Grand Parade to make slot machines locally: Hassen Adams – executive chair …

An incredible story – manufacturing jobs for South Africa, reviving unused capacity.


DOWNLOAD THIS INTERVIEW

HILTON TARRANT: Well, Hassen Adams is executive chairman of Grand Parade Investments, probably best known in the country right now as the man who is bringing Burger King to South Africa. That announcement out three weeks ago. Today an announcement from Grand Parade of something perhaps far closer to its core business – the joint venture with a German company to make gaming machines in South Africa. Hassen Adams joins us now.
   Hassen, are these the kind of slot machines that most South Africans will be familiar with in casinos that hey frequent?

HASSEN ADAMS: Ja. The agreement that we have signed is a joint-venture agreement with a company called Merkur in Germany. They are the biggest producers of gaming machines and gaming products in the entire Europe. If you just look at what they produce, they produce something like 85 000 machines a year, employ 8 000 people in Europe, and have an amazing philosophy in terms of how they deal with their workers.
   They virtually employ the whole town of Lübbecke and for us it is an enormous opportunity to form a company called Grand Merkur, which will now be registered in South Africa for the primary purpose of manufacturing and assembling and distributing slot machines, sports betting terminals, lottery terminals, etc. And we will also be looking at developing locally designed software for games and alternative hardware will also be developed. So what this tells you is there is enormous opportunity for South Africa to grow out of that from a skills development point of view and career point of view, especially being associated with a world-best company like Merkur.

HILTON TARRANT: Hassen, obviously the manufacturing angle here, in terms of the costs of production, the cost of actually making these machines here in South Africa, there must be some appeal there.

HASSEN ADAMS: No, not quite. I read an article about some of the guys here worrying whether it is possible to start a manufacturing company here for slot machines because of the cost. But this is a deal made in heaven for us, and it just happened by coincidence, where I triggered the statement that we would like to make our own machines because we have a manufacturing licence which we bought from the Australians.
   And as a result of that I had a call from Tellumat, which used to be Plessey, and the people who produce all this circuitry and instrumentation for Boeing and for the Defence Force, etc.
   I went to Germany on invitation by Merkur and I was astounded by what they have there and even more shocked to see that we have exactly the same sort of capacity and capability in Cape Town.
   Most of those factories are in dire need of help because, as you know, the Defence Force has gone a bit south and all of those people are going to be without jobs in the future. So here we come with this enormous opportunity to resuscitate all of those jobs and create even a lot more jobs and careers and offer them a more sustainability in their business.
   So it’s a match made in heaven by three parties who are willing to work together.

HILTON TARRANT: Hassen, how many jobs are we talking about here? Tens of jobs, hundreds of potential jobs? Obviously this will happen downstream, as you say, with the contract manufacturer Tellumat, not directly with Grand Parade. But how many jobs are possible?

HASSEN ADAMS: At the moment Tellumat employs 250 people in its Retreat factory in Cape Town and a lot more were employed in Atlantis. And we are now going to re-establish a process of increasing the number of people that they are going to employ on their side in Tellumat to assemble and manufacture these machines.
   We will use their facilities, we will use their conveyor-line facilities and the logistics facilities and our German partner will come over here and produce all the technology requirements to assemble these things and to build these things.
   We can also manufacture the boxes here. I have a factory called Mac Brothers that has the capability of producing all of those boxes, because everything that we do there is done by robotics and by laser cutters. We employ at Mac Brothers alone 400 people. And so every thing just fits in beautifully.
   So when you are talking about starting a business like this, people ask me how much are we going to spend. If it’s going to be a greenfields business I would be scared out of my pants because that’s a sort of investment that you have to put down – it’s probably more than half a billion in terms of bricks and mortar and technology equipment and machines and the computers and all of that sort of stuff. We are getting it laid on virtually without having to put our hands in our pockets. When we are going to put our hands in our pockets is when we are going to start to roll out and put in the money to drive that rollout. That to me is a pleasure to spend because we’ve got all the infrastructure in place already.

HILTON TARRANT: Have there been incentives or assistance from government?

HASSEN ADAMS: Ja, I’ve had discussions with the Department of Trade Industry. they were very kind to send some of their people down to our launch today.
Unfortunately the minister couldn’t be there because they had special meetings in Cabinet today. As you know, Cabinet is winding down. But he sent his best wishes to us and they are very excited about the fact that we are introducing this into the country as the first time ever that these machines will be manufactured in this country.
   Now you must remember it’s not only slot machines. It’s sports-betting machines, it’s machines for lotteries, etc, etc. And I can go on. And the opportunity is exciting because we are looking at putting an RD section in place where we are going to start to look at software design . And you know the technology betting of the future is going to have a big demand for that.

HILTON TARRANT: Massive opportunity for this new venture. Just to close off with, Hassen, to go back to Burger King, if you phone still ringing?

HASSEN ADAMS: Oh, continuously. I feel embarrassed just sitting with my German partner and having to talk about Burger King, but the same thing happened on CNBC when they interviewed me now. Everybody wants to know about Burger King.
   And I’m telling you, our relationship with Tellumat also affords us a bigger opportunity there. We have been inundated. We have decided to become a lot more aggressive now and you will see a much bigger rollout in the first year, against what we had anticipated because of the demand. I mean, it’s just amazing. I didn’t know so many people knew about Burger King.

HILTON TARRANT: Hassen Adams.

DAVID SHAPIRO: Do you think the Burger King people will allow the pokie machines to go into their outlets? I haven’t seen one in America.

HILTON TARRANT: [Laughs] David, on a serious note, an incredible story, manufacturing jobs for South Africa.

DAVID SHAPIRO: I think it’s using unused capacity and I think everything was there. The investment was made. So, as Hassen said, he didn’t have to lay out billions for a greenfields…

HILTON TARRANT: Imagine, half a billion rand.

DAVID SHAPIRO: I must admit I haven’t looked at Grand Parade in that greater detail. Gambling has never been an area that I’ve paid much attention to, but you’ve got to hand it to him. He sounds very entrepreneurial, very, very innovative. It’s great to hear people talking like that – from Burger King to pokie machines.

HILTON TARRANT: R3.66/share – it’s at a 52-week high. Now this was trading closer to R5 maybe three, four years ago. Might it be worth a flutter?

DAVID SHAPIRO: Ja, you’ve got to look at it. I don’t want to just make a flash judgement here, but it’s exciting and let’s go and have a look at it. Have a much closer look at where this can go.

• Subscribe to a daily email of transcripts from Moneyweb Radio – click here


The SAfm Market Update with Moneyweb is broadcast on SAfm 104-107fm, weekdays at 18:00 to 18:30.



Article source: http://www.moneyweb.co.za/moneyweb-safm-market-update/r-386

Tags: , , , , , , , , , , ,

Leave a Reply

CommentLuv badge

*