The conclusion of this historic deal brought the Caterpillar brand and its now-ubiquitous heavy earth-moving equipment and power-generation machines to South African shores.
Ironically, it is a bet that Punch won against a sugar cane farmer that sparked the partnership, prior to his travelling to the US to negotiate and conclude the agreement for the Barlows to be the sole sales and service Caterpillar dealer in South Africa. Punch sold the first Caterpillar tractor - a little-known brand in our country at the time - to the farmer after he had won a wager that the tractor could out-plough a span of oxen.
Since the introduction of Caterpillar in South Africa 90 years ago, both Barloworld Equipment and Caterpillar have grown exponentially to become successful multinationals, with Barloworld Equipment emerging to be Caterpillar’s leading dealer in the world, with a presence in 10 other southern African markets, along with Iberia and Siberia in Russia’s Far East.
Not only has the combination of the two companies played an essential role in the development of South Africa’s mining industry and impressive physical infrastructure, it has also been a strong contributor to job creation and tax revenues across the markets where we have a footprint. The Caterpillar-manufactured machines that we supply to our customers, range from the dragline excavators - used mainly to dig coal for electricity generation - to drilling rigs that drill oil and gas wells for extraction to bulldozers that push large quantities of soil or rubble at construction sites. And many other earth-moving machines that are deployed in mining or construction projects to build modern civilisations.
Due to the cyclical nature of the industries in which our customers operate, we have learnt over the last 90 years to be agile and to roll with the punches during difficult times.
This strategy has stood us in good stead, whereby we develop innovative solutions to respond to the challenges facing our customers and assist them to ride out economic busts to stay alive. As a result of the slump in commodity prices in the past four years, Barloworld Equipment has seen a consistent decline in its order book. The downturn in the mining sector has forced some of our customers to curtail their capital expenditure or defer projects whose returns have been considerably reduced by the low commodity prices.
Many customers are opting to prolong the lives of ageing machines instead of purchasing new ones to the point where the after-market segment of our business currently represents 56percent of Barloworld Equipment’s total revenue mix, offsetting a portion of the decline in new machine sales.
We have invested in new capacity to support our after-market customers, who are holding on to their old machines until the commodity markets bounce back. Part of this investment in new capacity has resulted in the establishment of a state-of-the-art component rebuild and remanufacturing centre in Boksburg, east of Johannesburg. In this rebuild centre, we have invested approximately R450million and employed nearly 200 highly skilled artisans, where we remanufacture end-of-service life Caterpillar products to “same-as-new” condition, or better, at a fraction of the cost.
As part of celebrating our 90-year partnership with Caterpillar, we are launching an advanced distribution warehouse that will radically reduce the time it takes for customers to order and collect spare parts for their machines. This $100m (R1.3billion) distribution facility, located at Isando, will supply all our customers in southern Africa.
The significance of these investments is that they will help extend the lifespan of old machines, while the quick turnaround in the availability of replacement parts will allow customers to carry out repairs and maintenance work on their equipment speedily. This will reduce production disruptions.
We believe that the investment decisions we have made - including the adoption of digital and technology-enabled solutions in our machines - in response to prevailing market dynamics will position our customers to take advantage of a turnaround in commodity markets.
When the turnaround eventually manifests, our customers will emerge stronger from the trough, having the ability to replace ageing machine fleets with new ones.
Over the next 90 years of our partnership with Caterpillar, Barloworld Equipment will continue working towards achieving its vision of becoming a leading Caterpillar dealer in the world. We will continue to rigorously contain costs to take advantage of the market upturn with a leaner, nimble, operationally efficient organisation.
Skills development will remain a key focus area of our business transformation implementation, which we will use as a launch pad to recruit more women into our organisation, in line with our gender diversity policy to boost women representation to 40percent of our staff by 2020. Barloworld Equipment’s artisan training has become the industry standard, having pioneered the technical learnership system in South Africa in 1970. I am confident that the next 90 years will bring nothing but prosperity for all the stakeholders of Barloworld Equipment.
Emmy Leeka is chief executive of Barloworld Equipment southern Africa.