Why West African demand is growing for Caterpillar dealer JA Delmas

The fact that JA Delmas employs hundreds of equipment operators in its West African operations tells you immediately that its rental business is slightly different from the traditional ‘non-operated’ model found in Europe and North America.

The prominent role that mining plays in the region, which is reflected in demand for large machines, explains the number of operators, but that does not quite tell the whole story of JA Delmas’s rental business. The Bordeaux-based company is also developing Cat Rental Stores in several countries and is seeing a general increase in demand for rental.

The recently opened Cat Rental Store in Abijdan, the Ivory Coast.

Denis Paput, Managing Director of JA Delmas - which holds Caterpillar dealerships in 11 countries in West Africa - tells IRN that mining represents between 50 and 60% of its total business.

“After mining, you have a more traditional activity for us, which is construction”, says Paput, a 27-year veteran at JA Delmas, “We have a long history with construction, mainly roads. Construction is around 25% of our activity today and the remainder is energy and industry.”

However, it is rental that is the fastest growing business line; “Rental is still the third or fourth largest regarding turnover, but is clearly the activity with the highest rate of growth.

“Rental today represents around €50 million of turnover, for a company with total revenues near to €600 million. And it’s clearly growing very, very fast. It was less than €10 million in 2013.”

Caterpillar machines in West Africa
He says that one out of seven Caterpillar machines its sends to West Africa are for its rental fleet; “If 100 machines, including from our competitors, are sold in West Africa, five are new Cat machines for our rental fleet.” It now has a fleet comprising 500 machines, including 300 Caterpillar models.

His colleague, Gilles Le Berrigaud, the Rental & Used Manager at JA Delmas, who has worked at the company since 2007, tells IRN that every country in the region is different, “but West Africa is very, very attractive because there are lots of projects in terms of mining in certain countries, and where there is less mining there are many construction projects. We have very dynamic countries and lots of projects in the past few years.”

Denis Paput says there was already a need for rental services 10 years ago; “We didn’t decide to shift towards rental very quickly, but it changed a few years ago. We decided clearly to go, and we have the ability to invest.

“We saw that the rental solution was good for customers”, he continues, “There is a trend in the region. Year after year, rental is considered with more interest by customers. Ten years ago they wanted to own the assets themselves. So, it has not been very fast, but it’s a long-term trend, even in West Africa.”

Denis Paput, Managing Director of JA Delmas, is a 27-year veteran of the France-based Caterpillar dealer.

He says that more recently, Covid also introduced some uncertainty into the market, which led some customers to consider renting rather than buying equipment.

Mining plays a major role in the economies of West Africa, and it is mainly gold; “Clearly, the gold price is high, which is a good thing for mining companies”, says Paput, “So there are projects which continue or new projects to be developed. There are also other minerals, like iron ore, but it’s mainly gold.”

Covid has had an impact on the region’s economies, as everywhere, but he says the countries have proven resilient; “GDP is coming from a low level, depending on the country, but there’s clearly huge potential in the coming years. The construction business is clearly at a high level.

“In terms of the general economies, the Ivory Coast is still the locomotive of our region, but in our business, each of the countries can be viewed separately.”

Major international rental companies
As rental develops, so does the structure of the customer base. For example, within construction, the role of major international contractors is diminishing, says Paput, and there is a growth in local players, including some quite large businesses.

“That means that they can operate in three, four, five or six countries in the region. And they are very clearly increasing their quality. And there is a third type of contractor, which is the Chinese. They are probably less present than in parts of East Africa, but they are present and very aggressive.”

The mining sector, meanwhile, currently accounts for two thirds of the company’s rental activity, and it is dominated by international concerns from Australia, South Africa or North America, and include a few Chinese customers; “Chinese companies are less active in mining than construction, but they will be more present in the future”, says Paput.

He continues; “Today in mining, we don’t yet rent to many customers, but when you rent a large fleet of mining machines you can have a high turnover on one project with one customer. But it’s a solution that mining customers are more and more interested in. Maybe not for the full fleet of the operations, but a small part of operational fleet or for construction works in the mine sites.”

A good example is a large rental contract with a mine in Burkina Faso; “They are renting for more than three years and for the lifetime of the mine”, says Le Berrigaud, “We also have mining customers who use rental to start their activity very quickly, to make the first stage of the mine and the mine construction. We also have customers who want rental for a peak of activity.”

Gilles Le Berrigaud is the Rental & Used Manager at JA Delmas.

The JA Delmas Country Manager for Burkina Faso, Eric Zouré, gives more background on the project; ”Burkina Faso is a big gold mining country and our rental activities are mainly in mining operations. One big project started at the end of 2015 with three machines and in December 2016 we signed the initial contract for the mobilisation of machines and started with a fleet of 14 machines. A workshop was quickly set up and progressively the fleet evolved to reach 27 machines in 2019. And we have a 23 machine on the site today.”

