Frost: Growth in South African Uninterruptible Power Supply Market Appeals to International Investors

October 6, 2006 // Published as a news service by IHS

As news of anticipated growth in the South African uninterruptible power supply (UPS) market continues to spread, international companies are adjusting their strategies to focus on this market.

According to Frost & Sullivan, the South African UPS market remains highly competitive, despite offering profitable opportunities. Only companies with focused strategies will be able to grab a sizable share of this attractive market.

Recent analysis from Frost & Sullivan found that the South African UPS market earned revenues of $46M in 2005, with estimates to reach $84M in 2010.

"The progressive modernization of the South African economy is driving the sales of new UPS systems," said Frost & Sullivan research analyst Fabrice Essono. "Continued growth in IT (information technology) infrastructure is driving the adoption of new technologies, with some of these technologies - such as blade servers in data centers - relying on the technical support provided by UPS systems to work efficiently."

Analysts said large data centers rely on vast amounts of clean power and integrated processing, networking and storage features to function cost-effectively. Blade servers have less cabling and space requirements than larger servers. The utility functions of blade servers have created an opportunity for UPS manufacturers to provide more blade-friendly product offerings.

"The market for UPS systems is also benefiting from South Africa’s current power crisis," said Essono. "Recurrent power shortages across the country have created reservations about Eskom’s (a national electric utility) ability to meet the increased demand for electricity while boosting the sales of back-up power systems."

At the same time, the South African government's projected $61.3B investment into infrastructure - as stipulated in the Accelerated and Shared Growth Initiative of South Africa (AsgiSA) - is set to have a positive ripple effect on market expansion.

Analysts said achieving the goal of 6% gross domestic product (GDP) growth will make it necessary to construct additional electricity-generating capacity with particularly strong demand for UPS set to emerge in the tourism and telecommunications sectors.

"However, high bandwidth and broadband costs are hampering the growth of IT infrastructure and are, in turn, restraining growth of UPS sales as few companies find it attractive to venture into the South African telecommunications industry," said Essono. "To illustrate, the cost of broadband in South Africa is estimated at $0.29/Kbps - 200% more expensive than the cost of broadband in Egypt (the second biggest African economy)."

The small number of dominant end-user companies is narrowing the customer base for UPS systems in the South African market. Analysts said establishing and maintaining long-term relationships with the biggest companies in the country should be a high priority for UPS firms. With the market still in its growth stage, a greater effort will be required to broaden public knowledge about the use of power correction technologies in the workplace.

Source: Frost & Sullivan.