Manufacturing amidst foreign competition

As acting CEO of Elso Holdings, I believe that while Namibian companies are struggling under the current economic conditions as well as with competition from foreign entities, local manufacturers can continue to be successful. I have insight into a number of portfolio companies through my normal role as Partner: Value Add for Eos Capital, a Namibian private equity firm that has invested in three manufacturing entities – Elso, Fabupharm and Panel to Panel - and has assessed many more as potential investments.

Elso Holdings has been a Namibian manufacturer of cleaning products and equipment for the last 63 years, and has its roots deeply entrenched in the Namibian soil. It services the local market through retail stores as well as through its non-retail offering. Competing in a market that is heavily dominated by large international companies is not always easy, but throughout the years we have kept up with the requirements of Namibians while still adhering to international standards.

Recently, however, we have faced stiff competition in the retail sector. South African brands have entered and started a price war – often at prices below what they are selling for in South Africa. In the Pine Gel category alone, Elso has gone from being the only brand on the shelf to being one of up to six brands. Despite this, our company continues to hold a significant market share in its categories.

We see the same price competition from foreign competitors with Panel to Panel, a prefabricated panel manufacturer Eos has invested in. The key to success for them is being on the ground, being close to the customers and ensuring excellent quality and customer service.

These tough times have forced us to be creative and think differently. Manufacturers need to focus on finding efficiencies, capturing new markets and strengthening their core. Elso has over the last two years undergone an extensive exercise to improve processes in our factories and introduced cost savings across the business, which has made us more efficient. This might never have happened had the economy continued at its previous fast pace, and once the economy recovers, our business will be even stronger.

In another move Elso recently partnered with a Namibian distribution company to allow us to focus on our core – manufacturing, sales and customer service. The benefits of this refocus are already evident and will see the company grow despite the economy. Along with this we are capturing new markets through the introduction of new products – such as our multi-purpose cleaner, Citro Power, and our window cleaner, Citro Shine.

Panel to Panel, on the other hand, recently branched out into building fantastic houses – quick to build, affordable and durable. The only difference compared to the traditional house is that the walls are made with prefabricated panels instead of bricks. They are also using their panels for cheaper insulated roofs.

Fabupharm, a Namibian pharmaceuticals manufacturer, has brought a variety of new products to the private market to increase its revenues.

In light of our shared challenges, Namibian businesses are also looking for ways in which to support each other. This includes considering smart partnerships to unlock further value. Elso procures as much of its raw material and packaging material from the local market as it can in order to support the growth of the local economy. This is the same for the other companies Eos Capital has invested in, including Panel to Panel, Fabupharm, Nambob (previously Avbob) and Heat Exchange Products.

In return, being proudly Namibian companies, we receive a lot of support from businesses and consumers. This is encouraging and is how we Namibians should work together to improve our economic situation.

Local manufactures should further take advantage of the government directive encouraging the purchase of locally manufactured goods by all government entities. Such government initiatives will ensure that we as local manufacturers survive during the hard times, and will most definitely make it possible for us to grow and continue to serve the Namibia community for many years to come. Elso has already felt the positive impacts of this directive and hope that more initiatives that support local manufacturing will be forthcoming, especially in the pharmaceutical space where Fabupharm operates.

In the retail sector, Namibian manufacturers not only face competition from foreign products on the shelf but struggle to get their products stocked in many South African chains. Fabupharm, for example, is not supported by the big South African pharmacies in Namibia. This is disappointing given the government directives to buy Namibian products and the dire need for Namibians to at least be given the option to support Namibian products.

Elso has remained persistent, though, and has started supplying Clicks’ house brand toilet paper – the first locally manufactured item on their shelves. We hope they will soon stock Fabupharm’s products as well. If this is the beginning of a new trend, we’re proud to be pioneers for the manufacturing industry.

Lastly, the size of the local market shouldn’t be used as an excuse not to manufacture in Namibia – Fabupharm is already exporting its products across Africa and is even being marketed in the United States. Although the Namibian market is small, manufacturers can use the local market to perfect their offering before venturing into exporting.

The manufacturing sector has the potential to create jobs and contribute to the revival of the economy. We as Namibians need to support our local manufacturing firms and be part of the growth of our country.