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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 South Africa’s Relevance for African ExpansionExpansion
Doors Ajar for New Transformer Entrants in South AfricaDoors 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 of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the written approval of Frost & Sullivan.
Today’s Presenter
Rob Smith, Research Analyst
Frost & Sullivan
2
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)
Focus PointsFocus Points
1
2
South Africa in Africa – How Relevant Are We?
What Challenges and Drives T&D Growth?
3
3
4
Overview of the Growth Opportunities in South African T&D Markets
Growth Strategies out of the East
5 Conclusions
South Africa in AfricaHow Relevant Are We?
The African Mega Trends
`̀
CairoAlexandria
Abidjan
Addis Ababa
Urbanisation
Corridors will unlock economic potential of landlocked countries and will improve inter-dependence among cities leading to regional economic growth
The North Delta Region• Combined population of 77 million
• 3 emerging corridors: Cairo-SuezCairo-AlexandriaCairo-Ismailia
900 km Kampala-Nairobi-Mombasa urban corridor
1,000 km Abidjan-Ouagadougou Corridor
Ouagadougou
Ibadan
Lagos
Luanda
Johannesburg/Pretoria
Dar es Salaam
Nairobi
Accra
Kinshasa
Main Corridors
Cape Town
DurbanData Source: UN-Habitat, 2010
The Greater Ibadan Lagos Accra (GILA) Corridor
• Combined population >18 million
• Contributes combined GDP of US$127,592,000
corridor
North-South Corridor• Facilitate inter-regional trade from Cape to Cairo
• Free trade area comprising 533 million people
• Combined GDP of $833 billion or 58% of Africa’s GDP
Trans-Cunene Corridor• Will link the Democratic Republic of Congo (DRC) with South Africa through Angola and Namibia
Regional Integration
An Integrated Continent
$50 billionPower Interconnection Investment:
Total Intra-Trade: $216 billion
Regional Transport Investment (road & rail): $30 billion
`
Planned Electricity Interconnections
Trilateral Free Trade Agreement (T-FTA)
Road Infrastructure development
Investment (road & rail): $30 billionICT Infrastructure Development: $60 billion
A Foot on the GroundConcerns, Restraints and Drivers
Concerns for ManufacturersConcerns for Manufacturers
Time pressures
• R&D and skills development to support technology developments could take up to 2 years
Planning Ahead
• Tender application
• Key concerns around efficiency of equipment
• Planning for international partnering and technology transfer
9
Industry Trends and ConsiderationsIndustry Trends and Considerations
• Budget Limitations
• Rising Failure Rates
• Services Offerings
• International IP Partnerships
• Equipment Assessments
Rising Efficiency
Requirements
Deepening Maintenance
Backlogs
10
• End User Training
• Internal Skills Development
• Price Competition
• Domestic Quality Concerns
Skills Shortages at End Users
Increasing Foreign Entry
Major RestraintsMajor Restraints
RestraintsShort
Term
Mid
Term
Long
Term
1 Restricted Installation Rate
2 Delays in IRP Development
3 Constrained Infrastructural Development
11
3 Constrained Infrastructural Development
4 Large Barriers to Entry for Newcomers
5 Strengthening Presence of Eastern Products
6Exchange Rate Fluctuations and Stability of the Eurozone
High
Impact
Medium
Impact
Low
Impact
Major DriversMajor Drivers
DriversShort
Term
Mid
Term
Long
Term
1 Aging Equipment
2 Grid Expansion and Strengthening
3 Growing Electrical Demand
12
3 Growing Electrical Demand
4 IRP and Supporting Infrastructure
5Increased Efficiency to Drive Replacement of Existing Equipment
High
Impact
Medium
Impact
Low
Impact
Gaining GroundGrowth Opportunities for the Informed
50
60
70
500
600
700
(HV
tra
nsfo
rmers
)
Re
ve
nu
e (
US
D M
illi
on
)High Voltage Transformer Market Unit Shipment and Revenue Forecast
South Africa, 2008-2016CAGR = 0.5%
HV Transformer Market Size ForecastHV Transformer Market Size Forecast
• The total market is valued at roughly $450 million and is looking to develop as illustrated below.
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
0
10
20
30
40
50
0
100
200
300
400
500
Un
its (
HV
tra
nsfo
rmers
Re
ve
nu
e (
US
D M
illi
on
)
Year
14
Source: Frost & Sullivan
T&D Planned ExpansionT&D Planned Expansion
High Voltage Transformer Market: Transmission Infrastructure Map South Africa, 2011
7,830km of new 400kV
501km of new 275kV transmission lines (Red)
Eskom
Installations
15
4,430km of new 765kV transmission lines (Purple)
new 400kV transmission lines (Green)
lines (Red)
The East in the SouthIs it the Solution?
� Asian versus Western Business Model
1 Capital project gifts, with contingencies
2 Tender preference and trade agreements
4 Geographic footprint and multiple industry entry
Offer of holistic development solutions3
What is Exported? Thinking Long TermWhat is Exported? Thinking Long Term
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
ConclusionsWhat to Take Away
Conclusion Slide: Key TakeConclusion Slide: Key Take--AwaysAways
Overview
Steady at first with uncertainty moving forward
Watch the TDP development and IRP implementation
Count on stable spending from Eskom
Next Steps
19
Next Steps
Track the development and plans of renewables
Identify key partners internationally
Some Recommendations
Establish the technology requirements early
Assess existing skills base and bridge the gap
Conclusion Slide: Where does that leave you?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
20
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?
Next StepsNext Steps
Develop Your Visionary and Innovative SkillsGrowth Partnership Service
Share your growth thought leadership and ideas or join our GIL Global Community
21
Growth Partnership Service join our GIL Global Community
Join our GIL Community NewsletterKeep abreast of innovative growth opportunities
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22
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Research Analyst
Industry
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24
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