In conversation with
Mr. Andrew Connold
CEO | Tellumat Ltd.
FDI Spotlight: What was your motivation to move to and take up the challenges of directing Tellumat?
Andrew Connold: My passion is running and growing businesses. I enjoy analysing the business and its markets, setting the strategic direction with the management team, getting the right people onto the team and seeing them succeed. It is exciting, and rewarding, to see people execute a good strategy and grow with it.
In my previous executive position, I was involved in building an ICT group of companies with its focus on health information systems. This included setting up the ICT network and software system that managed over 200 medical testing laboratories across South Africa, improving the efficiency and speed of the service to millions of patients. It was a great company to work for and a challenging but stimulating environment from a financial, technical and customer relationship perspective. Despite these challenges, the company was successful, won significant contracts and expanded operations both locally and into Africa.
I joined Tellumat because, after 7 years of working in the same environment and having set up a strong management team to take the business forward, I was looking for a new challenge. As a CEO, I feel that after about 7 years one’s ideas can get stale and, if this happens, it is best to move on and make way for someone else with a new vision.
Tellumat was originally the South African subsidiary of a UK based company called Plessey plc, but became autonomous in South Africa in the late 1980s. It was renamed Tellumat after some restructuring in 1998 at which time I was an employee in the company, but left to join the ICT industry.
Tellumat is a diverse and, at times, complicated business both commercially and technically. As such, I have found the stimulating challenge I anticipated when joining. During my tenure, we have had positive progress in several of the business units and particularly in the air traffic management business which has grown substantially, locally and up into Africa.
South Africa is not a typical research and development destination for electronic systems. However, innovation does not necessarily need to come from hard core research and development. There are a number of companies like Tellumat who investigate and integrate existing technologies, then adapt and apply them in new and different ways to meet customer needs. For example, if you look at some of our local African problems including those on the telecoms front of mobile high site cooling and battery theft, these are huge problems that through innovation we have been able to provide solutions for.
How do you think we can add to the value of BEE?
Andrew Connold: The BEE policies in South Africa are similar to indigenisation policies in several countries around the world. I believe that the real focus of BEE should be on employee skills development, small/medium enterprise and supplier development. This will help grow the economy, the number of jobs and the quality of life for all South Africans. From these beginnings, some large businesses will be created. South Africa carried out a lot of skills development in the 1980s and 1990s because the country was in isolation. However, with a change in government’s approach to skills development in the 1990s, the training of artisans, technicians and certain other skills declined significantly while new institutions and approaches to skills development were put in place. This said, government and business are now making concerted efforts to reverse the shortage of these skills.
For many years, most businesses were merely cherry picking employees from the available pool and bringing them in without much investment in training and development. With this trend changing to one of greater investment in developing skills, the skills shortage we are now experiencing is in the technical supervisory and management positions where employees need to be appropriately equipped with people management skills. Technical people are typically more interested in “things” than people. However, we need these managers to have a more holistic approach to managing operations to achieve business success.
Personally, I like to hire people with passion, initiative and preferably a world view – those who have worked in other countries for a time, those who are working hard to get ahead or have achieved, despite funding and institutional issues.
I believe that a big, non-industrial driver of South Africa’s economy will be our unique natural environment and the tourism it attracts. So, it is important that we all look after the environment for the benefit of all South Africans. Similarly, in the rest of Africa, tourism is an important economic driver. If maintained and nurtured, it will drive the improvement of transport and communication infrastructure in Africa which in turn will result in increased economic growth on the continent.
Can South Africa create a viable manufacturing base?
Andrew Connold: China has for some time been the leading manufacturing nation, particularly in the consumer goods market. The Chinese tend to dominate the very high volume, low margin but good quality product sector of the manufacturing market. One needs to invest significantly in creating access to the global market to sustain such a strategy. For Tellumat to compete with China in this space is challenging, particularly when Chinese manufacturers are being subsidised on their exports. Where Tellumat can compete in global terms is on medium volume, complex and high value add product manufacturing, and we do this successfully. As such, we are more of a niche market manufacturer for aerospace, defence, energy, select industrial and consumer electronic products.
