An unexplored market

An unexplored market
As emerging markets go, Africa is viewed by many as being the least developed but with the most potential. In this business insight InAVate explores the continent’s current and future prospects.

EMEA, a much bandied around term in marketing circles, stands for Europe, Middle East and Africa. Much has been written on the subject of the first two. InfoComm recently published the first research into Europe’s AV market. The phenomenal growth in parts of the Middle East have been well documented by this and other trade titles. However, the final part of this geographical triumvirate remains unsung, unwritten about and often under estimated.
This month’s business insight aims to go some way to redressing the balance. Whilst one can’t possibly hope to cover such a subject in a few hundred words, hopefully, at least procedure can be less than transparent at best. However, the beating heart, economically if not geographically, of any development of the African market must surely be South Africa. It boasts one of the top ten stock markets in the world, and a GDP of some 533bn USD.

Joe Copans is managing director of Wild & Marr, one of a handful of large pro audio distributors serving South Africa. In a general conversation he spoke about the current business climate, some of the market prospects, and also his hopes for the future, including the world cup.
“We’re in rather a strange situation at the moment. The Rand (SA currency) has always been pretty six months we out performed any previous years. At the moment we’re doing ok, but there isn’t the vibrancy there was at the start of the year.
“There’s a lot of reasons: our currency, interest rates have gone up a bit, the Middle East situation is affecting our fuel costs. The issue is that we import 99% of our products because we supply top brands like Harman Pro and Shure. We’re therefore very sensitive to the exchange rate.
“Primarily we are an importer and distributor of products, pro-audio products. One of the biggest problems we face in this industry is a lack of qualified contractors. I think that’s one of the symptoms of our emerging

A selection of South African Installations.
>story). There is no contractor in the country that can really take on a job like that. The only people who can are ourselves or our two competitors, who themselves are distributors importing different products. So, for us to sell our products, we have to get involved in vertical integration.”
“On smaller installations yes, we have a lot of dealers who buy from us and we support them. We have an engineering team who looks after them. But when it gets to something of the order of Moreletta they just don’t get involved.”
Wild & Marr have also been ploughing somewhat of a furrow in the development of South Africa’s cities. A new breed of theme bars, and chic eateries is appearing, with a budget for decent AV equipment.
Joe commented: “Up to a few years ago, we couldn’t really believe what they were prepared to spend, and neither could our dealers, but we’ve gotten some very good sales out of this market.
“One of our other very successful markets is the AV market. There are about eight or ten good AV contractors in this country, and what we do there is provide them with audio solutions. We don’t want to compete in that market with them, we’re happy just to be a supplier and consultant. Eight or so of those are pushing our product and we’ve no desire to step on their toes.”

One of the hot topics amongst South Africa’s business community is the impending arrival of the 2010 FIFA World Cup. The AV community is no exception, keen to replicate the kind of success that both the fixed installation and rental companies of Germany enjoyed. On the face of it there’s a lot of opportunity for money making, but could the lack of skilled contract labour be a problem?
“We’re going to have to get involved in the vertical integration ourselves. We’re definitely going to be making a pitch (no pun intended) for some of the stadiums involved. We’ve done stadium work before, both in and outside of South Africa.
“When it comes down to the crunch, there’s only three of us that can get a handle on these projects. We’ll either get them or we won’t. It’ll be very tight, but there’ll also be a lot of peripheral business. From what I understand there will be two completely new stadiums, and then they’re going to be revamping others.”
Given the perceived lack of skills within the country, isn’t there a risk that international players will come in a take the jobs. Copans certainly thinks so: “At the moment there is an issue, and we don’t really know, it might be that the stadiums are all going to be turn-key because of the time constraints. It’s possible that a Philips or a Siemens, might come in and get the lot, and they have the ability to source from wherever they want.

“To some extent there’s not a belief in the quality of engineering ability in our country. There’s a tendency to think that if you go to the US or the UK you’ll find better engineering people. But I think that’s really not the case. We can do the job, and we’ve proven it.”
But what about outside South Africa, civilisation doesn’t just end in the Northern Transvaal and start again at the Mediterranean does it? Certainly not, but you do have to be a bit more circumspect when doing business. Copans says that Wild & Marr have worked on a number of projects further north:
“We’ve just finished a club install in Mozambique, we did a stadium job in Angola last year and we have guy looking at another site in Angola at the moment. We also supplied a very large rental system to the Democratic Republic of Congo last year, but that was through the Heineken brewery so we were pretty sure the money was there.”
“One of the problems we face in these even less developed markets is supply into Africa from the outside via the internet. They sell at say distributor price plus 5% on a cash basis. We’ve invested in developing markets, and it’s certainly not cheap to travel to Kenya or wherever. Then we find that when we go back, that these people are just buying the product off the net. There’s no support offered and no value added. Whilst we see there’s great potential, unless people are prepared to work with us, our expertise and value add, it’s just not worth it for us to get involved.”

One of Wild & Marr’s competitors is fellow distributor and importer Tadco. The company distributes a large range of pro audio and AV products in sub-Saharan Africa, including the likes of Audio-Technica, Nexo, Furman Sound, XTA and Christie Digital Projection. Director Richard Barnes shares a similar view of the market to Joe Copan.

“Any market like ours is extremely unpredictable. There’s little or no forward planning, and there’s not a large number of big installations coming along at the moment. Of course there’s smaller stuff around, but it seems that the whole country is sitting on top of this high dive spring board because of the World Cup. No one is really sure what it will mean for us.

Tadco are also active outside of South Africa. “North of the border there’s no real distribution at all. Someone phones you up with a problem, and you have to solve that problem. It’s that simple. You might go up and size the job up, we’ve been to Uganda and done some conference systems there, and we’ve also done a few bits in Kenya and Tanzania.”

This concept of South Africa as a shop window for the rest of the continent rings true with a client of both Tadco and Wild & Marr. Hattech are an AV integrator who specialise very much in the church market. Leon Theunissen the company's technical director elaborated:

“It’s incredibly hard to find business there unless you get on the ground and go looking. What you tend to find is that South Africa is the first stop for people who are looking for solutions for churches. It acts like a shop window. Then we can talk to these church groups and see if it’s sensible or viable to proceed further.”

Hattech are also feeling the economic pinch at the moment, the weakness of the Rand is affecting anyone dependant on imported goods for business. But the increasing cost of fuel is having a more mundane effect on Leon’s business.
“Transportation is becoming much more of a factor in our calculations. We don’t have particularly well developed transport links so everything has to be shipped around in a car or truck. That’s becoming a lot more expensive and it’s really affecting our margins and profitability.
“I don’t think capital expenditure is really slowing down particularly, it’s just going less far than it used to because of the currency situation and fuel prices. This certainly isn’t the worst state the economy has been in recently but it’s not great.”
Whilst what has been learnt here is very slanted towards South Africa’s view-point, this is largely unavoidable due to the almost non existent formal supply chain in the rest of sub-saharan Africa. The challenges posed by trying to offer meaningful after sales support to other countries than South Africa make any such undertaking exceedingly expensive, and until these markets are developed further it seems unlikely that situation will change drastically.
That being said it’s apparent that there is still business to be done by those prepared to go the extra mile and work to build relationships in other countries. Provided they do so with open eyes.

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