South Africa's Relevance for African Expansion


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An analyst briefing about South Africa's place within African expansion.

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South Africa's Relevance for African Expansion

  1. 1. South Africa’s Relevance for African Expansion Doors Ajar for New Transformer Entrants in South Africa Rob Smith, Research Analyst South African HV Transformer Market 14 March 2012© 2012 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property ofFrost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the written approval of Frost & Sullivan.
  2. 2. Today’s Presenter Rob Smith, Research Analyst Frost & Sullivan Expertise Experience base covering broad range of sectors, leveraging long-standing working relationships with leading industry participants’ Senior Executives – South African HV Transformer Analysis – Coal Purchasing Contract Analysis Experience and skills in statistical financial analysis, together with a broad economic understanding of the South African business environment, the economics of finance, labour and development Education BCOM Hons (Economics), Rhodes University, Grahamstown, South Africa RPE Examinations (South African Institute of Financial Markets) 2
  3. 3. Focus Points 1 South Africa in Africa – How Relevant Are We? 2 What Challenges and Drives T&D Growth? 3 Overview of the Growth Opportunities in South African T&D Markets 4 Growth Strategies out of the East 5 Conclusions 3
  4. 4. South Africa in Africa How Relevant Are We?
  5. 5. The African Mega Trends `
  6. 6. UrbanisationCorridors will unlock economic potential of landlocked countries and will improve inter-dependence among cities leading to regional economic growth The North Delta Region 1,000 km Abidjan- Alexandria • Combined population of 77 Cairo Ouagadougou Corridor million • 3 emerging corridors: Cairo-Suez Cairo-Alexandria Cairo-Ismailia Ouagadougou Addis Ababa 900 km Kampala- Abidjan Ibadan Nairobi-Mombasa urban corridor The Greater Ibadan Lagos Accra Accra (GILA) Corridor Lagos Nairobi • Combined population >18 million Kinshasa Dar es Salaam • Contributes combined GDP of US$127,592,000 North-South Corridor Luanda • Facilitate inter-regional trade Trans-Cunene Corridor from Cape to Cairo • Will link the Democratic Republic of • Free trade area comprising 533 Congo (DRC) with South Africa million people through Angola and Namibia • Combined GDP of $833 billion or 58% of Africa’s GDP Cape Town Main Corridors Johannesburg/ Durban Pretoria Data Source: UN-Habitat, 2010
  7. 7. Regional IntegrationAn Integrated Continent Total Intra-Trade: $216 billion Power Interconnection Investment: $50 billion Regional Transport Investment (road & rail): $30 billion ICT Infrastructure Development: $60 billion ` Planned Electricity Interconnections Road Infrastructure development Trilateral Free Trade Agreement (T-FTA)
  8. 8. A Foot on the GroundConcerns, Restraints and Drivers
  9. 9. Concerns for ManufacturersTime pressures • R&D and skills development to support technology developments could take up to 2 yearsPlanning Ahead • Tender application • Key concerns around efficiency of equipment • Planning for international partnering and technology transfer9
  10. 10. Industry Trends and Considerations • Budget • International IP Limitations Partnerships • Rising Failure • Equipment Rates Assessments • Services Rising Deepening Offerings Efficiency Maintenance Requirements Backlogs Skills Increasing Shortages at Foreign Entry End Users • Price • End User Competition Training • Domestic • Internal Skills Quality Development Concerns10
  11. 11. Major Restraints Short Mid Long Restraints Term Term Term1 Restricted Installation Rate2 Delays in IRP Development3 Constrained Infrastructural Development4 Large Barriers to Entry for Newcomers5 Strengthening Presence of Eastern Products Exchange Rate Fluctuations and Stability of the6 Eurozone High Medium Low Impact Impact Impact 11
  12. 12. Major Drivers Short Mid Long Drivers Term Term Term1 Aging Equipment2 Grid Expansion and Strengthening3 Growing Electrical Demand4 IRP and Supporting Infrastructure Increased Efficiency to Drive Replacement of5 Existing Equipment High Medium Low Impact Impact Impact 12
  13. 13. Gaining GroundGrowth Opportunities for the Informed
  14. 14. HV Transformer Market Size Forecast• The total market is valued at roughly $450 million and is looking to develop as illustrated below. High Voltage Transformer Market Unit Shipment and Revenue Forecast South Africa, 2008-2016 CAGR = 0.5% 700 70 Units (HV transformers) Revenue (USD Million) transformers 600 60 500 50 400 40 300 30 200 20 100 10 0 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 Revenue $558. $575. $440. $457. $451. $457. $473. $499. $507. Units: All Transformers 40 40 41 42 50 57 39 53 46 Year Source: Frost & Sullivan14
  15. 15. T&D Planned Expansion High Voltage Transformer Market: Transmission Infrastructure Map South Africa, 2011 501km of new 275kV Eskom 7,830km of transmission Installations new 400kV lines (Red) transmission lines (Green) 4,430km of new 765kV transmission lines (Purple)15
  16. 16. The East in the South Is it the Solution?
  17. 17. What is Exported? Thinking Long Term Asian versus Western Business Model 1 Capital project gifts, with contingencies 2 Tender preference and trade agreements 3 Offer of holistic development solutions 4 Geographic footprint and multiple industry entry 5 Linked market capacity development 6 Price-based competitive advantage 7 Cross-market Chinese support and development 8 Skills export and rent seeking in private sector 9 Domestic market dominance with political bias
  18. 18. ConclusionsWhat to Take Away
  19. 19. Conclusion Slide: Key Take-Aways Take-Overview Steady at first with uncertainty moving forward Watch the TDP development and IRP implementation Count on stable spending from EskomNext Steps Track the development and plans of renewables Identify key partners internationallySome Recommendations Establish the technology requirements early Assess existing skills base and bridge the gap19
  20. 20. Conclusion Slide: Where does that leave you?Overview Have you considered multiple scenarios in your strategic planning? Do you have hands-on information on the CODs for generating plants? Are you tracking technical requirements at major end users?Next Steps Have you linked strategies with the realities of the future Africa? Not to mention future competitors’ capabilities, are your services even on par with what is already offered by your competitors?Some Recommendations How do you compare with your competitors’ offerings? How are you differentiating yourself as an employer of choice?20
  21. 21. Next StepsDevelop Your Visionary and Innovative Skills Share your growth thought leadership and ideas or Growth Partnership Service join our GIL Global Community Join our GIL Community Newsletter Keep abreast of innovative growth opportunities 21
  22. 22. Your Feedback is Important to Us What would you like to see from Frost & Sullivan?Growth Forecasts?Competitive Structure?Emerging Trends?Strategic Recommendations?Other? Please inform us by “Rating” this presentation. 22
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  24. 24. For Additional InformationChristie Cronje Rob SmithMarketing and Corporate Research AnalystCommunications Manager Industry(+27) 21-680-3566 (+27) Rob.Smith@frost.comCornelis Van Der Waal Vassilissa KozoulinaBusiness Unit Leader - Africa Sales ManagerEnergy and Power Industry(+27) 21-680-3266 (+27) Vassilissa.Kozoulina 24