Hardware distributor Compucomp went into provisional liquidation yesterday and fellow distributor MPC closed its doors last week. Both fell victim to what one industry player describes as a market characterised by rumour and insecurity.
Carlos Vizcarra, CEO and founding member of Compucomp, confirmed the company`s closure, citing ongoing struggles with management and MDM Growth Investments, a former shareholder in Compucomp.
Vizcarra says the company`s bank called in its loan facilities with 24-hour notice, and the company is now in provisional liquidation.
He says the bank, which he was unwilling to name, has undertaken to pay off the company`s 70-odd staff nationwide.
Compucomp, founded in 1989, had acted as a distributor for electronics manufacturer LG`s IT products until the beginning of last year. It was also the sole supplier of Auwa PC products locally.
Deon Botha, account manager at LG Electronics` IT division, says Compucomp began to face financial difficulty at the beginning of last year, at which time LG severed relationships with the distributor.
Botha says the channel is facing shrinking margins, price wars and tightening payment terms, all of which has made it increasingly difficult for smaller distributors to compete. He adds that dealers are not immune to the difficult trading period.
"This is a very competitive industry, payment terms have gotten much tighter. You are looking at seven-day post-dated cheques or cash, the days of 30-day-from-statement payments are over," says Botha.
"Distributors are going to have to offer some value-added services if they intend to stay in business. Dealers are also going to have to act more as a VAR [value-added reseller]. Many think they can operate the same way they did three years ago, and this isn`t good enough any more."
MPC acted as a sub-distributor for distribution company Sahara. Ross Jardien, sales manager at Sahara, who confirmed MPC`s demise, says the market is characterised by rumour and insecurity.
Jardien says the Pretoria-based MPC had been operational for many years and was another victim of the difficult market. ITWeb was unable to contact MPC for comment as telephone calls to the company went unanswered.
Botha says LG Electronics is still performing well despite the market, and has signed up Axiz as its IT distributor, as well as Bethesda, which services the northern parts of the country.
Jardien says Sahara now has the Samsung account as well as a good Microsoft contribution and the company is looking healthy.
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