Accentuate CEO on Business Challenges, Including the Looming Water Tsunami

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ACCENTUATE CEO FRED PLATT

All too many PR people and CEOs get it so wrong.  They fail to engage properly with the media, to chat face-to-face, to build up a relationship.   We receive many news releases which have a glimmer of interest in them, but the best way to really understand a company and its executives is by chatting to them.   Top marks, then, to Accentuate, which not only hosts regular media lunches, but is able to look at the business scene in SA from a wider perspective.   Our last encounter was prompted by their latest results, but also gave an invaluable insight into the company’s views on ZA today.   We spoke to CEO Fred Platt:

ZAC:   You indicated that Eskom’s power cuts are a major headache for you, with a 2 1/2 hour disruption translating into 7 hours of downtime at your flooring factory in East London.   Why is this, and do you think other manufacturers are in the same boat?

 FP:  The situation regarding load shedding with our manufacturing facility extends well beyond the (un)scheduled 2.5  hours of load shedding. As a manufacturer of vinyl flooring, the process is a continuous process, requiring heat as well as energy to power the machines. Load shedding leads to a situation where more often than not the machines need to be cleaned and heat needs to be generated prior to production resuming – resulting in loss of production for up to 7 hours. 

 ZAC:   Is it going to get any better, and if not, what can be done to minimise the harm?

 FP:     The issues around load shedding do not only relate to the lack of electricity,  but also around planning and some degree of certainty as to when power will not be available. Unfortunately, notwithstanding engagement with both Eskom and the local municipality, we still do not see a situation where the agreed load shedding schedules are implemented as published. Adhering to these schedules will go a long way towards alleviating waste and allowing the company to implement proper shutdown procedures prior to load shedding. Currently management is also investigating alternative energy sources to try and mitigate the impact of load shedding.

 ZAC:    Your fastest growing business unit is the one dealing with water treatment.   What are the water challenges facing South Africa, and how can you help with the solutions (every pun intended!)? 

 FP:      If we believe that the current energy crisis is a problem and an inhibitor of economic growth then the looming water crises will unfortunately dwarf this problem. South Africa is facing both a situation where existing water infrastructure is failing as well a very severe shortage of water-  forecast for as soon as 2025. The solution to this problem relates both in the rejuvenation and expansion of existing water infrastructure as well as the responsible recycling, reuse and disposal of water and effluent. As with energy, water has been underpriced and undervalued as a resource and I am of the opinion that over the next decade we are going to see a massive increase in both the price of water as well as penalties for the lack of recycling and irresponsible discharge of effluent. The cost of managing water will need to be factored into the production process of both industry and agriculture and alternative sources of water supply, such as desalination, will need to be actively explored. Drawing on the experience of developing economies such as India, and through our partnership with the leading water treatment company in India, Ion Exchange, Accentuate is able to provide agriculture, industry and government with innovative and appropriate technology, application and funding models to address some of these looming challenges. 

ZAC:    A lot of firms talk about the opportunities in Africa, but you seem to believe many are going about it in the wrong way – by pricing too high.  How is this, and how are you doing it differently?

 FP:  It is sad that South African companies are not taking their rightful place on the African continent and leading economic development on the continent. Certainly I believe that South African manufacturers are underrepresented on the continent. Although huge opportunities exist on the continent, we do not seem to take advantage of these and very often lose these to Europe or China. This is as a result of two major contributing factors, both relating to our past and the global isolation due to sanctions and strained relationships with our African brothers. The first, unfortunately, relates to a certain arrogance that was developed during our period of isolation towards African countries and cultures. The second relates to the fact that due to the restrictions on ownership of foreign currency, Africa gave access to earning hard currency. In addition to this, the risk was perceived to be great and African trade was generally conducted at exorbitant margins. Very often a Rand price was merely converted to a US$ price resulting in product being sourced at much reduced prices and margins from European or Asian companies. Unfortunately this mindset still persists in many costing models when dealing with African trade. Pricing therefore remains one of the major obstacles to effective South African Trade on the continent. 

ZAC:    Your flooring division has important State customers, with schools, hospitals and so on….    There has often been concern in business circles that it is easier for government at all levels to allocate funds than to spend them.  What is your current insight?  Is trade picking up? 

FP:   2014 was a particularly difficult year where we saw Government infrastructure spend slow right down with very little spend in the areas of schools, hospitals and clinics. This was due largely to three factors including the national elections, provincial political battles as well as diversion of capital budgets to operational expenses. Although spending is still constrained due to a lack of efficient and effective delivery mechanisms in some areas, we are currently seeing an uptick in infrastructure spend in the areas of education and healtcare in certain areas, especially in Gauteng and the Western Cape. Government is acutely aware of the lack of service delivery and we remain cautiously optimistic that this upward  trend will continue and accelerate.

 ZAC:    The rand is weak, and has been for some time.  Are you seeing the benefits of this?

 FP:    Although the rand traditionally acts as a hedge against competitor imports, while at the same time increasing the competitiveness of South African manufactures on the continent, we are still seeing an unusually high level of competitor activity within the domestic market. As the only local manufacturer, we remain confident that the prolonged relative weakness in the local currency will ultimately provide our Floorworx business with a sustained competitive advantage in both the local and African markets.

 ZAC:   Your latest financial results were posted this week, and show an impact from strike action.   How concerned are you about labour unrest in SA, noting that we are very badly regarded on this matter in international rankings?

FP:  Industrial action in an economy such as South Africa where there is so much inequality will remain a reality for some time to come. Most of this activity is cyclical and we have periods of extreme turbulence tempered with period of relative calm. What is of greater concern however is the politicisation of the union movement with factions within the movement mobilising workers towards the achievement of political objectives. The potential impact of this on industry is of major concern.

Conclusion:

It is easy to complain about the day to day irritations in life, but when they are happening on a monstrous scale, and when they are having a real and growing impact on business, it is time to sound the alarm bells.

Tweet of the Day:

Mark Twain (@TheMarkTwain):

Such is the human race, often it seems a pity that Noah… didn’t miss the boat.

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One response to “Accentuate CEO on Business Challenges, Including the Looming Water Tsunami

  • Michael Tatalias

    Thank you John, a great interview. Good to see a senior business leader speaking up on challenges, and still remaining dignified and polite. Business in South Africa is really going to have to up its game, to send out clear and unambiguous messages that the way the country is being governed has to be improved. Fred Platt has done a good job here – more power to his elbow.

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