performance that he wants, while engineering the crane to be as immune to these problems as possible.”

Kleiner said Africa’s sporadic armed insurgencies remain problematic. “Beyond the tragedy and fear, unpredictable attacks make business difficult,” he said.

“Witness the recent attack by ISIS in Palma, northern Mozambique. One of the oil companies there declared force majeure because of that attack, so now we have the crane that they ordered stored here at our factory until the situation can be normalised.”

On pricing, Kleiner said Condra does not try to win contracts through price-cutting because the company has invested too much in its products for this to be a viable approach.

“We don’t outbid. We have realised over time that we don’t want to compete against cheap products. Our success bears out the fact that if a customer knows what he wants and has experience of other manufacturers, he will eventually come to Condra.

“The natural flow of professional engineers around the world has led to many re-contacting us to become repeat customers, and this has gradually given us more of the world market. Our growth into Canada and Australia has been largely based on people who have previously experienced the reliability of our products and insisted on Condra.”

Looking to the future of the African lifting equipment market, Kleiner said, “I think that it will be more of the same. It will remain possible to succeed, but it will remain difficult. However, Condra was born African and remains African. We understand Africa, so our success is likely to continue”.

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