Customers’ loyalty a ‘major positive’
Heavy downpours with a strong glimmer of sunshine.
This is the description of 2022 and the outlook for next year from the Dolphin Bay sales and business development team.
“We’re optimists by nature, but economic conditions have made this a tough year for our industry,” was their common comment.
Our customers’ loyalty to Dolphin Bay has been a “major positive” for them, they said.
Most of the timber treatment industry across Africa has been sorely affected by rising costs and sinking demand due to economic conditions. However, the outlook for next year looks more promising in several countries where new tenders are set to kick in.
Niche market stays strong
There are few regions we serve where our industry has not suffered in recent months. One is Limpopo in South Africa, where timber treaters in rural areas are maintaining their niche agricultural markets, reported Dolphin Bay’s Wayne Driemeyer.
Dolphin Bay has gained a few new customers this year through our team’s dedication to service and to building relationships over time. Among them are Safind Forest Products, Clifton Pine and Sotsho Treated Timbers in South Africa; Brookewood and Inspiration in Kenya, and Sheda in Tanzania.
The East African market has had a frustrating year, reported Darren Marillier. “I’m an optimist, but it’s been very difficult.”
With a few exceptions, Tanzanian timber treaters have had substantially less business than they expected; it’s been “press pause” for timber treatment in Uganda since its Rural Electrification Agency was absorbed into the ministry of energy, and the Rwandan market has struggled to get going.
“The stop-start nature of business this year is due to the economic pressures we’ve all been experiencing. It’s also the nature of tender-based business,” said Darren. “When funds are allocated elsewhere, the industry splutters; when they are reallocated again, things pick up.”
Better outlook for East Africa
Indications are that the East African market should do better next year. A two-year tender issued by the Tanzania Electric Supply Company (Tanesco) is about to be awarded to several of our customers. The Ugandan market is likely to click into gear and has good prospects, as only 42% of Ugandans have electricity, according to World Bank figures; and contracts for poles have just been signed in Rwanda.
Tanesco is determined to improve the quality of treated timber in Tanzania by regulating the industry better. Dolphin Bay looks forward to playing an active role with industry players, to ensure quality verification.
“This is the next phase for the East Africa in general – to improve quality by better regulation,” said Darren.
Kenyan businesses suffered in 2022 due to high inflation this year and scant funding for electrification during the recent election period, reflected Wayne. However, hopes are now high that the dynamic new president and cabinet will boost opportunity through new electrification projects, as part of their pledge to boost the economy.
The East African market should do better next year. A two-year tender issued by Tanesco is about to be awarded; the Ugandan market is likely to click into gear, and contracts have been signed in Rwanda.
‘Flash-in-the-pan’ local influences
While the global economic downturn is a common influence, local influences have caused more distinct difficulties. In KwaZulu-Natal, timber treaters are “fed up” with the multiple hardships of doing business, reported Mark Duckham.
“The despondency is fueling a fierce price war in both the pole and structural pine industries. People are in survival mode and it’s getting worse.”
The challenges include flash-in-the-pan events such as the mid-2021 riots and the floods earlier this year, along with the ongoing national power cuts and deteriorating infrastructure.
Some customers are investigating international markets, which could offer opportunities, Mark said.
Timber treaters in the Western and Eastern Cape have been badly affected by the imports of treated timber, sold more cheaply than their own, by a KwaZulu-Natal business, observed Braam Rust.
To compound matters, the fires that ravaged Western Cape plantations in 2021 have caused a dearth of suitable pine in the province. Local treaters are having to import timber from sellers further north, who prefer to supply treated wood, so the Western Cape treaters are making less profit than previously.
Agriculture still going strong
Another factor for South African treaters is congestion at local ports, which means that farmers are exporting less fruit than they had hoped, diminishing their capacity to expand and buy more treated poles. “It’s a knock-on effect. November is usually our best month for CCA sales, but there’s been a definite decline in usage in this geographical area,” reported Braam.
The timber treatment industry in South Africa is likely to tick on next year as it did this year, predicated Braam and Mark. “Costs will remain a big challenge,” observed Mark. “But we’ve got a lot to grateful for.
“Agriculture, which buys a lot of poles, is still doing well, so hopefully things will look up. Farmers say that their businesses have one bad year, then five good years. Perhaps it’s the same for us, and our five good years are about to begin!”
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