There’s no doubt that the ICT channel is facing massive headwinds in 2017.
But understanding what the challenges are, and putting tactics in place to mitigate them, will help resellers to weather the storm.
Jenny Rex, sales director of Drive Control Corporation (DCC), points out that the 0,5% growth projected for the South African economy impacts everyone.
In the ICT market, the effect is exacerbated by currency fluctuations.
“Contributing to the perfect storm is the strengthening of the South African rand against the US dollar,” she says. “With an approximate strengthening of the rand at 10%, the commensurate decline in turnover may well track the decline in an – at best –stagnant market. Basic math tells us that 10% at R11 last year versus 10% of, say, R10 for the same time this year means less margin in rand terms.”
With margins under pressure, she advises channel partners to steer clear of doing business for the sake of doing business. “It’s a dangerous tactic. With declining revenues, we all need to be non-negotiable at doing business at a sustainable margin.
“Margins must be maintained and business must be conducted in a sustainable manner. Ultimately all businesses pay their costs in rands and not in percentage margins.”
To maintain margins in a tough economic climate, resellers should aim to add value. “Supplying good products, adding value and offering great service will continue to be important differentiators,” Rex says.
“Cost-cutting is the not the route to survival – and definitely not to success. Look after your business and if a deal looks too good to be true, it probably is.”
Established partners may also face challenges from a new procurement regime, Rex adds. “Government spending and the new BBBEEE codes continue to influence the South African channel.
“Government’s avowed strategy to include more new entrants with smaller tenders will definitely impact traditional, established resellers.”
Despite all the challenges, the channel partners that add value and maintain their margins should win through.
“There’s always light at the end of a tunnel, otherwise it wouldn’t be a tunnel,” Rex says. “However, the exit at the end of the tunnel is a lot narrower than the entrance so some will come out significantly leaner on the other side.”