It seems that energy supply issues have become an every-day part of life in South Africa. For that reason, one of the biggest areas of growth in the energy market in recent years has been the drive towards more efficient use of electricity. That is where Standard Electrical (SE) comes into its own.
For the big contracting companies, relying solely on the construction industry for business has in recent times proved a challenging approach. At SE, the decision was taken several years ago to explore the energy efficiency market and the results have lead to a more diverse business that continues to enjoy exponential growth, as Mark Scop, Director explains:
“We operate two main focus areas for energy efficiency retrofitting; the first is a solutions based approach. This approach is adopted where the landlord or tenant is prepared to commit capital to the project. In such an instance a full audit of the site is conducted and a complete retrofit solution is proposed.
“The second approach is a free issue, where the landlord or tenant is not prepared to commit capital to the project. In such an instance a site audit is done focusing on specific technologies that meet the burning hours required to qualify for a free issue of specific technologies.”
The company has seen significant growth in the energy efficiency retrofitting market over the last 18 months, but has its roots in more traditional electrical contracting work, which Scop describes as “still our bread and butter work, as it has been over the last forty years.”
Johannesburg-based SE was founded in 1946 by Chaim Abrahamson, the father of the outgoing Managing Director, Gary, who took over the running of the business in 1978. A measure of how far SE has grown can be taken by the fact Gary only employed 6 staff back then; today SE has in excess of 200 employees.
A major development within the company occurred on 1 December 2012. Zeb Palla, who started in the company 24 years ago and was the Operations Director, was appointed Managing Director of the company. Zeb replaces Gary, who assumes a non-executive director’s role, directing his passion and energies toward the creation of new business opportunities for the company in energy-efficiency solutions.
“The big game changer for us came in 1987 when we bought Lipman Brothers and doubled in size almost overnight,” Scop describes. “The company listed on the Johannesburg Stock Exchange in 1997 and grew in size with further acquisitions – however the business became diverse and the listing was unsuccessful.
“Since 2000 the business has been privately-owned and has enjoyed organic growth. Our general electrical and contracting work involves installing, electrical infrastructure, lights and plugs in retail parks, shopping centres and office blocks and we were able to piggyback off the construction boom in recent years,” he continues. All was well until the construction industry began to feel the effects of the economic downturn and work started to dry up. This almost coincided with the increased demand within the energy efficiency market and Scop says that the company has been able to take advantage of the various Eskom Integrated Demand (IDM) programs that offer financial incentives for energy savings.
“We take our technology and replace energy hungry building devices with energy efficient solutions. The big thing in South Africa is that you are able to get the Eskom funding; they will pay you for the savings generated.” says Scop.
“This has created lots of business opportunity for us over the last 2 years and the momentum continues to build. Whilst we tend to rely more on electrical consultant approvals (as opposed to working with designers and architects), we have worked on quite a few Green Star Rated buildings and our focus is on lighting, solar power and photovoltaic projects.”
Scop says that the government in particular has been vocal in its public support for solar power and the trend towards energy efficient buildings continues to gather momentum and is beginning to attract overseas electrical companies.
Despite added commercial competition, Scop says that SE is well-placed to serve the South African market: “We are one of the top five electrical engineering companies in the country. The energy efficiency aspect is something that we have always had a working knowledge of and used to deploy within financial parameters. We have a deep knowledge of cost drivers for buildings and the introduction of the Eskom incentive has made this much easier.
“One of our key differentiators is that whilst there are lots of smaller electrical companies out there who can carry out energy efficiency retrofitting work, none of these come with a track record that extends over 60 years, boasts some of the most prestigious developments in Gauteng in their CV and has delivered to Eskom on major projects”
Those resources have been bolstered by the company’s own efficiency drive and Scop says that the skills deployed by SE’s onsite workforce are transferable to energy efficiency projects, with the right training – something he indicates is a work in progress:
“In the last 12 to 18 months we have trained up our experienced staff to cope with energy efficiency demand. Six weeks ago we had no dedicated people available to carry out audits on buildings but today we have 20. We have spent a lot of money and time on training to ensure we can deliver in this growing market.”
One successfully delivered energy efficiency project ended last April, when the company completed its first Performance Contract with Eskom. Over a three-year period this will result in 55GWH of saving, as Scop explains:
“We installed 29,000 light fittings in 129 buildings across the country over an eleven week period. We are about to start a new project for one of the country’s largest fund managers.”
Such large scale projects are not unknown to SE which has built up an excellent reputation for getting the job done on prestigious buildings, over many decades. Whilst the business has historically developed around Gauteng, SE is a national company and hopes to open an office in Cape Town, where Scop says it has formed some key alliances.
Another core aspect in the energy efficiency business is Photo Voltaic (PV) installations as rooftop, carport and ground mounted solutions. SE has recently been involved in the completion of the first carport PV installation at Eskom’s Megawatt Park Headquarters. It is currently involved in 12MWP rooftop projects for its client base and is seeing the recently awarded PV farms as further significant opportunity in the energy efficiency space.
Among the many notable buildings SE has worked on are the Mall of the North, the Sedibeng Heineken Brewery, Nicolway Shopping Centre, DIRCO Building in Pretoria and the newly-finished head office for Alexander Forbes.
“We have worked on many of the bigger projects that have won many accolades at the annual South African Property Owners’ Association Awards,” states Scop, adding that the list of major contracts is thankfully ongoing: “We are currently working on the new Cradlestone Shopping Mall and have just been appointed for Group Five’s new corporate head office,” he affirms.
Significantly, another current project he mentions is the Fairscape Precinct in Botswana, where SE has identified further opportunity in its traditional contracting role:
“We set up business in Botswana and are now in our second year,” Scop states. “It has been a good business decision for us and we have set up a separate entity there. There is plenty of opportunity and we are also now starting to look further north, into East Africa, in countries like Ethiopia and Kenya, but this will take time.”
The cross-border move has potentially opened up new markets for SE, while a conscious ownership change in 2010, has begun to deliver the company more opportunity on its doorstep:
“In 2010 we got together with Crowie Holdings and one of the results has been that we have greatly improved our BBEEE rating (which is currently at level 4). At the moment approximately 90 per cent of our business is derived from the private sector but with the government drive for infrastructure improvements, we can see great potential in public sector contracts – as long as we meet BBEEE criteria.
“It takes time to accomplish this but also to become recognized and we hope to build this area of the business over the next few years. Our relationship with Crowie Holdings has also helped to create additional working opportunities.”
Operationally Scop says that the business has to stay focused on keeping costs down and maintaining good labour productivity, whilst copper theft is always prevalent in the electrical industry.
“We are always looking to keep our overheads down and are a cost conscious business with a strong focus on systems and processes. The next year we will continue to look for new niches and further develop our opportunities in Africa,” he ends.