Local CE Dr Klaus Döring observes: “We have a principle that says we are not involved in politics and will never react heavily to politics. However, we have stayed here through the good and the bad times and support the country in the transitionary process.”
Siemens`s lengthy history in South Africa has enabled it to entrench itself in its chosen disciplines and Döring estimates the company holds, overall, around a tenth share of the markets it is active in.
The big deals
“We are particularly strong in telecommunications and medical engineering, while our information technology services component, Siemens Business Services, has improved considerably since our merger with
The deal with Unihold, a company of which it would not be unfair to say was battling in the unfavourable climate of the time, raised some eyebrows, yet it appears to have been one of the few IT mergers that have worked well.
“On average, only around 20 percent of company mergers succeed and this was one,” says Döring. “We`ve managed to increase the combined profitability and have landed a number of important contracts, including
Other major customers include
“Telkom is an important customer to us,” says Döring. “While its investment plans are not too exciting at present, this fluctuates and will come back. We are hoping that
Siemens dominates the local medical solutions sector. Döring confirms the company deals with the majority of private practices, most private hospitals and a large number of government hospitals.
“Government spending on tertiary healthcare has been subdued for a time as the emphasis has been on improving primary healthcare. However, there is a growing realisation that unless there is renewed investment in the tertiary sector, the installed capacity there will crumble,” he warns.
The Siemens route to market is generally direct; the company positions itself as a solutions provider as opposed to a box dropper. “If we win a large turnkey contract it goes without saying we need to maintain overall control. This said, we do invite sub-contractors to take up some of the work, particularly installation and commissioning,” Döring says.
The company applies the indirect model in areas where it is just involved in the sale of product. “We co-operate with individual companies and retailers in the areas of automation and drive products, while, in the cellular sector, the major operators are the channel to market for our handsets.”
Döring adds that Siemens is currently setting up partnerships for the distribution of PABXs and other products where the volumes don`t warrant the direct approach.
What then of the challenges of doing business in a developing country, particularly one with a fluctuating currency like the rand? “The rand has depreciated constantly on average over the last 30 years and Siemens has been able to manage this quite well,” says Döring.
“I did an analysis a couple of months ago, converting our business volumes between 1975 to 2002 from rands to euros to get another measure and it showed we`ve always had growth,” he says.
Siemens Southern Africa recorded a turnover growth rate, in euros, of around five percent from 1975 to 1994, increasing to seven percent year on year since 1994. Measured in rands, the figures stand at 17 percent and 20 percent respectively. Profit numbers are similar.
“So, it can be seen that the country has treated us well as we strove to become a major solution provider for turnkey infrastructure development projects,” Döring says.
Targets to the north
“We have seen an improvement in business development in South Africa since 1994/5. Over and above that we are positive about prospects in the SADC region and I`m personally excited about developments in Angola and the Democratic Republic of Congo. The latter will be our next major target market.”
Döring adds that the geographic isolation of southern Africa is no longer an issue as the company ships its goods and imported components via airfreight. “We also source a great deal locally. If you are a major turnkey provider, you cannot depend solely on imports from overseas. Sure, we still import key components, but maintenance services and extra installation and commissioning capacity can be sourced locally,” he says.
Siemens, according to Döring, is making measurable strides in terms of black economic empowerment (BEE). The company began investigating potential partners on a shareholder level in 1998 and now boasts three significant empowerment stakeholders –
“Another area we concentrate on is procurement, and we have set ourselves targets in this regard. We`re currently generating 45 percent of our local sourcing through BEE companies, and we aim to grow this to 50 percent by the end of this year. Offhand, I can`t think of any local company that has done as much,” Döring says.
Ahead of the game
Siemens, he adds, defined an internal affirmative action policy in 1996, long before the promulgation of the Employment Equity Act. Several foreign companies operating in South Africa did the same, prompted not by local pressure, but by sentiment back home.
“Since then we have been implementing the necessary actions in terms of recruitment, promotion and training. Nowadays, 42 percent of senior, middle and supervisory management is drawn from previously disadvantaged communities.
“This is quite an achievement considering that when we started this number stood at 25 percent. Our target for 2004 is 46 percent.”
Siemens Southern Africa, says Döring, enjoyed a record 2002, and while he concedes it will be difficult to maintain that level of growth going forward, he is quietly confident about short-term prospects.
“Doing business in Africa is complex – there`s such a lot of red tape – but things are definitely improving. A number of the bigger South African companies are moving northwards and, rest assured, they`ll be taking Siemens along with them.”
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