Company Report: Electro Inductive Industries
Transforming the Industry The distribution transformer industry in South Africa may be struggling, but Electro Inductive Industries is defying the downturn. Exec Digital finds out how the company has developed in the last decade

Loading onto road freight

Pole mounted transformers awaiting shipment

Winding small power transformer

Back in 1999, two budding entrepreneurs, Vernon McMahon and Mark Going, had the inspiration and drive to start Electro Inductive Industries, or Eii. Now it is one of the foremost companies in the Distribution Transformer industry in South Africa and sub-Saharan Africa.

Errol Kotze joined the business seven years ago as Sales and Marketing Director. With a background in the transformer industry, he was well-placed to establish Eii and see it make a name for itself in the market. However, he also saw some¬thing in the Company’s founders.

“By joining them, I was going from a very large listed company to a relatively small Company, but they were full of flair,” says Kotze of McMahon and Going. “And there seemed to be more scope with them, being young entrepreneurs.”

Eii has contracts with local authorities and Eskom but when it first tendered for work, Kotze admits that they were all somewhat naïve. “Little did we know when we tendered, the enormity of the contracts,” he says. “Overnight we were called upon to produce large quantities of Compact Substations.”

“However, when these orders started rolling in, we had to grow substantially and very quickly.”

Today, the company manufactures to the SABS 780 specification. “The SABS specifica¬tion is from 16 to 3150KVA transformers. We do what we call miniature substations,” he explains. “We also do power transformers up from 20MVA at 66KV.”

TAKING ON THE COMPETITION
Despite Eii’s initial growth and success, the market in the region was still extremely competitive. “Being a small company, and we were competing against two very large companies in South Africa, we realised that to become competitive we had to do something with our costs,” Kotze says. “So we looked at our technology and we found technology in China that allowed us to use less materials in certain of our transformers – the smaller range.

“We purchased that technology, purchased those machines and thereby became more com¬petitive in the market.”

Thanks to the ambition of its founders and Kotze, Eii has become one of the leading manufac¬turers in the transformers industry. From its head office in Cape Town, the company has expanded to Johannesburg where it operates a miniature substation assembly plant. It now enjoys a 20 per¬cent share of the market, although Kotze is modest about Eii’s success, while its main competitors each have a 40 percent share. “We’re one of the big three and that’s always been our aim, to be up there,” he adds.

However, the recession is pushing the trans¬formers industry to its limits. Kotze is the first to acknowledge that the sector is struggling. “Yes, we are feeling the pinch,” he says. “Eskom, our national utility, is not ordering what they set out to; local authorities are cutting back, mainly because there is very little development going on in the country at the moment.”

So has Eii continued to make investments? “When times are hard, you have to go and look for work, and we can only do that by investing in our sales and marketing force,” explains Kotze. “So we have taken on additional sales and marketing engi¬neers to try and source the work.”

THE OUTLOOK
So far, the company’s efforts have paid off and it has a “moderate” order book, according to Kotze. “We have identified certain projects that we are pretty confident in receiving a portion of,” he says. “That’s the only way you can really forecast your future market.”

But that’s not to say the industry is seeing signs of recovery. As Kotze reiterates, the current state of the market remains serious. “The electri¬cal industry in South Africa is undergoing a severe recession – there’s not much going on,” he says. “Once there’s no development in the country, nobody needs bricks and mortar, nor do they need transformers and switch gear.”

Nevertheless, Eii has made plans for the future and is as determined as ever to see off the compe¬tition, as Kotze attests: “We have plans to increase our market share, we have plans to get greater cov¬erage and to increase our customer base.”

Meanwhile, its reputation has seen the com¬pany build strong relationships with its clients in the last decade – now Eii can rely on these customers for continued support. “We try and have long-term relationships with customers because once you’ve established a contact with a customer, they will always come back to you, providing you’ve offered a very good service,” he adds.

So what does Kotze believe the future holds for Eii? “We’ve got to be competitive because every single job has to be quoted for and if we’re a rand up, we won’t get it,” Kotze explains. “We have to give a very, very good service level and we have to adapt to customers’ requirements and be versatile.”

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