07 Aug Five-year-plan makes all the difference
Andre Potgieter has come a long way since the days of borrowing welding machines and transporting steel in the back of his bakkie. When he started his steelmaking company in 1993, he was at the bottom of the heap; today, he has grown his business into an R18-million a month venture.
Before getting into the steel business, Potgieter, who is the managing director of Quality Steel in Nelspruit, was a diamond diver. But after his boat broke, he realised he had to start working; and the first thing that came to mind was steel. He was familiar with the industry as his father was involved in it 40 years ago. “I remember my first security gate taking me two weeks to build. I could not understand why. Then I started welding, and it took me a whole day to do it.”
But Potgieter owes his success to one simple idea: the five-year plan. He first decided to follow the idea a few years ago when he heard about it at a seminar. Speakers said many companies based their decisions on what was currently happening in their business. But this was not the right approach, he recalled. Every critical decision in business should be based on where you wanted to be five years from now.
“It is not like I can relax now and say, ‘I have arrived’. I want to be a big company five years from now so I have got a lot of work to do. In the last financial year, we made R39-million. This year we [have] orders [of] up to R30-million already. I think we are going to make R50-million this year. I want to be a R200-million company in the next five years.”
Equipped to succeed
And he certainly has the tools to reach his goal. New, computerised machines bought from the Dutch steel processing machinery maker, Voortman, allow the company to reach its current output target of 150 tons of fabricated steel a month consistently. Yet they have the capacity to go up to 600 tons, meaning Quality Steel can grow even further. Potgieter also bought a crane worth R4-million, which is not only used by Quality Steel, but is hired out to a number of companies.
Before he received funding from the Industrial Development Corporation, Quality Steel managed to secure a plot next to its current factory, which Potgieter said could help increase his capacity to 500 tons of steel produced per month. And the recession has begun to work in Quality Steel’s favour. The economic downturn forced a lot of steel companies who were “not serious about doing business and providing a good service” to shut down, making a gap in the market Quality Steel could exploit.
New machine means more volume
When Quality Steel applied for the loan from the IDC, the company had hit bottom because of the recession. But when it got the R20-million windfall from the corporation, it was able to buy the computerised machines from Voortman, build new offices beside the factory and set aside R2-million for capital. With the new machines, it was able to take on its biggest project yet; a 36m frame for a high-rise steel building worth R14-million.
“What is great about the machines is that [they make] us competitive now. You cannot control the cost of steel and labour so the only way you can enter the market is with volumes. And those machines are making volumes.”
There are only four such machines in the country, which are used for producing frames for high-rise buildings. It has three drilling heads, which means that unlike the boilermakers who drill one hole every 10 minutes, the new machine drills 200 holes in 15 minutes. As a result, labour costs have also dropped from R9 000 per ton to R5 000. “Before, we used to cut 50 to 70 tons a month and work until midnight. I had to pay overtime. Now, with the new machines, we are doing 100 to 150 tons a month within normal working hours.”
He added that he could bring down the cost even further to around R4 000 a ton if the drawing department produced blueprints quicker. However, it would take time for the new technical drawers to become accustomed to what the company required. “You need to be patient and you need to spend money.”
“I have hard workers at my factory”
Potgieter has a knack for picking the right workers for the right job; it is one of the reasons many of them have stuck by him since the company started 20 years ago. He also looks after his workers, and would not hesitate to give them as much as a 30% raise to hold on to them if they ever wanted to leave.
Daniel Makabe, who mans the new Voortman machine, is a prized employee. When he started working for the company in January 2013, he knew nothing about steel manufacturing. But just nine months into the job, he has learned everything he needs to become one of the company’s best steel cutters. “I have learned a lot of new things since I started here,” he said. “My computer literacy has helped me grasp the computerised machines quickly and now I know how to cut different types of steel.”
Potgieter is also planning to sell 15% to 20% of the business to his staff, making them shareholders. And in the future, he will look at acquiring a black partner who will have 50% of the business. “I do not want to get a black owner for the wrong reasons because you can get the wrong person in and he will run away. I want a person who is actively involved in the business.”
Growth and Africa
Quality Steel will also look into expanding its business into other African countries in the near future as Potgieter believes there is a large market for steel producers. Additionally, he said, South Africa, already the hub of Africa through which most trade passed, would be at the centre of global trade in the next few years. “There is no growth anywhere else as everything will come through South Africa.”
Yet he is wary about growing too quickly, saying he would need to expand gradually or the company could go under. For now, he is looking to develop in South Africa, and particularly in Mpumalanga. “I will stay in Nelspruit, I will die in Nelspruit. That is because I have a vision of growing my business here.”