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African expansion to come as Bonfiglioli rides V-shaped recovery

By David Whitehouse
Posted on Thursday, 15 October 2020 18:32

bonfig

Bonfiglioli, the Italian supplier of industrial gearmotors and drive systems, plans to expand in sub-Saharan Africa to take advantage of anticipated post-pandemic economic recovery.

A strategy document under review by the company’s board targets entry into as many as seven countries in sub-Saharan Africa in 2021, Henco Du Plooy, managing director of Bonfiglioli South Africa, tells The Africa Report. He expects the board, which has already made some amendments to the plans, to discuss the document by the end of the year.

Partnerships, rather than a bricks and mortar presence, are the preferred method of entering.

Du Plooy, based in Johannesburg, is bullish on the prospects for a “V-shaped” recovery once the pandemic is brought under control. Expansion will be driven by following Bonfiglioli’s customers who “will find the hotspots,” says Du Plooy. “Where one industry is booming, others are likely to follow.”

  • Promising countries, Du Plooy says, include Nigeria, Ethiopia, Tanzania, the Democratic Republic of Congo and Mali.
  • The first new partnerships may come in countries closer to South Africa: Du Plooy, who is working on a PhD by building mathematical models for new market entry, is interested by growth in Malawi’s mining sector.

READ MORE Malawi’s Chakwera: Remarkable victory, but now the hard work

In South Africa, the company is “slightly behind” last year’s results due to COVID-19, says Du Plooy. The fact that the company is classed as a provider of support to essential services in South Africa has limited the economic damage. “If you told me six months ago this is where we’d be today, I’d have taken it with both hands.”

Rand hedging

Input costs have been affected by the rand’s slide this year. The company limited the impact through hedging contracts, and is considering hedging again for 2021. This, Du Plooy notes, will be more expensive to secure than it was 12 months ago. He expects the rand to continue to weaken.

Supply chains were disrupted by the pandemic, with congestion at South Africa’s ports adding two weeks to lead times, says Du Plooy.

  • There has been a “major improvement” in the last two months, with the country’s ports now more or less back to normal, he adds.
  • He gives credit to the government for “early, hard” lockdown in limiting disruption and the rate of infection. “It did have a positive impact in saving lives.”

READ MORE Can South Africa stay one step ahead of the pandemic?

The company is now testing an e-commerce platform in Europe and the Americas. Du Plooy expects that this will be deployed in Africa in 2021, probably in South Africa first. The pandemic has quickened the implementation of the platform, which will used for purchases and post-purchase technical support.

  • Another priority area is testing new products which allow the remote monitoring of equipment. Du Plooy plans to roll these out in the first quarter of 2021.

None of the prospective new partners have been chosen yet. Finding the necessary level of technical standards to meet the company’s global standards will be “a bit of a concern,” says Du Plooy. “We don’t know. Every country will be different.”

Still, economic development means that the skills environment in sub-Saharan Africa is greatly improved compared with 20 years ago, he adds.

Bottom line

Following your customers will be the best way to identify the unpredictable growth spots in post-pandemic Africa.

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