Jako Laubscher – Director, 6Sigma, South Africa
Jako Laubscher, founder and director at 6Sigma, shares his motivation for establishing the company in 2012, the challenges and opportunities the company has seen in the past five years, and his growth priorities for the next few years.
Jako, what motivated you to enter the shipbuilding industry and establish 6Sigma in 2012?
“In general, as an industry, the outlook for 2018 is more positive than 2017.”
On a personal level, I have always been drawn to abstract design – projects where you design and calculate but do not see the final result until you actually build it and launch it onto the water. It came down to a choice between aviation and oceans.
I also have a strong entrepreneurial spirit. It became apparent very early on that there was a lack of young naval architects in South Africa. Most people in the industry were in their 50s or 60s, so there was going to be a skills shortage in the future. I saw the opportunity in this; after all, it does not make sense to go in the direction that everyone else is going!
As the education options in naval architecture in South Africa were limited, I went to the Netherlands in 2009-2012 to extend my knowledge and also understand better the European view of the industry, in a country with a strong global shipbuilding reputation. After obtaining my MSc degree in naval architecture, which included a thesis I did while at Damen Shipyard, and working as a Naval Architect for companies such as Bluewater Energy Services, I returned to South Africa and established 6Sigma.
Establishing an engineering company is particularly difficult as it is quite a closed industry. Companies build strong relationships with their clients and clients like to stay with the people they know and trust. Breaking into such a market is quite challenging. Fortunately, I had made some connections before I left and upon my return, I won a contract with Dormac, one of the largest maritime service providers in Southern Africa, to work on two jack-up rigs in Saldanha Bay. That was our first job and it set us up for a good first few months.
In the past few years, the global oil and gas industry has seen a slump with the fall in the oil price. How did 6Sigma adapt to the market environment?
As a company, we always have a backup strategy. In addition to our engineering services, we also provide training courses in naval architecture and marine engineering (design) in South Africa. In the first year of the company, we saw it more as a buffer against the volatility in the oil and gas industry, but it soon became obvious that it was also a good business on its own. As a result, we spun off that business into a new company, Oceans Technology Higher Education, which offers courses at postgraduate level and is registered with the Royal Institute of Naval Architecture in the UK. This diversified our business and helped us weather the downturn.
In 2013 when we saw the downturn coming, we collaborated with DCD Marine, another large Western Cape maritime service provider, through a mutually beneficial, exclusive partnership with them. As a large company, they helped to anchor our business and until a few months ago, we were located within their office but as we saw the market taking its toll, we decided to move out and make ourselves directly available to the market again.
We have also partnered with a number of software companies to provide technical support for their products within South Africa. For instance, we work with CostFact, a cost estimation company, and through this, we helped Southern African Shipyards with the cost estimation for a huge ZAR 3 billion (USD 250 million) contract.
We also ensured that the company stayed lean and agile. 2017 in particular was a very challenging year but through the diversification of our business activities and keeping our staff number low, we managed to steer the company through the storm, and in fact, we have already had a very strong start to 2018.
In general, as an industry, the outlook for 2018 is more positive than 2017. The oil and gas segment of the business will pick up a little more slowly. While there is talk of new tenders, we expect the earliest impact of that will only be felt in the second half of the year. While people are no longer pessimistic about this sector, I think most people are still biding their time and waiting to see who will take the first dip.
As a smaller service provider, what differentiates 6Sigma from the rest of your peers and competitors?
As a maritime and offshore engineering and EPC company, over the past five years we have worked very hard to establish a strong reputation through our work. We have worked on a number of large-scale complex projects over the past five years that really separates us from small boat-buildings. For instance, we have done work on a 350 meter container ship, the MSC Ines, that broke her rudder by running into the Port of Durban. The rudder was a massive 12 meter-high structure. We had to work with 300-400 tonnes of steel and we did the engineering planning and detailed engineering work as well. Not many companies can do this.
