Built to last

ENTREPRENEUR: HANNES LOUW | WHAT IS the best marketing approach when you have a sure-fired top-quality product, but a market flooded with sceptics?

That was the question that young Cape Town-based public company Approved Precast Homes (APC Homes) faced when it presented its first showhouse to the world early last year.

“Actually, there’s only one answer,” says Hannes Louw, founder and MD of APC Homes. “You must first convince your potential market that your product is of excellent quality. If, in addition, it costs less than similar products and can be made available to clients much quicker, you will have a great advantage. That’s easier said than done, but it’s the only route in a market where failure seems the norm.”

The company achieved this in less than a year. “Our big breakthrough was when we entered for an international competition for innovative house-building methods, the Absa Bank International Innovative Housing and Sustainable Energy Efficiency Competition, and emerged the winner among the approximately 20 participants from SA and overseas. And as far as energy efficiency is concerned, APC Homes came second.”

According to Louw, to get an unconventional building method accepted, especially in SA, is a serious obstacle, and you must first convince prospective homebuilders before you have any hope of conquering the market.

“In an independent acceptability study among all income groups conducted prior to the competition and covering houses from R50 000 to R2,5m, we achieved a very high acceptability rate of 96%,” Louw says. “It’s important that the people could look at the houses and inspect them properly. If that hadn’t been the case, the level of acceptability would certainly have been much lower. Seeing is believing – the houses must be experienced.”

But why would the construction method used by APC Homes be preferred to conventional building methods?

Louw says there are many advantages. “It’s durable but much cheaper than conventional building. Houses can be erected three times quicker, are energy efficient, and banks have approved the construction method and granting finance. In addition, it has Agrément SA certification.”

Agrément SA (ASA) is the division of the CSIR that assesses the efficiency and quality of non-standardised construction methods and is recognised by more than 20 countries worldwide. ASA is a founder member of the well-known World Federation of Technical Assessment Organisations (WFTAO) and has been doing research into alternative building methods since 1969.

The density of the material that APC Homes uses, including the approved poles and panels used in the initial process, is 30MPa (megapascals) compared to the 8MPa of standard bricks. This gives rock-solid building structures, better insulation and waterproofing and is used in all structures, regardless of the size or cost. The end product looks exactly the same as any conventional house.

According to Martin Fourie, financial director of APC Homes, a combination of quality and a significant cost benefit makes APC houses attractive: “Let’s take SA’s low-cost housing projects as an example. This industry has existed for years, but it’s in a crisis because of factors like the poor construction work and poor management. Millions of rand are spent on houses that are collapsing. With the APC building method, poor construction is eliminated, and it costs nothing extra. In fact, it’s cheaper.”

The market for affordable housing is one of APC’s main targets. This market consists of houses of at least 50sq m that banks are prepared to finance. “In this market, a conventional house of 60sq m costs about R550 000 – R250 000 for the stand and R300 000 for the building costs. That’s high for the income group in this market sector. The APC building method will cost the same homebuilders about R100 000 less – R250 000 for the stand and R200 000 to build the house – and it’s obvious that a 30% saving on the building costs will suit the homebuyer’s pocket.”

Fourie says the quality for small and very luxurious houses does not differ. The APC building method is, for example, being used to put up eight classrooms, with change rooms, for the primary school at Eerste River in the Western Cape. Approval has also been given for new classrooms for a high school in Centurion in Gauteng.

Though APC Homes only moved into its head office in Brackenfell in Cape Town and its regional office in Centurion last year, the basis for the company was formed in 1998. “I got the idea of using prefabricated concrete walls in the building process when I did not like using the ordinary concrete walls, which have been used in SA for 50 years, so I started doing research about plastering these walls to improve them. My company Classy Crete developed from that. I sold it just over a year ago to start the new company.

The 56-year-old Louw, who has been the full-time head of APC Homes since its inception, says he put all the money he got from selling Classy Crete, plus “a lot more”, into the new business. “Though I contributed most of the capital, the other three shareholders also invested a few hundred thousand rand each. We didn’t use any bank funding. Since we thought of listing later, we registered it as a public company.”

The company’s recipe for growth is firmly based on the franchise concept, which enables the rapid expansion of infrastructure. “When we started our marketing a year ago, our aim was to train 200 building licence holders in three years and send them all over the country,” Fourie says. “Now, after 12 months, we already have more than 90 and enough enquiries, indicating that we can easily double this figure in two years.”

Louw foresees large expansion opportunities for his company. “In SA’s thousands of schools alone, there is excellent potential,” Louw says. “Legislation requires that the many asbestos classrooms must be replaced before 2012. The APC building method is excellently suited to this great challenge.”

Foreign interest, especially following its international award, confirms the company’s growth possibilities. “Licences have already been sold in Angola, Botswana and Nigeria,” Louw says.

This isn’t just daydreaming. Property economist Erwin Rode recently said that cheaper quality housing is undoubtedly the solution for new homebuyers, pensioners and the low-cost market. The greatest challenge for APC Homes is to overcome the psychological resistance against houses that aren’t constructed in the traditional way, especially more upmarket houses, he said.

Louw’s company has already partially overcome this resistance by its quality award, number of licence holders, praise from industry experts and satisfied homebuyers.

Four questions

What is your academic and business background?

I studied law and owned and managed several businesses.

Have you always lived in the Cape?

No, among other places, I once had a farm near Vaalwater in Limpopo. We moved to Cape Town in 1994, where my son and I started a furniture factory.

What makes you excited about your industry?

The “discovery” of the APC building method and its potential for our country. The massive housing shortage offers excellent opportunities for our industry.

What worries you about our country?

Unfortunately the way affirmative action is applied has resulted in poor management and service delivery. Nepotism, corruption and crime are serious problems.