To improve the viability of the manufacturing industry locally, government must address its own procurement policies and support local manufacturers better. Failure to do this will merely result in South Africa essentially “exporting jobs” and increasing the number of unemployed in the country. When South Africa had a strong Rand versus the major currencies, business and government tended to import our electronic and other products as it was inexpensive and easier. However, now that we have a weaker Rand and a high unemployment rate, I believe that government needs to expand the application of their designated product policy (products for government purchase that require minimum levels of local content) and duties on fully imported manufactured products.
Electricity meters and TV set top boxes are examples of designated products, while TVs attract import duties when they are not manufactured in South Africa. There are a lot of consumer electronics that government purchases annually which can and, I believe, should be manufactured locally. However, this is only viable if the volume of demand is sufficient and reasonably constant. Certainty of government policy and its application in procurement will go a long way to improving the viability of electronic product manufacturing.
South Africans will probably pay slightly more in the short term. Yet, increasing the manufacturing base will create more jobs, reduce reliance on social grants, create a larger skilled workforce and uplift many communities in the medium term.
Considering that we are on the same time zone as Europe, and closer than the typical Eastern manufacturing destinations, a strong manufacturing industry in South Africa with a weak Rand could be attractive as an alternative manufacturing destination. Furthermore, South Africa has effective air, sea, road and rail logistics hubs that are used to handle goods for the African continent and world markets daily.
How realistic is this electronic manufacturing base in South Africa? How confident are you that South Africa can build that manufacturing base?
Andrew Connold: South Africa already has a number of competent electronic manufacturing companies in the Johannesburg, Cape Town and Durban areas. I am confident that these can be grown into a world class manufacturing service industry, particularly if appropriate government procurement and incentive policies are put in place and consistently applied to support such a manufacturing industry. I believe this to be a realistic view given our world class motor manufacturing capability that has been built up over many years and which exports thousands of vehicles annually.
The biggest challenge the industry currently has is a lack of demand for local manufacturing at reasonably consistent volumes to sustain the existing factories. Therefore, if there are international companies looking for local manufacturing to supply South Africa, the rest of Africa and select world markets from a single factory, South Africa is a good location for this.
If you were to hold a round table meeting with three or four representatives from both the private and the public sectors in different industries, what would you put on the agenda in order to unite South Africa?
Andrew Connold: The number one thing would be the need to work together, finding ways to grow the economy to create fair access to viable opportunities for all South Africans that wish to participate in the economy. Viable opportunities will need to provide reasonable value to customers, shareholders, employees and the South African public, while acting in an environmentally responsible manner.
What would be your confidence rating, out of 10, for Tellumat and the development in the ICT sector in South Africa?
Andrew Connold: For Tellumat, a 7. From an innovation point of view, I’m excited. I want to see the business grow and anticipate that it will happen. If we can’t find essential skills locally in the short term, we may need to import them and use these skills to train local talent for the longer term.
For the telecommunications sector, I would say a 7. There is currently a huge roll out of broadband communication and our local high-speed internet and connectivity will continue to improve.
An 8 or 9 for the air traffic management sector due to the growth in air traffic into Africa and a 7 for our Defence and Security business, driven mainly by increasing demand for Unmanned Aerial Systems. As such, we anticipate making further investments in these industry sectors.
I’ve always been confident and optimistic about the country. I think we are moving forward as a democracy, as an economy and as a nation.
What would be your message of confidence to the international investment community?
Andrew Connold: South Africa has a solid industrial base, a very strong, effective and well-regulated banking industry and stock exchange (JSE). Furthermore, South Africa has a good reputation for corporate governance with institutions such as the South African Institute of Directors, the JSE and other NGOs consistently striving to ensure that companies and state owned entities align with the King recommendations on corporate governance. These efforts encourage transparency and ethical behaviour which should be encouraging to investors and businesses looking to partner locally.