These machines are used in the mining process, and not on the construction of the mine, include 90 tonne Cat 390 excavators, three 150 tonne 6015 mining shovels, and 14 of the 100 tonne Cat 777 haulers.

“The customer used to buy machines”, says Zouré, “The site where we manage to rent, the customers had mainly Komatsu trucks. They didn’t rent on this site before, so it was a way for us to offer a solution to the customer and also a tool to compete.” He adds that the company is currently negotiating for other projects.

Denis Paput says the goal is to develop other deals in countries like Mali, Ivory Coast and Guinea, with mining customers and for mining operations; “We have another rental deal in Mali. The fleet, although not as big as the Burkina project, is already significant for mining operations.”

It is also a quite distinctive kind of rental business, involving a lot of staff and operators. In Burkina Faso alone the company has 100 equipment operators and 200 rental-related staff.

Says Paput; “We have the strategy to operate the rental machines ourselves. It’s requested by our customers, but it’s also an important point on our side. The rental business involves a lot of people, because especially in mining you need maybe four or five operators for each machine, probably more on mining operations, because it’s working 24 hours a day, seven days a week.

How is JA Delmas developing the rental sector?
Mining may be important, but JA Delmas is doing a lot more to develop rental in the region. For example, it is working to develop Cat Rental Stores. Last year is established a store in Abidjan, the Ivory Coast

“It’s inspired by the experiences and successes from European Cat dealers”, says Gilles Le Berrigaud, “and with the help of Caterpillar we launched it, but with specific, local solutions.

“We can rent large equipment for the long term, and large mining customers, but definitely we want to promote the rental of small equipment for short-term, a few days or few weeks. And we strongly believe in the growth of this type of rental in our market.”

The product range includes lighting towers, small generators, compactors, compact loaders, as well as a small number of aerial platforms.

“The idea is to propose a wide range, the right portfolio of small equipment to various customers. We definitely think that this will promote rental and promote our company”, says Le Berrigaud.

The Abijdan store is a separate location from the main Delmas office in the city; “It is totally separated”, says Paput, “A different location with different equipment. That makes the distinction between the two rental proposals: this is two different ways of renting equipment.

“It is a site which is located more in the centre of the city, so it’s more visible. It is a different target customer, so it was important to do it with a site in the centre of the city.”

Le Berrigaud says Covid delayed the launch last year, but that it has been a very good experience; ”We are testing the market and are very eager to understand and to get customer feedback, to confirm what equipment, what kind of operation, what kind of service they need.”

Paput says it is too early to talk about its financial performance; “but it adds value besides being a pure rental business or rental store business. It’s also a question of visibility. I have a lot of people coming to me saying, ‘I saw your rental store, your new location in Abidjan’.”

Eric Zouré, the JA Delmas Country Manager for Burkina Faso.

JA Delmas is now considering Cat Store launches in other countries, such as Senegal, as well as a second store in the Ivory Coast. Is there a target number; could there be 10 stores within five years? “It could be the case”, he says, “but it’s too soon to announce that we will develop as fast as that.”

Many of the West African countries are dominated by the central city. Paput says it is not a problem to serve customers from these cities for longer duration periods, “But clearly if we want to develop the short-term rental of Cat machines it will be difficult if we don’t have a location based near the operations of customers.

“We have this perspective on the future. But today, we have machines in only one main site in each country, even if there are a few exceptions.”

What about competitors in the rental market? Denis Paput says the need for capital investment in rental is limiting its wider development; “Rental is not yet a priority for our competitors, and it’s also a new activity which needs CapEx and cash. Today, not many manufacturers are developing rental.

“Regarding pure rental companies, there are different type of companies in West Africa. You have many small, informal companies and you can rent from them, but I don’t know if we can consider them as offering the same the same service as us, but it’s a form of competition. And you have also a few rental companies which try to develop this business, and sometimes they buy Cat machines.”

Gilles Le Berrigaud adds that existing rental companies are often specialists in forklifts or handling equipment. Paput says it is not easy to have a clear view of the market; “We have key statistics regarding market share or sales of new machines, but for rental, although we try to study the competition, it’s difficult to get statistics and clear data.”

One other aspect of the Delmas rental strategy is power rentals. Le Berrigaud says it is a big market because of the vulnerabilities of national grids and increasing demand for electricity; ”We definitely want to develop this activity, and also with smaller generators for contractors.”

The new Abijdan Cat Rental Store is in a city centre location, and separate from JA Delmas’s main office in the city.

He says the target market will be installations using gensets in the 10 KVA to 1000 kVA range; “We are playing in the ‘few megawatt’ market. We have in our region some rental projects over 50 MW rental, but that is a totally different business. We will operate more on the smaller generators or power plants from 10 KVA up to 2 to 10 MW.” JA Delmas has a sister company, Africa Power Services, which is 100% focused on power, including rental.

In any case, JA Delmas has a lot on its plate with the development of smaller equipment rentals through its Cat Rental Stores and its growing mining rentals operation. It seems that it will have even more equipment operators on its books in the coming years.