Sometimes, taking the next step in a company’s growth means giving up total independence, as Alan Swaby learns.
South Africa has a history of engineering contractors growing to the point where they implode and disappear. Over the years, most of the world’s biggest contractors have been attracted by the vast amount of work generated by the country’s mining industry; but you’d hardly know that now. Compare today’s crop of contractors with those of 30 years ago and only a few remain.
Conscious of the pitfalls accruing from pursuing a purely growth based strategy, LSL Consulting and its sister company Tekpro Projects have until now been content not to chase the big projects and the big bucks. When LSL was initially established in 1981 as an engineering consultancy on materials handling projects, regulations forbade professional engineers from being directly linked with a contractor. “In those days,” explains managing director Dimitri Simigiannis, “mining houses had their own extensive engineering departments and the only time we got work from them was when a project was particularly tricky. As such, we soon gained a reputation for producing good quality engineering solutions.”
This opened the door to another way of getting around the professional regulations. LSL started doing all the tendering work for turnkey projects on behalf of major contractors, on the understanding that LSL would be awarded the engineering work should the bid be successful. And, of course, on those successful projects, LSL was soon seen as the interface between client and contractor.
As a consequence, Rand Mines invited LSL to bid as a contractor on a particular project, and Tekpro was created as a separate company to carry out the work. “It took us into a new league financially,” admits Simigiannis, “but the risk was low as we had already been doing estimating and engineering for many others.”
The two businesses work from the same premises, use the same personnel but remain separate legal entities even though the professional regulations have now been eased. It’s meaningless to compare sales revenue for the two sides of the business but typically the consulting arm is generating in excess of R150 million a year in fees while the construction wing is working on R300 million to R400 million of projects per annum.
LSL defines its area of expertise as anything to do with moving ore, with particular specialization incoal and iron ore—but excluding the beneficiation process. Conveyors are the mainstay of the work, with other items (crushing, screening, stockyard storage, load out stations, etc) built in as the case dictates.
Ten years ago, Tekpro made its mark when it was successful with a tender to Anglo American for the design and construction of a dual carrying conveyor at the Namakwa Sands site in the Western Cape. “Normally,” explains Simigiannis, “the return belt of a conveyor lies flat and runs empty. But by putting trough idlers on the bottom it’s possible to carry material on both strands of the belt—bringing ROM into the process plant and taking the waste back for rehabilitation.”
It’s not that the conveyor design was new; but getting the nod from Anglo American was a great vote of confidence in the company’s engineering ability and has been the source of a decade’s work for LSL from Anglo American alone. The dual carry conveyor has subsequently been extended on a couple of occasions and now runs for an impressive 6.6 kilometres.
The nature of any project is that the client only generally realises that things are going wrong during commissioning. A plant designed by X or Y will probably contain the same number of conveyors but what won’t be apparent is whether the conveyors are up to the job. “LSL was set up by very experienced and well respected engineers,” says Simigiannis, “and the business is still controlled by hands-on directors. By ensuring that the engineering is right from the outset, we eliminate all the problems that could arise during commissioning.”
With the company owned by working directors, there is little appetite for excessive risk. Simigiannis makes the point that without factories and masses of plant and equipment, and a small workforce of between 50 and 60, there is no need to chase unprofitable work simply for the sake of keeping people occupied. At the same time, the two distinct sides of the business help to smooth out the inevitable peaks and troughs that are the nature of contract engineering.
Nevertheless, and despite not being too fussed about growth, the directors have realised that the company has come to a natural point at which it needs to move up to a new plateau, or the business will go backwards. Eighteen months ago, Simigiannis found himself working in conjunction with Jim Harrison of Taggart JHDA. “We had been hired to consult on the materials handling for a mine and Jim’s company was consulting on the process. Our two companies are similar in size and ethos and Jim suggested that getting together would make good business sense.”
As such, 18 months later, the team at LSL is delighted to find themselves linked with the US contractor Taggart. “JDHA has the process expertise,” explains Simigiannis, “Taggart has the international connections and financial muscle and we provide the both of them with materials handling know-how and an intro into iron and other minerals which neither of them really had.”
LSL and Taggart JHDA will continue to operate separately for a few years before moving in with each other. In the meantime, the troika will search out suitable projects on which they can mount a joint approach. Already the association is paying off for LSL, as it is about to embark on the engineering of a materials handling plant on the other side of the world, brought to it by Taggart Australia.
“We never had the desire for high risk projects nor were we well equipped to take on international work,” says Simigiannis, “a doubt that was reinforced when we got our fingers burnt when using Swedish technology which went wrong. But the Taggart connection will reduce the risks of that type of project and open many new doors for us.”
