PPPs to Bolster Growth in the South African Facilities Management Market, Finds Frost & Sullivan

CAPE TOWN, South Africa, May 24 /PRNewswire/ -- Public-private partnerships (PPPs) are creating significant opportunities for growth within the South African facilities management market. Although the market currently remains unrecognised as a formal industry, the South African Government has acknowledged the benefits of professionally managed facilities through the adoption of the Immovable Asset Act of 2007.

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New analysis from Frost & Sullivan (http://www.buildingtechnologies.frost.com), South African Market for Facilities Management, finds that the market earned revenues of $587.3 million in 2008 and estimates this to reach $1.1 billion in 2015. The market is divided into commercial, public and industrial end-user sectors.

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"The main driver of growth in this market is the increasing number of PPPs with facilities management requirements," says Frost & Sullivan Research Analyst Linda Harding. "The high demand for facilities management services is likely to expedite the formalisation and regulation of the facilities management market in South Africa, along with greater job prospects."

There has been an increase in the number of concessionary agreements with specific facilities management requirements every year. This is as a result of government acknowledging that they do not necessarily possess the skills and capabilities to run their facilities effectively and at the lowest cost. These agreements often have strict equity requirements and therefore only those facilities' management providers who are willing to take on risks will be able to capitalise on these growth opportunities.

In 2005, only three PPPs were approved. They included specific facilities management requirements at the sanction phase. In 2008, more than ten concessionary agreements, that included facilities management requirements, were in varying stages of approval.

Whilst outsourcing non-core operations offers many advantages, such as cost savings and efficient management of assets and facilities, most end-users are unaware of these possibilities because the facilities management market is still unrecognised as a formal industry. Furthermore, some companies are unwilling to engage in the process as there is a stigma attached to outsourcing – namely that it leads to job losses within the company.

"A mere 30 percent of facilities management is currently outsourced, leading to fierce competition amongst service providers for shares of a limited market," explains Harding. "The concept of facilities management is largely misunderstood to imply a loss of jobs due to outsourcing, and, as such, the demand for services continues to be low."

Offering clients a professional and reliable facilities management service, with a measurable value addition is not only essential for securing contracts, but also critical in fostering customer loyalty. Establishing a strong and trustworthy reputation through professionally rendered services will guarantee a strong market share to the service provider and ultimately provide maximum value to the client.

"Despite the low awareness amongst end-users, the demand for facilities management services within the public sector is expected to contribute significantly towards the understanding of its benefits and growth in all sectors," concludes Harding. "The rising demand for facilities management services will accelerate the process of formalising the industry and regulate competition levels, which will result in the formation of several innovative businesses and job opportunities."

South African Market for Facilities Management is part of the Building Management Technologies Growth Partnership Services programme, which also includes research in the following markets: South African Building Management Systems, South African HVAC Market, and South African Lighting Controls Market. All research services included in subscriptions provide detailed market opportunities and industry trends that have been evaluated following extensive interviews with market participants.

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South African Market for Facilities Management

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SOURCE Frost & Sullivan