In addition to the ability to work with heavy steel, we are also extremely familiar with the rules and regulations of the offshore oil and gas industry from DNV-GL, ABS and all relevant certification agencies.
Outside of the oil and gas sector, we have recently been awarded work as project managers and technical advisors for the new Robben Island ferry, which is a testament to our expertise and capabilities.
Finally, we are an accredited company and our qualifications are recognized globally. I am personally registered as a Chartered Engineer with the Engineering Council in the UK, which would probably help differentiate my capabilities and experience. Also recently, I was registered as an International Professional engineer and can therefore sign on for work in 14 countries including New Zealand, Hong Kong, India, he UK, Canada, and the US. I am very excited to see how 6Sigma can leverage this.
Could you share a flagship project that showcases 6Sigma’s capabilities?
I would highlight the Halliburton Stim Star hydration tank project, which we delivered as a turnkey project, working three shifts 24/7 to complete the project within five to six weeks.
Many companies have expressed a challenge in finding the right engineering skills and talent as there is a bit of a skills gap in the country at the moment. How is 6Sigma managing this?
This is definitely a significant issue in heavy steel and engineering. There are perhaps only three marine design companies in South Africa that can work with heavy steel. In the past, it was the South African Navy that sent their engineers to obtain their Master’s degree in naval engineering so everyone else in the industry is ex-Navy.
This is one of the reasons we established our training courses business. We have tried to have Oceans Technology Higher Education registered with the South African government as a degree but the bureaucracy and red tape have been a big barrier. We are currently in early discussions with Mauritius University to perhaps set up an UK-accredited degree with them.
The cost of living in Cape Town is also a challenge. As there is such a shortage of skills, we have to compete with other industries like building and mining industries. To retain my best employees, I need to make sure I offer attractive remuneration and benefits, which can be challenging given the volatility of the oil and gas industry, where we can go a few months without sizable projects. Nevertheless, I do invest in my best talent to ensure that we have the best skills and expertise at 6Sigma.
What is the scope of 6Sigma’s current international operations?
As a company, our strategic focus is on the African continent. After all, it does not make sense for a South African company to compete in Houston or Rotterdam or Singapore! We work on vessels that come to this part of the world, so our work is international in terms of scope but we keep close to Africa.
We also have a concept called 6Sigma Shipyards where we reach out to manufacturing companies in Africa and provide them our management team to assist on a project basis. This make a lot of sense as it helps them keep overheads low, especially given the naturally expensive management overheads.
In particular, we are looking at Angola. Until very recently – January 2018 – we needed visas for Angola so visa-free travel will open up the market to us significantly! We hope to get some traction there in the next few years.
We are also very open to international partnerships, especially with larger companies, so we hope to find a project where we can begin to build such a collaboration with companies, where we can offer our expertise.
Do you have any advice for foreign companies looking at South Africa as an investment location?
Companies should always be clear about their interest and risk appetite – and how much they want to engage with the country. They need to understand the rules and regulations locally, especially regarding local content and participation, as well as government policy and framework. For instance, if a foreign company’s involvement with a local project exceeds USD 2 million, they need to meet some minimum local engagement requirements. It would also be wise to keep the company capital in a stable currency like dollars or euros.
The South Africa Oil and Gas Alliance (SAOGA) is also a very good way to reach the local industry and understand the local environment better, as is the Department of Trade and Industry. It is also always a good idea to speak with South African companies and South Africans to hear their local perspectives.
Looking forward then, what are your main priorities for 6Sigma over the next few years?
For the time being, we are going to focus on the training courses business, which is more predictable than the oil and gas service industry at the moment. Our goal is to build something that is able to receive international accreditation. The South African brand is not as recognized internationally so it is important to be recognized by an international body as we work within such a global industry.
We are definitely still looking at the oil and gas sector and I am optimistic that it will pick up over the next few years, but we will wait for more momentum before we expand further in this direction.