MACIG Connect Series
Amaury Lescaux (AL): The SMT group was founded in 2010 with its headquarters just outside of Brussels. The group was created out of the restructuring of a former company, ATC, which was also involved in the distribution of mining equipment and vehicles. We belong to the Belgian holding Société de Distribution Africaine (SDA). SMT’s business is split into three areas: Volvo Construction Equipment, Volvo Trucks and Volvo Penta, which is focused on the sale of electrical generators and marine engines. We have full operational offices and workshops in 14 African countries, but we also have exclusive distribution agreements to market Volvo products in eight African countries, the most recent of which is Algeria.
In Kinshasa, we have very strong sales for trucks and operate a full repair workshop; the goal now is to boost sales of construction equipment. In Katanga, this trend is reversed, as we see high demand for mining and construction equipment and are working to reinforce our market share in trucks.
Given the difficulties associated with transporting equipment around the DRC, how do you manage your stock of spare parts?
AL: We keep an inventory of $4 million in spare parts between Kinshasa and Lubumbashi. Aside from this, we have access to a large stock of Volvo parts that is kept in South Africa, financed by the Volvo Group. As an official dealer, we can request an urgent item, and it will be on a plane to the DRC within two or three days. As for transport within the DRC, over the years we have grown accustomed to dealing with the logistical challenges of moving components around to the mines themselves. We have arrangements with local trucking companies and airlines for when the roads are obstructed.
Support services and maintenance are of key importance to equipment providers. What kind of services can SMT offer in this regard?
AL: In total, SMT has 90 employees in the DRC, 60 of which are dedicated to technical support. We always aim to promote local skills and two years ago, we formally initiated our training program for young local technicians. The course lasts two years and includes theoretical and practical elements. While enrolled in the course, all trainees receive constant oversight from a senior technician. At present, SMT is involved with six large maintenance contracts at major mines. At Kinsevere and Kapulo we supply MCK with all their equipment and take care of all their maintenance, repairs and spare part requirements. The largest Volvo fleet in the country – 120 machines – can be found at ENRC’s Kakanda operation. We also have some machines at Kamoto and Mutanda, mainly used by different local contractors.
Reliability and durability are two of the main qualities that miners look for in their equipment. How does Volvo compare with the competition in this regard?
AL: A standard truck or excavator will work approximately 5,000 hours per year on intensive application. The expected lifespan for most equipment is between 20,000 and 25,000 hours, or four to five years. However, we have sold machines that have continued operating for 30,000 hours, particularly at Kakanda. We are proud to record the uptime of the Volvo fleet at above 98% for the year 2014 at Kinsevere. This is due to our excellent maintenance solutions and the high quality and durability of Volvo machines.
As local banks seem unwilling to finance purchases of expensive equipment, what kind of financing deals can SMT offer its clients?
AL: There are two issues to consider when it comes to equipment supply in the area: availability and financing. We maintain a large stock of machines and trucks in Antwerp so we are able to ship them out to the African territories very quickly. As for financing, Volvo has a long history of working in association with EKN, a Swedish public entity that exists to promote Swedish exports. Once we have detailed project information and financial statements from a client, EKN is prepared to assume the risk of financing large deals within the DRC. Although interest rates have come down in recent years, there is still limited access to credit here so alternative financing programs from Europe are growing in popularity.
Given the lack of consistent power in the DRC, how have you seen demand for Volvo Penta products evolve?
AL: There is a saying here that the generator market is a universal market. While there have been great improvements in transport infrastructure, fuel quality and general quality of life in recent years, the power supply has actually worsened. All businesses, no matter what size, need a genset. In fact, our client base includes everything from private individuals to retail outlets or even churches. We do not generally sell to the mines themselves; as they require such a huge amount of power they need specialized generation equipment, capable of producing output in the MW range. Sometimes they choose to install their own power plants. We focus more on mid-size machines that can deliver from 10 kilovolt-ampere (kVA) to 2,000 kVA.
We have heard of poor fuel quality leading to a need for increased engine maintenance in the DRC. Is this still an issue today?
AL: Ten years ago, it was difficult to find high quality fuels in the DRC. There were no good storage facilities and import controls were lax, which led to fuel being adulterated with other substances. Most of the fuel was produced in South Africa at outdated refineries and the end product was often high in particulate mat-ter or contained too much sulfur. Consequently, there was even more need for maintenance as diesel injectors are susceptible to damage if they are running on lower quality fuel. Now there is better storage infrastructure, more control over imports and the fuel itself is imported from modern refineries in the Middle East.
Looking to the future, is SMT planning to introduce any new product lines into the DRC?
AL: On a global level, Volvo has several partnerships with other equipment providers, one of which is the Indian manufacturer, Eicher. In India, it is one of the most recognized names in the production of light trucks and buses but they have a very limited footprint in Africa. Their reliability and ease of maintenance makes them ideally suited for the African market. The quality of public transport in the DRC is extremely bad, even by African standards, and the local authorities are seeking to improve the situation. Kinshasa is already on the right track and last year the city received its first order of 250 buses. There are big investments planned for new municipal bus fleets around the country so there is a huge potential market for us to bring over these vehicles. In Dar es Salaam there is already a fleet of 500 Eicher buses in circulation.
Volvo also owns 70% of the Chinese equipment manufacturer SDLG. In 2011 we began marketing their products in the DRC and met with great success. The main focus is on equipment for large civil works such as road building or construction sites. To date, more than 100 SDLG machines have been sold throughout the country.
The DRC has suffered from an unfortunate reputation for violence and disorder. As a long-term resident and businessman operating in the country, what message would you like to convey to potential investors here?
AL: The DRC is full of opportunities and now is the time to be setting up operations. Copper and cobalt min-ing is already well established in South Katanga but there is still enormous room for growth outside this small region. Gold mining in the Kivus and Orientale Province is in its early stages but it could grow to be a second mining hub to rival Katanga. Manufacturing could also be an important driver for the country. The market is huge and almost all consumer goods are imported. More local production would be beneficial to investors and consumers alike. As long as we can maintain the political stability that has characterized the nation over the past few years, the future of the DRC will be a true African success story.
This interview was part of research being conducted by GBR for its upcoming Mining in Africa Country Investment Guide (MACIG) 2016. A pre-release report on the Central African Copperbelt was released in May 2015 and can be accessed here. To participate in this report, please contact Molly Concannon at firstname.lastname@example.org or +243(0)826300684.