30 years ago, IT distributor Mustek opened for business.
By Kathy Gibson
The modest business of components distribution has changed a number of times since then, mirroring the many shifts that the industry has undergone.
Not long after it started the components business, founder and chairman David Kan realised that there was a significant business opportunity in assembling these components into full PCs.
The resulting Mecer brand was the core of the business for many years, says group MD Hein Engelbrecht, particularly after the components business was spun out to Rectron in 1995.
Today, Mustek is a significant player in the IT industry, distributing about 30 product brands and employing 530 people directly, as well as about 1 500 in the group.
And, although the company’s fortunes have not always been rosy, Kan takes pride in the fact that not one of 360 paydays since Mustek opened its doors has been missed.
Engelbrecht has been with Mustek for almost 20 of its 30 years, having joined in October 1997 as group financial manager. He became the group MD in 2008.
He points out that the company has made a positive contribution to its staff, its shareholders, a wide community of stakeholders and the country as a whole.
“We have built up a pension fund of R250-million,” he says. “Over 30 years, the Mustek group has accumulated net assets of R1,5-billion, of which R500-million has been given back to shareholders.
“In addition, we spend about R5-million a year on staff training that goes from learning to read and write in English to first aid, A-Plus certificates, degrees and MBAs.
“We believe this has helped to make a difference in people’s lives.”
Customers have been impacted as well, he adds. “We affect the extended community, tens of thousands of people, by offering knowledge and facilities to partners.”
Over the years profit has been up and down, Engelbrecht says, but after 30 years Mustek can boast a stable company, a good asset base, great employees and a committed partner base.
The worst experience Engelbrecht has had during his tenure at Mustek was the economic downturn in 2007/2008 when the company was forced to “rightsize” and reposition itself, and had to retrench some staff members.
“It was a very sad time,” he remembers. “But over the last few years we have managed to replace most of those jobs.”
Mustek takes its role in the community seriously, Engelbrecht adds. “There is a bigger picture, and it is about all the stakeholders. Being in business is about being a responsible corporate citizen, paying taxes, and creating an environment where people are safe.
“You have to look after shareholders, financiers, customers, vendors and staff – you have to make sure everyone involved in the organisation is comfortable with you. Because if they aren’t, you will disappear.”
A lot has changed over the last 30 years, Engelbrecht adds. Thirty years ago, high school students might have finished school without ever seeing a computer; even university students would only have had access to computers if they were in engineering or computer sciences.
“Unless you worked for a big corporate or a bank, the average worker wouldn’t have had anything to do with computers either,” he points out.
“The big acceleration probably came with the Internet, and then mobile devices really saw technology becoming mainstream.”
While the PC changed the way people worked forever, the rise of the mobile device in the form of smartphones and tablets, changed the way people play and live, Engelbrecht says.
“Back when Mustek started, we brought in components and a very small group of people used the to build their own PCs. Later on, we started building our own Mecer brand.
“The only multinational PC brand in the market in those days was IBM, and that was very much in the corporate environment. There were local brands like Psion and Mecer but more of the multinationals only came in after sanctions were lifted.”
Once PCs became mainstream, computing started to become smaller and more ubiquitous. “We got pagers, then PDAs (personal digital assistants) and then mobile phones – although the first phones were huge and had very limited battery life. But they got smaller and more usable.
“Then the smartphone changed everything, followed by the tablet – and now computing is more or less ubiquitous.”
With such rapid and dramatic changes in a relatively short time period, any company playing in the IT industry has to make sure it stays relevant – not an easy task by any means.
“In the early days, when we were building our Mecer PCs, we were very much a Wintel (Windows and Intel) company, so we had a lot of guidance from these industry leaders as to where the industry was going,” Engelbrecht says.
Later on, when more multinationals entered the market and created more competition for the local brands, Mustek decided to realign itself and take on other products. “We became more of a distributor than an assembler/distributor.
“This alignment has worked well for us,” Engelbrecht adds. “We have had a lot of guidance from these vendors.
“When it comes to new technologies, they can do the R&D that is required, and add the value the customers want.
“If we had stayed the way we were, we would have been lagging, but this way we are at the forefront of what is happening, and we can give the market what they need.”
Standing still has never been an option and Mustek has continually expanded into new ventures that go beyond the PC. “These areas include networking infrastructure, fibre and solar,” Engelbrecht says.
“We have had to step back from the device and look to providing the full ecosystem. We are continuously adding on, and giving our customers a complete package.”
One of the prevailing benefits that the locally-built Mecer computers brought to Mustek was its assembly line, and the company still assembles its own-brand PCs.
As the PC market has come under pressure, though, the number of Mecer computers coming off the production line has decreased.
However, having the facilities and skilled staff has allowed Mustek to add technical services to its offering.
A number of multinational vendors now allow Mustek to make modifications to their hardware when customers require specific builds.
“So the number of machines going through the production line and the service department have actually increased,” Engelbrecht says. “Now, when we take on a new brand we typically become an authorised service centre for the vendor as well.
“So the production facility has now become a profit centre.”
With all changes going on in the industry, and the pressure on margins, there are some queries about whether a distributor like Mustek has a role to play in the future.
“We definitely do,” Engelbrecht says. “If distribution was as easy to do as people think, the vendors would have their own infrastructure.
“Sometimes people underestimate the knowledge that the distributors have. Because we are so close to many vendors and customers, we are able to see the big picture.”
This knowledge starts with logistics – with bringing in the products that customers want, in the correct quantities, and incudes warehousing, inventory control, trade risks, forex fluctuations, bad debt, stock obsolescence and forecast. In addition, one distributor can deal with all the resellers, on behalf of all the vendors.
“For our reseller partners we give them easy access to many things: the can get information, and stock at the right price. We take the forex and interest risk as well as the credit risk, and we carry the inventory.
“If the distributor wasn’t there, where would that leave our partners?”
Going forward, Engelbrecht believes Mustek will continue to diversify and expand to meet its partners’ needs.
“When it comes to technology we will be guided by the multinational vendors,” he says. “We are always looking at what is available and where we can best position ourselves.
“For instance, software is a big thing and we need to look at what our role is. Cloud is also a bit thing and we should position ourselves accordingly.
“New technologies like devices, sensors and Internet of Things are all big topics and we have to continually assess them, determine how our customers want to work, and position ourselves accordingly.”