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South African Transformer Market
Frost & Sullivan, Dec 2008, Pages: 80
The South African electricity crisis is characterised by a significant unbalance between power demand and supply. This is partly the result of underinvestment in transmission and distribution infrastructure. This development has translated into total energy losses estimated at 8.0% in 2008. As a result, power and distribution transformers are seen as key components in mitigating the effects of the current electricity crisis. This research service presents a comprehensive analysis of the high, medium and low-voltage power and distribution transformer markets in South Africa. Its objective is to assess the dynamics of this market and provide an understanding of the competitive environment.
Market Overview
Electricity Crisis to Heighten Transformer Equipment Market in South Africa
Transformer equipment is becoming ever more important as a means to alleviate South Africa from its current electricity crisis. End users are looking to capitalise on local resources, involving robust local manufacturing capabilities, competition-induced transformer prices, engineering expertise and experience in the respective end-user segments. This implies that established suppliers with a large installed base will retain their market positions. Expansion is mainly due to a strong pipeline of projects in the power sector, as Eskom, the public utility, has embarked on a massive $42.7 billion capital expenditure programme paralleled by strong demand from the metals and mining sectors. “The South African transformer market will continue to remain robust till 2014,” says the analyst of this research. “The power transformer segment, with 80.0 per cent of the total market revenues in 2007, will remain the key transformer segment.”
A combination of significant investments in the expansion of South Africa’s generation capacities, an increasing replacement demand together with the growth of the South African mineral industry and rural electrification programmes, will keep the market bullish in the long term. Three major technological trends are currently observed in the South African transformer market. First, there is an increasing need for energy-efficient transformers, notably in the distribution segment, which will lower the current level of distribution and transmission energy losses in the country. Second, a renewed focus on dry-type transformers. This will improve energy savings in the commercial and industrial sector. Finally, a renewed interest in condition monitoring (CM) techniques, which can reduce operating costs and maintenance, while making transformers more reliable.
South African Transformer Market Optimistic on the Whole despite Setbacks
While the outlook for the South African transformer market is positive, a combination of factors such as lack of skilled work force, the availability of imported materials, unfavourable currency fluctuation and rising prices could hinder growth in this market, if not properly addressed. Additionally, new entrants will struggle to gain a substantial market share since the market is highly concentrated with most of the market share held by a few large suppliers. Further, the effect of volatile raw materials will have an immense impact on the South African transformer market for the next four years.
To benefit from the combined development in the South African electricity sector and the recent decrease in the price of raw materials, transformer equipment manufacturers should adopt a competitive pricing strategy, as this is critical to determine suppliers’ product position. This will enable them to focus on maximising long-term profits. They should also design a comprehensive range of value-added solutions derived from excellent after-sales support. This would include on-site service, maintenance, installation and training, aiding equipment providers to differentiate themselves from many of the suppliers in South Africa. Moreover, manufacturers must provide experienced and skilled personnel, flexible enough to perform maintenance and repair work on any transformer brand. “By providing a strong after-sales support, transformer manufacturers will be able to help customers achieve the highest level of profitability,” concludes the analyst.
Market Sectors
Expert Frost & Sullivan analysts thoroughly examine the following market sectors in this research:
- Industrial
- Eskom/the municipalities
- Commercial
- Technologies
The following technologies are covered in this research:
- Up to 100 KVA
- 100 to 500 KVA
- 500 to 1000 KVA
- 1000 to 10 MVA
- More than 10 MVA
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