Demand for food and beverage refrigeration systems and facilities is increasing in South Africa, as well as globally.
Air compressors are a key component of refrigeration equipment and are typically imported in South Africa. An opportunity exists to establish a local manufacturing plant for air compressors with potential national and international distribution. Assuming that a full 85 million rand currently being spent on imports is invested in the local economy, a total of 304 new jobs can be created, of which 100 are expected to be direct jobs and 204 are expected to be indirect jobs. With these plants, new business sales are expected to bring 195 million rand per annum.
The investment opportunity
Refrigeration compressors and air conditioning compressors provide air conditioning, heat pumping, and refrigeration for large-scale facilities and equipment. They compress low-pressure, low-volume gas into high-pressure and high-temperature gas.
Refrigeration compressors and air conditioning compressors also remove vapour from the evaporator. Most refrigeration compressors are large, mechanical units that form the heart of industrial cooling systems or heating, ventilation, and air conditioning (HVAC) systems.
Demand for refrigeration of food and beverages has grown substantially along with urbanisation in industrialised countries. The level of urbanisation is a key factor determining demand for commercial refrigeration equipment.
This is especially true in developing countries, where urban residents have higher incomes than their counterparts in rural areas. Rising product development, manufacturing and marketing costs, coupled with the need for brand name recognition and access to distribution channels, are shifting the balance toward large multinational producers whose headquarters are in developed countries.
At the same time, these giant firms recognise that labour costs are less in developing countries and that a local presence is useful. Thus, they are investing heavily in production capabilities outside their own borders. Joint ventures with local companies are becoming quite common.
Compressors for refrigerating equipment are a major import, by value, into KwaZulu-Natal. Upon closer analysis it was shown that the iLembe District imports large volumes of compressors for refrigerating equipment on a regular basis, importing a value of 85 million rand per annum.
The demand for compressors for refrigerating equipment in the iLembe District is relatively robust in terms of the value and quantities demanded.
Compressors for refrigerating equipment represent the most viable market for air, vacuum pumps, compressors and ventilating fans in terms of the relative size being imported and the robust growth in import demand that has occurred since 2005. The biggest market is being driven by demand from consumers in North America, Europe and Asia.
