12 April 2013 – The South African transformer industry is unsettled and has become increasingly vulnerable to infiltration from international players. A drop in tariffs owing to free trade agreements has led to an increase in imports. Merchantec Research, which recently completed a major industry report on the South African transformer industry says that major global competitors and Asian manufacturers selling lower priced transformers have both managed to gain significant footholds.

However, domestic South African manufacturers have remained relatively resilient, owing to repeat business from a loyal customer base. As a result, competition on the transformer market in South Africa has become more intense and key end users such as Eskom have a wide range of suppliers to choose from.

Slower demand growth is anticipated in the international transformer market during the forecast period from 2014 to 2018, thus increasing the level of competition in the local market. Domestic transformer manufacturers should gear themselves for this anticipated increase in competition from international suppliers.

Transformer manufacturers who want to achieve growth in this maturing market must offer reasonably priced transformers and shorter lead times. Presently, technical compliance, quality, low price and strong broad based black economic empowerment (BBBEE) credentials are critical success factors.

The main challenges facing the South African transformer industry is the delay in the implementation of the Strategic Infrastructure Projects (SIPs) and also funding constraints facing Eskom and large municipalities are expected to inhibit the growth of the market.

Any company wishing to grow in the South African market must form strategic relationships with Eskom and large municipalities. Eskom’s supplier development and localisation policy thrust is expected to sustain market success for domestic suppliers during the forecast period especially in the low voltage transformer division which requires less stringent supplier qualification criteria.