South Africa’s construction boom has proved a lucrative time for a raft of new elevator and escalator companies. The rise in demand prompted Schindler South Africa, one of the established players, to review its approach to business. Pankaj Sinha, newly appointed managing director, tells Andrew Pelis how the company has transformed its operations.
The story of South Africa’s elevator industry over the last three years has been an uplifting tale of booming business. The downside for established companies like Schindler South Africa has been the need to re-evaluate and restructure in order to meet the changing demands of an ever-growing customer base, while also fending off new competition.
Schindler has long been one of the world’s largest elevator and escalator companies. Headquartered in Switzerland, this multinational giant is regarded as market leader for escalators and the number two company for elevators. It has had a presence in South Africa since 1949; and during the bleak years of apartheid, with Otis Lifts, it dominated the local market, with the two businesses claiming roughly a 90 per cent share of the market.
As the country became assimilated with the rest of the commercial world, there was a boom economic period of growth. In 2007 Pankaj Sinha relocated from India as head of operations, since when the business has undergone a major transformation. “We remain a subsidiary of Schindler Switzerland and from our Johannesburg headquarters we cover all of Southern Africa,” he explains. “We no longer have any manufacturing facilities here in South Africa—instead we rely on competency centres that manufacture at a global level and we source from Spain, Switzerland and China.”
Schindler South Africa concentrates on sales, installations and maintenance work—a change in focus that has significantly helped the business to adapt to its changing environment. “The average life of an elevator is 20 years, so the aftermarket is an important aspect of what we do and we also have a large modernisation operation in place to upgrade old systems,” adds Sinha.
Around three years ago, the company entered into a joint venture with Matemeku Group who now own 10 per cent of the business. Matemeku is wholly black-owned and its stake has contributed towards Schindler’s standing as the only elevator company in the country with a BEE Level 4 Rating.
“This certainly gives us an advantage when it comes to bidding on government projects,” admits Sinha, “but it also gives us an emphasis on developing local talent.”
That development comes through a number of training initiatives, including a very strong apprenticeship programme that currently accommodates 25 trainees, where Sinha says the changing racial mix becomes apparent.
Aside from apprenticeships, he says there is an ongoing training system designed to meet constantly changing safety regulations. “Certainly this is one aspect that we focus heavily on and we aim to achieve zero tolerance; but we also provide technical training that helps to update our people’s skills, while we also focus on keeping our engineers up to date with maintenance issues.”
The company’s commitment to training was further underlined by the launch last March of the Schindler Development Academy in Johannesburg. The purpose of the centre is multi-functional and it not only grooms the next generation of company leaders but helps employees across the business to learn new skills. Although run in partnership with local company Wow Group, Sinha suggests that by next March Schindler will have invested around R1.5 million in the project, with around 30 per cent of the company’s 550 employees having undertaken some form of training there.
Sinha says that the shift from a manufacturing base has improved product quality and consistency and has allowed Schindler South Africa to concentrate more on customer needs. Innovation has played its part in that goal and led to the launch of pioneering products such as destination control technology that enables an individual to press a destination button in a lobby and receive notification of which elevator to get into to reach that destination.
“This has proven very successful in South Africa,” comments Sinha. “There are lots of prestigious buildings here now that use this system of traffic management. Now that the market has changed, there is much more competition in our industry and the customer has more choice. I think this is a positive development, as it forces companies to ramp-up their level of service. The companies that understand the emerging reality are the ones which will ultimately win. Schindler has transformed itself from an inward-looking business to one that is focused on customer requirements.”
The changes made, he says, have resulted in the business growing in the region of 70 per cent over the past few years. Certainly the FIFA World Cup presented a number of spin-off opportunities on a number of construction projects; although Sinha feels government spending has now slowed down, with this type of contract accounting for roughly 25 per cent of the company’s business.
“The rest of our work tends to come from the private sector, with commercial opportunities more common than residential,” he states. “We have certainly seen growth in the number of shopping malls and infrastructure projects (like office buildings) that we work on. Today we have market share in the region of 27 per cent.”
The challenge of maintaining that market share and growing it is a mantle handed to Sinha as recently as this July, when he assumed the role of managing director. It is a role he is comfortable with, although he never loses sight of current market activity. “We do not offer the cheapest elevators or escalators but there is a premium for the brand and quality is relevant. We may not compete with local players on prices but Schindler South Africa is today perceived as the best project management company and that is something we have invested lots of time and training into, bringing people with specific project management skills into the company and looking at specific competencies. Our core skills are people management, customer relationships and project management competencies; and we have even invested in our sub-contractors to train them in our technologies, following a performance review.”
Sinha says it is a good time to be involved in the elevator sector, so long as the company is prepared to cope with demand. “The boom has happened in the last three years and some people were caught unawares and did not have the capacity to deliver, whereas we could.
“When I came to South Africa, I had already experienced the construction boom in India and knew that our efforts here needed to focus on planning ahead, something I was used to. Our priorities now are to keep improving our market share (we are the number one construction company right now), to continue to improve our safety track record and to develop the next generation of management.” www.schindler.co.za
