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Capital Equipment News November 2017ON THE COVER:

The leading story in the November edition of Capital Equipment News explores Goscor Earth Moving’s (GEM) landmark deal with a contract miner. GEM, the official dealer of SANY’s earthmoving equipment in South Africa, has delivered four new machines to mining contractor, Exclusive Benefits Enterprises.

The transaction is a landmark deal, not only due to its R7 million value, but most importantly because it’s Goscor’s first customised sale to the mining industry, which saw the supplier go beyond the call of duty to tailor the buckets of the machines to suit the customer’s taxing chrome handling application.

The two new SY335C excavators and two SYL956H5 wheel loaders have been specifically acquired to work in a challenging chrome loading application at a mine in Palaborwa, Limpopo.

Tebogo Makofane, owner of Exclusive Benefits, initially purchased a Bobcat S450 skid steer for one of his sweeping contracts at a mine from Lee Sampson, sales executive at GEM Witbank. When the fast-expanding mining contracting business clinched a bigger contract for loading duties at a chrome mine, Makofane’s decision to opt for GEM’s SANY offering was largely influenced by the more than customer-supplier relationship he had forged with Sampson.

For an uptime-conscious chrome handling application, Makofane was looking for more than excavators and wheel loaders. This is such a demanding contract, and its success hinges on both a dependable product that gets the job done with no unnecessary standing time, as well as reliable aftermarket support to keep the equipment running at all times.

After extensive consultations, a R7 million deal was structured, and saw Exclusive Benefits ordering two 30-tonne SY335C excavators and two 5-tonne SYL956H5 wheel loaders. The transaction represents one of the major deals for GEM to date. “This is the first customised deal we have done for the mining industry. We have tailored the buckets of the machines for the customer to make them smaller than the standard ones to accommodate heavy chrome loads,” says Sampson.

The buckets have been reduced from the standard 3,5 m³ size to 3 m³ on the wheel loaders. They have also been reinforced on the sides to be able to withstand the taxing nature of the chrome handling application. The decision to downsize the buckets was reached after considering the machines’ lifting and breakout capabilities versus the material density. “Machine capability establishes how much lifting force the machine has for the bucket and payload at a given reach. Material density tells you how much a bucket load would weigh at ideal conditions of 100% fill,” explains Sampson.

Enabling local enterprise development

Enabling local enterprise developmentIn one of its largest investments in Africa to date, Caterpillar has launched a record-breaking Equity Equivalent Investment Programme (EEIP) in conjunction with the South African Department of Trade and Industry, representing the largest ever EEIP initiative in South Africa.

Caterpillar’s EEIP pledges to localise a cumulative R1,3 billion (about US$90 million) of component content over the next 10 years, representing the largest programme of this type in South Africa to date. The investment forms part of the previously announced plan of Caterpillar, its independent dealers and the Caterpillar Foundation to invest more than US$1 billion in countries throughout Africa over five years.

The EEIP is a dti initiative for multinational companies that are unable to relinquish shareholding to contribute towards their Broad-Based Black Economic Empowerment (B-BBEE) obligations. The dti’s Codes of Good Practice require that all entities operating in South Africa make a contribution towards the objectives of B-BBEE. It is, however, acknowledged that there may exist multinationals, such as Caterpillar, that have global practices preventing them from complying with the ownership element of B-BBEE through the traditional sale of shares to black South Africans.

In such instances, and provided that it can be proven that such entities don’t enter into any ownership arrangements in other countries globally, the B-BBEE codes make provision for the recognition of contributions in lieu of such sale of equity. Such contributions are referred to as Equity Equivalent and are measurable against 25% of the value of operations in South Africa.

Caterpillar applied for participation in the EEIP with the aim of empowering local and black-owned enterprises through enterprise and supplier development. Speaking at the official launch of the historic empowerment deal on 4 October 2017, Rob Davies, Minister of Trade and Industry, said on 21 January 2016, Caterpillar Southern Africa was granted exemption from selling equity and was instead allowed to participate in the EEIP. Caterpillar’s EEIP initiative becomes the 9th of such empowerment deals already concluded in South Africa.

“The proposed programme is aimed at contributing towards product localisation to further capacitate the South African industrial base. The investment amount is R1,3 billion, based on the 25% of the business value of Caterpillar’s South African operations,” says Davies.

Zakieya Parker, Managing Director of Caterpillar Industries, said the 10-year investment will allow local, empowered South African suppliers to develop world-class capabilities and the capacity to plug into Caterpillar’s global supply chain, adding that this also opens up opportunities to regional and global markets.

“Caterpillar welcomes the opportunity to work with the South African government to achieve economic transformation in the country. We believe our EEIP goals are closely aligned with those of the government,” says Parker.

Gaining a strong foothold

Gaining a strong footholdThe African mini excavator market remains a very small segment of the continent’s overall construction equipment market, but all indications are that it has to grow. This is in line with global trends, with available data showing that the compact excavator sector is one of the most competitive areas of the global construction equipment market, worth an estimated US$5,85 billion annually.

With almost 200 000 units sold worldwide each year, available statistics suggest that the compact excavator market might be the single largest sector of the annual global 700 000-unit construction equipment market. The mini excavator, also known as the compact excavator, has earned an increasingly popular reputation in the developed world through its size and utility, especially considering that most construction work in these countries is based on reconstruction of existing infrastructure, often calling for compact pieces of equipment that can navigate in space constrained jobsites.

But what about the African market? We are a little bit late to the mini excavator party, but all indications are that this sector has to grow. Tom Bloom, general manager for Construction Equipment at Smith Power Equipment, the authorised distributor of the Kubota range of mini excavators in South Africa, predicts the market for compact excavators in South Africa to be around 160 units per year. Bear in mind South Africa is the biggest equipment market on the continent, contributing almost half of the overall equipment sales every year. However, Bloom predicts this market will increase by almost 20% year-on-year moving forward.

Lani van der Watt, marketing manager at High Power Equipment (HPE) Africa, the exclusive distributor for Hyundai Construction Equipment in South Africa, says there has been a significant improvement in demand in the agricultural sector in recent months. “This might create some opportunity for the mini excavator sales to increase. The mind-set of the South African market players would also need to shift,” she says.

According to Van der Watt, there were approximately in access of 75 mini excavators sold in South Africa in the first three quarters of 2017, and about 5% of those were exported to other African countries during the same time.

What are the major drivers? The first big driver of compact gear is urbanisation. As towns continue to grow, space is at a premium at many construction sites, hence the need for a smaller machine that can get the better of space constraints. According to the African Development Bank, the proportion of the world’s urban population is expected to increase to about 57% by 2050 from 47% by 2000. More than 90% of future population growth will be accounted for by the large cities in the developing world. Africa has experienced the highest urban growth during the last 20 years at 3,5% per year. Projections indicate that between 2010 and 2025, some African cities will account for up to 85% of the population.

Contact Capital Equipment News

Title: Editor
Name: Munesu Shoko
Email: capnews@crown.co.za
Phone: +27 11 622-4770
Fax: +27 11 615-6108

Title: Advertising Manager
Name: Elmarie Stonell
Email: elmaries@crown.co.za
Phone: +27 11 622-4770
Fax: +27 11 615-6108

 
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