Peter remembers doing a turnover of R45 000 in the first month of running the business that he started with the assets of an insolvent company in 2001. Today, the company does close to R8 million per month.
What is remarkable about the growth of Armcoil Afrika is that it far exceeds the growth of the transformer industry in South Africa, which has gone through stages of stagnation or decline. At one stage South Africa had the largest number of medium voltage motors in the world, but with the decline of the country’s mining industry the number has fallen sharply.
Furthermore, new insulation technology introduced in the 1980s made motors much more robust, decreasing the need for repairs and servicing.
It was certainly not a booming industry in which Peter, at the age of 44, stepped out of his well-paid, enjoyable corporate job to start his own business. His decision was not based on any major opportunity that came along, says Peter, but rather on a realisation that if he ever was to start his own business, it was now or never.
In a sense, Peter seems to have been destined to one day run his own electrical manufacturing company. His grandfather started one at the age of 60, and when he retired from his business at 70, Peter’s mother, a Latin teacher, took it over. The result was that Peter grew up in the industry.
After school, he joined the merchant navy and spent a few years in Uruguay. On his return to South Africa he was drawn back into the industry in which he grew up. On the strength of the knowledge with which he had grown up, and despite the lack of formal electrical qualifications, Peter rose to director level at a local corporate.
He saw his chance to step out on his own when he came across the remains of a company that had gone insolvent. It had been too reliant on one or two large customers to keep afloat when the industry started its decline. Peter cashed in his pension, persuaded four of the key personnel of the company to join him as partners, and negotiated with the liquidator to pay off the assets of the company in instalments.
Since then, Armcoil Afrika has grown from strength to strength. About 70% of the company’s revenue comes from the manufacture and repair of transformers and other electrical equipment at its plant in Roodepoort. About 15% comes from importing high-voltage transformers, and the remainder is from the servicing and maintenance of electrical equipment for Eskom, municipalities and private companies, mainly mines.
Increasingly, Armcoil Afrika sends teams of experts for site work in places as far as Mauritania, Burkina Faso, Zambia and Mauritius. What accounts for Armcoil Afrika’s fast-paced growth in a slow industry?
Peter believes that a crucial aspect of Armcoil Afrika’s success is his focus on building up knowledge and expertise inside the company through full-time employment. Contract employment through labour brokers can be a convenient way of doing business, says Peter, but in the long term the only way a company can build strength is to nurture its talent through training and full-time employment.
Peter, who is clearly passionate about training, says one of his greatest frustrations is with South Africa’s learnership system. For example, Armcoil Afrika struggled for two years to convince the industry’s training authorities to issue a formal qualification to an excellent apprentice simply because he didn’t have matric maths. He says the requirement that an apprentice must have matric maths to qualify causes the industry to train the wrong candidates - relatively over-schooled youngsters who tend to leave their trades at the first opportunity.
Expanding a business in a capital intensive industry requires constant finance, and Armcoil Afrika has used bank facilities throughout the years. About three years ago, a mentor of Peter’s introduced him to Business Partners Limited (BUSINESS/PARTNERS), who agreed to lend the company working capital. Since then, Armcoil has taken a second loan to buy equipment.
Peter says dealing with BUSINESS/PARTNERS is different compared to the banks. “You get the sense that you are dealing with the decision-makers. They understand business,” he says.
Looking forward, Armcoil Afrika is set for still more growth, although the focus will be on profitability and not just purely on turnover, says Peter. There is a lot of growth potential in the manufacturing of transformers, and as Africa to the north develops, the sky is the limit.