Electrical engineering firm Powerspeed Ltd has set its eyes on expanding its retail branch network. Zimbabwe Independent business reporter Taurai Mangudhla (TM) spoke to MD Hilton Macklin about the expansion plan. Below are excerpts:
TM: What is the rationale behind the branch expansion and your focus on retail?
HM: We believe that consumer spending is going to continue growing in Zimbabwe. We believe that the consumer today, that is the man on the street, is far better off than they were a few years before and that situation is probably the one area that is growing. Bearing this in mind, we want to use that as a means of growing our branch network and once we have the retail presence in the different locations, it then justifies the industrial sales.
TM: What is the current situation in terms of wholesale operations?
HM: Part of the problems we had, for example in Mutare, was that we were aiming at industrial sales but there wasn’t enough business to sustain the operation, so you end up closing it down and minimising operations to cut your overheads. But then you have inadequate sales, inadequate stock and management etc. So if you go the other route – where we use the retail income as the base for our operation – we then have better management, sales staff, better stock availability and it makes it easier for us to go after the industrial sales alongside that.
TM: How many new branches are you looking at?
HM: In the current financial year we have one definite branch planned, which is Victoria Falls, but there are other branches which are not operating optimally at the moment, basically as result of poor location. We are looking at relocating and revamping those branches.
For example, since September we have relocated our Mutare, Msasa, Kwekwe and Masvingo branches.
TM: What are the estimated costs of the expansion exercise?
HM: It’s not significant in terms of our overall costs.
TM: Perhaps we can talk of costs on the Victoria Falls project in particular because it’s entirely a new thing I suppose?
HM: It’s an existing building that we will move into and it’s just really putting in the infrastructure, the lighting, the computer systems, the shelving etc, otherwise it’s not a significant expense relative to our overall expenses.
TM: Do you foresee the industrial side of your business improving in future?
HM: Yes, but not in the short term. Unfortunately, Zimbabwe is not perceived to be a good investment location at the moment and until it becomes a good investment location, industry is not going to accelerate and we need industry to accelerate in order for that market to take off. We don’t expect that to be happening imminently.
TM: How much are you affected by power outages?
HM: Not to any larger extent. Generally in Graniteside — where our main operations are — power is fairly reliable. We do have faults streaming out now and again but power is fairly reliable. All our manufacturing operations are here but we are not really hit by load shedding. We do have load shedding in all our branches but we have back up power so it doesn’t affect operations.
TM: I suppose power cuts are giving you big business in terms of generator sales?
HM: Power cuts… yeah, of course.
TM: So it is safe to conclude generators are like your cash cow at the moment?
HM: Generators are not a very high margin item. They are high value and there is regular turnover but they are not high margin. Instead, it’s all the other things that go along with generators. You know, once people have a generator they need the cable that goes with it, they need the changeover system etc. People are also looking at the power consumption. If they are going to be running on batteries because of fuel costs it means they need chargers for the batteries. Sometimes they may want to convert their normal lights to more energy-efficient lights: It is such things that give us good turnover.