State of the manufacturing nation

November 2008 News

Hi-Tech Security Solutions spoke to two local manufacturers to find out their opinion on the state of manufacturing in South Africa. Grant Hazell, sales director at Inhep Digital Security (IDS) and Derick Terblanche, director at Dex Security Solutions offered their insights.

1. What is the market like for local manufacturers? Are South African companies looking for local products instead of international ones? What about exports? Are your products in demand?

Hazell: Actually, the market has remained surprisingly buoyant for locally manufactured security products, and especially so for control panels. The world might be heading for a recession, but people need security now just as much as before. Conditions certainly are tougher for the industry right now compared to six months ago, but we have been relatively unaffected up to this point. I think a lot of it has to do with the fact that protecting ones home, family or business is not a luxury – it is a necessity. Crime does not come down when the economy slows, in fact it may even increase, and so demand for well priced, well supported security products will remain strong.

We starting exporting our control panels into Africa and parts of the Far East (China and Malaysia) a few years ago. In terms of alarm panels Inhep is one of the few – if not the only – exporter of alarm panels out of South Africa. We are enjoying exceptional export growth at the moment – four to five times the growth rate of the local market. This remains a key strategic growth area for the company.

Terblanche: When considering security products clients look for a proven solution and typically a known reputable company. This makes the introduction of the new local products quite challenging. Known branding is important. It makes a difference for local brands to compete against large international brands.

2. What are the benefits of buying local products? Price/service/quality etc?

Hazell: Locally made products are insulated from exchange rate fluctuations, we are not forced to keep raising our prices to keep ahead of a falling rand. The other key advantage of purchasing locally produced security products vs. imports is access to after-sales service and support. It is very easy to get replacement parts or technical advice from a local manufacturer than trying to get the same from an importer. But customers who use locally made products are also a lot closer to the R&D process – their feedback on the ground can be rapidly incorporated into new product updates, new features, improved functionality, and so on.

Terblanche: Support is a key requirement considering the product range being security related. Local conditions, both environmental and user requirements are in every case different to international requirements. Local products cater for this and customisation is key.

3. Is the global economic uncertainly affecting your business? Do you think there will be any impact in the coming year?

Hazell: Again, there has been a surprisingly negligible effect on us up to now, part of the reason being that we manufacture the majority of the alarm systems we sell, and from strong demand of our CCTV range. However, there are already strong signs of an industry-wide slow-down as a result of the global downturn – it is inevitable and we must plan for it. One of the key strategies for countering this will be our export strategy into untapped markets such as the rest of Africa and the Far East.

Terblanche: Impact is relatively low as security is a necessity and not a luxury. Overall economic downturn will however eventually spread over to all sectors and will impact going forward.

4. What makes your manufacturing operation different? How have you innovated to get the best product at the lowest cost? In other words, what is unique about your operation/product/service.

Hazell: Over half of our turnover comes from our own inhouse designed and manufactured products. Inhep has a strong R&D team that is constantly researching how to improve the IDS product range. We are not dependent on imported products that are being pushed through from overseas manufacturers; we know our market and its requirements.

Terblanche: Customisation and development according to local requirements is a differentiator, as is service and support levels. Focus of DSS is a solution and business focus rather than compact or technology focus. We are trying not to compete on price, but rather to fit the best solution to client requirements. Therefore offering best value for money.

5. How important is innovation in the local manufacturing market? Is there a lot of competition?

Hazell: Compared to 20 years ago, when Inhep began operations, competition has increased massively. This is very positive for the industry and gives the customer a wider range of options to choose from. The market demands continuous innovation because criminals are also innovative and we need to remain ahead of the curve.

There has been a great deal of innovation recently in terms of integration between different product groups, such as a control panel with a GPRS unit, or the new hybrid wireless systems that are now available, and so on.

The type of competition has also changed over the years. First it was the international brands being imported into the country. Now the trend of the one-stop shop distribution outlet has reached prominence – just as one would shop for all of one’s groceries at the local supermarket, so customers are now able to enter a security store that offers a wide range of products from a large number of different suppliers.

Terblanche: Due to unique challenges in local markets innovation is critical to success. This could be customisation rather than full product development Competition is not that fierce but clearly showing differentiation is more of a challenge. Again competing against large industrial brands, especially in security is quite challenging.

6. What about the skills factor? Do local manufacturers have the skills on hand to function and innovate effectively?

Hazell: Yes, local manufacturers most certainly do have the skills to take on the big international names head on in terms of quality and range of product. However, we are facing a serious challenge in terms of retaining our top-end designers and engineers. Too many are leaving the country and taking their skills with them. We are finding it increasingly difficult to fill especially the high-end positions because of the brain drain the country is experiencing.

Terblanche: Skills is a major problem, not so much on the innovation side but on the manufacturing, installation and service quality side. A substandard level of service has developed in SA due to the experience and skills shortage and has resulted in a snowball effect allowing suppliers to get away with bad service. Unfortunately no immediate solution is evident and will require high levels of discipline, training and some sort of independent rating to allow clients to choose the best suited supplier and differentiating objective service levels.

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