Maravi

BUK embarks on expansion

COMMENT - “The ironic thing about the Zambian market is that it is not price sensitive whereas if a trader wants to increase prices, you have severe rejection from clients, they will just not buy your products. That means that the Zambian market is price sensitive, but only in one direction. This is because as they lower prices, more buyers do not show up, but if they raise prices, existing buyers drop out. That is because there is very limited demand. Raise demand (wages and incomes), and you will see economic growth.

BUK embarks on expansion
Written by Chiwoyu Sinyangwe and pictures by Sydney Mungala
Tuesday, March 03, 2009 5:37:38 AM

THE economic meltdown is here and most companies are either sinking into the abyss or facing outright closure and throwing thousands of workers out of employment.
Any social statistician estimating the situation to be much more grave than what official statistics are currently indicating would certainly be entertained.

Against that backdrop, it is good for a tiny economy like ours to see companies like BUK Parts weathering the storm and embarking on their own massive expansion programmes.

BUK parts last week commenced operations in the new premises along the Kafue road with an initial investment of about US $1.2 million (about K7.3 billion) in this expansion programme.

“As BUK, we have to remain focused because this economic crunch is just temporal. If you look at world history in terms of economy, this is not the first time,” explains BUK parts managing director Benjamin Katubiya.

“We have had recession in the past, Britain, United States but it takes those minds that are brave enough to take risks and sit down and coming up with solutions and I think what the new US administration is doing now will bring positive change and this will trickle down to the rest of the world. We are actually in a dilemma, the cost of operating companies like BUK is higher and higher here but you cannot just throw workers away at the same time; with the expansion, you need the workers to join in.”

BUK is a wholly owned Zambian company founded in November 1997 and specialises in spare parts for European and United States-built trucks and the range includes Cummins, Detroit, Scania, Volvo, Leyland Daf, Deutz and Dodge.

The company has grown from very humble beginnings to the current levels of an estimated market share of about 40 per cent and its clientele includes Sable Transport, Transport Afrique, AAM Transport and Zambian Breweries, including Somalians, among others.

The company at the moment has a staff establishment of 23 and this number is expected to increase to 32 with the opening of this branch on Kafue road.

Katubiya, who boasted about the growth journey of the company, explains the other motive behind the (US $1.2 million) expansion programme for company which also operates in Ndola and Kitwe.

“And as we move to our new premises, BUK is looking at, apart from keeping suspension on engines, we will also be doing body parts and we will soon be opening a workshop which will start in August as part of stage two of our expansion programme,” he said.

Katubiya appreciated the customers for their support and the government for creating an enabling environment for the company’s growth.

He also recognised the role Standard Chartered Bank Plc had played in contributing about 22 per cent towards the financing of the current project.

Katubiya, however, had a message for the government over the foreign exchange, which he said was a huge burden for BUK.

The kwacha has seen its lowest trading level against the US dollar since late last year. A few weeks ago, the local currency tumbled heavily against the US dollar when it traded at an average rate of K5,800.

“Our business is import oriented. All these parts are imported from outside, so if we have any devaluation in the kwacha, customs duty goes up and the cost of landing these goods also goes up,” Katubiya said.

“The ironic thing about the Zambian market is that it is not price sensitive whereas if a trader wants to increase prices, you have severe rejection from clients, they will just not buy your products. Just as BUK, last week we sat here for four days reducing the prices in order to arrest the falling sales and to try to encourage these clients to buy as they had been hit by the effects of the current global economic crunch.”

While it is fairly believed that the current effects of the global financial crisis is hitting the country in secondary stage through mainly the collapsing international copper prices, BUK Parts is a little unique in the way it actually transacts from the toxic Western economies.

“It has affected us in the sense that our suppliers have reduced on supplying parts to us on credit because they are of the view that Africa is hard hit,” he explains. “Business is about taking risks and they are of the view that if they are to supply us on credit now, the risk will be much higher than if they sold in the US market.”

Katubiya who also complained about domination of the local trucking sector by foreign transporters also counseled local truckers.

He, however, said the transport sector in the country had the potential to become a leading contributor to the country’s gross domestic product (GDP) going by the number of economic sectors in the country that needed transportation facilities.

“Why should we allow South African transporters to come here and ferry goods to ports such as Durban when we have our own transporters,” he wondered.” Look at Zimbabwe which despite the current problems in that country, the transporters there (in Zimbabwe) are more organized than Zambians… the problem is our transporters haven’t sat down to form a union where they would agree on uniform prices of, say we will charge so much for one kilometer. They do things in a cohesive manner.”

Despite the wind of economic recession sweeping across the world fueled by the financial lunacy in the western economies, Katubiya remains resolute to contribute to Zambia’s economy through the enterprise.

“The future for BUK is very bright. We have a dedicated and honest work force and we have a vision…these problems come and go, we are not going to be weak-hearted,” said Katubiya, adding “…we are going to be strong and bold and move forward. This country can only be developed by local entrepreneurs. Foreigners will just chip in…look at China, it is all about local entrepreneurs, east Africa has a strong industrial base with 70 per cent locals, Nigeria is the same…”

Labels: BENJAMIN KATUBIYA, BUK PARTS, GREAT DEPRESSION II

posted by MrK @ 5:35 AM