Interview: MCC Plant Hire in South Africa looks to Sub-Saharan Africa for growth

South Africa-based MCC Plant Hire is the largest heavy equipment rental company in Africa. Murray Pollok talked to the company's Werner Scheepers about the challenges in the coming years.

Another big challenge is on its way for MCC Plant Hire in South Africa. Over a decade on from its decision to establish a network of regional branches throughout its domestic market, the company's vision now is to establish a permanent footprint within sub-Saharan Africa.

"Throughout the years, MCC has had numerous contracts in Mozambique, Namibia, Zambia and Botswana", says Werner Scheepers, MCC Plant Hire's regional manager for sub-Saharan Africa, "MCC Plant Hire's present goal is to establish permanent branches within neighbouring countries."

The shift in focus towards these newer markets is part of a strategy to maintain growth at the company as well as a wider aim for MCC to diversify its mining-related activities beyond the hard rock business in its home territory.

MCC Plant Hire was founded in 1972 by Mike Barnes and focused on big civil engineering. In 1988 it moved into mining (see box story below), and has grown to the point where it now offers extremely large open cast machines - dozers, 720 t face shovels and more - to mining companies in sub-Saharan Africa.

These two markets - with MCC Plant Hire offering machines under 120 t and contract mining from 120 t to 720 t - have helped the company become one of the largest heavy equipment fleet owners in Africa with a total fleet of 1200 units. MCC says it is "comfortably" the biggest heavy equipment rental company on the continent.

"We've had incredible growth", says Mr Scheepers, speaking to IRN from MCC's head office in Midrand, halfway between Johannesburg and Pretoria. "We increased our business greatly in the mining sphere and our turnover has climbed dramatically. In addition the FIFA World Cup provided tremendous momentum. However, some big projects are coming to an end, and if the local government doesn't continue with their infrastructural spend, then we could have a difficult time ahead."

Mr Scheepers says the potential for growth in South Africa and further afield in sub-Saharan Africa is great; "Hence the company' decision to move into Mozambique."

Mozambique means more than a new outlet for MCC's rental business. It also represents a big opportunity for its contract mining operation, which has a new focus on coal mining to offset the heavy reliance on hard rock mining such as platinum.

MCC is establishing a permanent operation in Moatize, Mozambique, close to the new Benga Coal mine in Tete where MCC Contracts has recently won the open cast mining job.

Mr Scheepers says MCC will mobilise the equipment needed for the mining contract as well as equipment for potential work construction/infrastructure projects in the country. For example, a new power plant is to be built near the mine as well as a railway from the mine to the coast.

Once Mozambique is on target, MCC Plant Hire will look at opportunities in other sub-Saharan countries like Botswana, Malawi and Namibia; "South Africa will play a leading role in helping these countries", he says, "Funding will be made available, and MCC will be on their doorstep to help."

MCC Group's business will continue to straddle mining and construction/infrastructure sectors. Mr Scheepers says there are natural advantages in combining plant hire (where machines are rented by the hour) and contract mining (costed on a per cubic metre basis).

He says mining operators, when faced with uncertainty in the market or difficulties in raising funding for capital expenditure (as they are at present), start to look at rental of the machines they had previously owned.

MCC is able to channel this kind of equipment through its plant hire operation; "The two businesses are seen as one operation complementing each other in supplying yellow metal", says Mr Scheepers.

Of course, running a business like MCC requires enormous investment. "Three years ago the company wisely decided to invest in new equipment", says Mr Scheepers. This was needed for the major projects ongoing. Investment in the year to 30 June 2009 included Rand 385 million (€21.5 million) on expanding the fleet, alongside a further Rand 956 million (€53.4 million) on replacement of heavy equipment.

"MCC continues to invest in these types of projects", says Scheepers. For example, new machines added recently include among others, articulated dump trucks, rigid trucks, dozers, excavators, as well as rollers, wheeled loaders and water tankers.

On the mining side, investment has included massive CAT D11T Dozers, Cat 793 Trucks and Liebherr 996 mining shovels.

"It is a massive inventory and that's where [parent company] EQSTRA comes in - providing the much needed capital", says Mr Scheepers.

The company favours premium, established brands of equipment, for good reasons; "We work in desolate, remote areas", says Mr Scheepers, "You need very reliable plant with excellent backup and service support from the suppliers."

These desolate areas also constitute a major challenge for any plant hire company in South Africa. Establishing MCC's network of 15 locations in the country was about finding the right balance between proximity to sites and affordability. Each location has to service an area with a radius of 300 km.

Think about doing the same thing for sub-Saharan Africa and the scale of the challenge for MCC is easy to see.

BOX STORY
MCC backstory

MCC Group was founded in 1972 by Mike Barnes as a plant hire company focusing on larger scale infrastructure projects and roads. Graders were a core early product and the company retains one of the largest fleet of Cat 140 graders in the whole of Africa - around 160 units.

In 1988 the company diversified into open cast mining, offering contract mining services to companies mining hard metals such as platinum. The company supplies ‘heavy iron' on a per cubic metre basis and also rents large equipment to mines.

In 2005 the company became 50% owned by Imperial holdings - a move that gave it access to the capital resources it needed to grow the fleet. In 2008 Imperial Holdings ‘unbundled' a number of businesses and MCC Group became a division of EQSTRA Group, a newly listed company on the JSE (Johannesburg Stock Exchange).

MCC Group is now part of the Construction and Mining division within EQSTRA. This division also includes new equipment dealerships for New Holland Construction and Terex as well as another equipment plant hire business, Hyper Plant Hire, which focuses on smaller equipment, mainly under 10 t.

EQSTRA's other main businesses are Industrial Equipment (forklift rental and sales, tractors and cleaning equipment) and Passenger and Commercial Vehicles.

MCC Group's business represents around 50% of EQSTRA's annual Rand 6.9 billion (€385 million) turnover. EQSTRA splits out the construction rental and mining revenues into ‘rental/lease', which had revenues of Rand 438 million (€24.5 million) for the year to 30 June 2010, and ‘value added', which is largely contract mining activities valued at Rand 2.7 billion (€151 million).

BOX STORY
Operator challenge

It is a sad fact that the HIV/Aids pandemic has had a negative impact on the workforce of South Africa. That has been true in all walks of life, but for a plant hire company like MCC it has had a particular effect - a shortage of trained and/or experienced plant operators, as well as all other employment fields.

"A large portion of our workforce consists of operators and sadly HIV/AIDS takes its toll", says MCC's Werner Scheepers, "We record a number of deaths within our workforce due to AIDS related illnesses on a weekly basis. You can well imagine the impact this has on any workforce."

MCC says the good news is that through "awareness and wellness programmes", which have been promoted by MCC, HIV/AIDS is better understood and treatment more accepted, thus contributing to a healthier workforce.

The company employs around 2400 operators out of a total workforce of 4500: the high number of operators is required because many of the mining machines work shifts 24 hours a day.

The constant demand for operators and other skilled workers has led MCC and EQSTRA to establish in January 2008 the EQSTRA Technical Training Academy (ETTA) to produce qualified artisans for the entire group. Here operators are schooled in the operation of a wide range of equipment using a combination of simulators and real machines.

The graders in particular need highly skilled operators, says Mr Scheepers; "With graders it can take three or four years for operators to be able to work to 5 millimetre tolerances."

The academy, which has 12 dedicated staff members and accommodates around 60 apprentices at any given time, is also accredited to South Africa's Manufacturing, Engineering and Related Services Sector Education and Training Authority (MERSETA).