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Komatsu to set up plant in South Africa to battle Chinese rivals

Strong demand for infrastructure investment attracts heavy equipment makers

Construction machinery maker Komatsu thinks the African market has plenty of room for growth, thanks to heavy demand for infrastructure. (Photo by Wataru Ito)

TOKYO -- Japanese construction machinery maker Komatsu looks to build a plant in South Africa that will refurbish construction and mining equipment by June 2020, Nikkei learned Thursday.

The move is part of the company's expansion drive in Africa as it aims to boost sales of high-margin mining machinery on the continent. It comes as Komatsu faces off against rivals such as China's Sany Group and Caterpillar of the U.S., which have increased their sales in Africa.

Komatsu thinks the African market has plenty of room for growth, thanks to heavy demand for new infrastructure.

The plant will be built in Johannesburg, where the company already operates a factory. The facility will be relocated and greatly expanded to disassemble and clean key machinery components, such as engines and hydraulic devices, restoring them to near-new condition.

The complex will cost 8 billion yen ($73.9 million) to complete and will serve as a major operating center for Komatsu's expansion in Africa.

The services provided by the plant will help customers cut costs by extending the life of machinery. Komatsu hopes to repair about 1,000 units per year. The company plans to build additional refurbishing plants in the nearby countries of Botswana, Namibia and Mozambique over the next five years.

Komatsu made 124.1 billion yen in sales from African operations during the fiscal year ended in March, accounting for about 5% of consolidated sales. However, Africa was identified for the first time as a strategic region worthy of market development in a business plan released in April. 

Meanwhile, demand is slowing in key markets in North America and Southeast Asia. "If I were to anticipate the next growth market, it would be Africa," said Komatsu President Hiroyuki Ogawa.

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