VENTURES: Contrarian A Great Exporter
Recent Western Cape Business News
THE usual way to enter export markets is for a company first to establish its products or services in its local market, and the bigger the share of the local market and the more profitable it is, the better. Then one tip-toes into the lure of exporting, hopefully with some handsome profits to show for your efforts.
So goes the conventional business wisdom.
Fortunately we sometimes encounter contrarians who, with breathtaking execution, will up-end this ‘logic’ completely with remarkable results.
One such noteworthy company is Bellville-based Technical Systems, which was started in 1993 with the exclusive purpose to export.
Last year it won the Transnet Port Terminals award in the engineering and manufacturing sector, organised by the Absa/Cape Regional Chambers Exporter of the Year Competition. Better still, Technical Systems was the overall Cape exporter winner in 2003.
Theuns Kühn, founder and CEO of Technical Systems, started the company with three other employees “with the main aim to export and add value to local materials. That was the concept,” Kühn says.
The group had two engineers working on various products to see where value could be added. Obviously large capital was required to manufacture high-tech products, something local industries wouldn’t be able to compete with easily. Originally manufacturing in the computer and printing industries was explored.
Then a group of farmers in Gauteng explained their problem of importing a particular component used in their poultry feeding systems. This set the ball rolling. Technical Systems developed its flat feeder chain, to be used in machines that distribute feed to poultry.
Once the product was chosen, the company started attending trade fairs and potential customers overseas. “We started to exhibit in 1993, actually before the product was manufactured. We were in Germany at the time and the first order was received from a company in Thailand, which is still a customer to date”, Kühn notes.
What followed will make most any exporter green with envy if the measure is annual growth in turnover. In 2003, for example, the value of exports was R24 million with growth the three consecutive subsequent years coming in at 35%, 66% and 14%. Eventually, in the last financial year ending February 2007, there was another increase of 28% with export values clocking in at R79 million.
With only about 5% of turnover generated in South Africa a figure that has remained more or less constant since the company’s inception Technical Systems now exports its products to more than 42 of the world’s leading poultry markets, including countries in the Americas, Europe, the Middle and the Far East.
In so doing it has become the world’s largest combined chain and auger manufacturer as well as the world’s only wire and auger manufacturer.
The success of the company is not necessarily the result of a bright idea. Rather, the emphasis is put on marketing and technology, not only for product improvement, but to enhance manufacturing processes as well (see separate articles).
And yes, it has its problems too. Kühn points out, for example, that the supplier of its steel, Mittal, has during the past eight months (at the time of writing) increased the price of one ton of low-alloy steel from R4 600 per ton to R9 700 AND capped its supply to about 80% of the company’s normal requirements.
He points out that steel represents up to 55% of costs, so this could be a hefty bite out of profits. Fortunately there are alternatives - imports - and the weaker rand value against other currencies has also helped to cushion the effect of the steel price increases.
Nevertheless, the future still looks rosy. This financial year turnover of R120 million is targeted, with the company stretching itself to increase production capacity, improving productivity and expanding markets.
“We have to be focused, keep specialising and improving all the time,” Kühn says. The company never lets up, working 24/7 year round.
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