BCX buoyant about Africa

By Iain Scott, ITWeb group consulting editor

Johannesburg, 12 May 2005

Business Connexion (BCX) expects a return on investment from its new African operations within three years, says deputy CEO Benjamin Mophatlane.

Although he acknowledges that "things are not all rosy there and a lot of people get burned", having African offices presents the group with substantial opportunities for growth and a steady stream of revenue.

The group obtained a presence in several southern African countries through the acquisition of Intrinsic Technology in December, and Mophatlane says this will help even out the "lumpy" African revenues of the past.

Intrinsic, with offices in Angola, Tanzania, Zambia and Namibia, had an annual turnover of more than R150 million. The offices are now being rebranded with the BCX name.

Sustainable margins

BCX has always operated in Africa, although, as Mophatlane explains, this has always been done on a contract-by-contract basis, which meant that revenue from the rest of the continent was unpredictable.

For the year to May 2004, BCX generated R349.8 million revenue in the rest of Africa - 12.4% of the group`s total revenue of R2.81 billion. But Mophatlane says that project-led revenue is not guaranteed.

Contract business also resulted in low margins in Africa, since the group had no one on the ground and was forced to go in with partners, with whom margins had to be shared.

BCX is hoping that the Intrinsic acquisition will change that. With 70% of the group`s revenue derived from services, it needs a firm presence in countries where it operates.

"This goes some way to create sustainable margins," Mophatlane says. "But it won`t happen overnight - it`s a process."

He adds business prospects in Africa are good. "Many infrastructure projects are still needed on the continent, and outsourcing is a crucial area as those markets become developed." He adds that Africa is on the mend politically, and says South African President Thabo Mbeki has played an important role on that front.

"So we are ideally placed as a country to grow our market in Africa, and Africa is seeing SA as a capable partner." The fact that other South African companies are also moving into the rest of Africa also provides BCX with opportunities, he adds.

"But we are very realistic about it," Mophatlane says. "You always hear the success stories, but the fact is that people have been burned. At the same time, I believe South Africans have learned not to be arrogant, but to partner in African countries in a real way."