Sep 23, 2011
Afsa calls for development of a national manufacturing strategyBack
Engineering|Expertise|Africa|Industrial|PROJECT|Projects|Transnet|Waste|Waste Management|Welding|Africa|China|South Africa|One Foundry|Energy|Equipment|Manufacturing|Manufacturing Industries|Overseas Products|Power Generation|Power-generation|Products|Services|Adri El Mohamadi|Afsa|Fabrication|Mark Krieg|Power|Waste|Far East
© Reuse this
Afsa executive director Mark Krieg notes the strong rand has resulted in imported goods being cheaper than locally manufactured goods in many sectors. Many businesses are unable to withstand this competition and close down, which contributes to the deindustrialisation of South Africa.
The federation has assessed different ways for companies to improve their ability to compete against imports; however, this is difficult, as imports from countries such as China are incentivised by at least 13%. “For many engineering companies, that is their whole profit,” says Krieg.
He believes there is an uneven playing field in the aluminium industry, owing to the export incentives on overseas products coming into the country.
Afsa is concerned that it has taken too long for government to recognise the severity of the impact of imports on local companies, as this has resulted in many companies closing down, with subsequent losses in jobs and potential export opportunities.
Local foundries will have to work towards becoming more competitive, and the only way for them to become more competitive is to invest in new equipment, says Krieg. “The adoption of technology would drive down costs, but this requires large amounts of investment. It is difficult for local businesses to justify large amounts of spending in the current economic climate.”
Other countries have bigger markets and have made greater technological advances that enable companies operating in those countries to lower their costs.
The ability of the Far East to produce products effectively and efficiently at a lower cost is another threat to manufacturing industries in western countries, says Afsa.
In these countries, people are prepared to work for lower wages. Further, these countries often incentivise exports, as well as the raw materials used by companies. This provides industries with greater economies of scale, which results in more productive industries.
“In China, the total foundry industry is able to produce 40-million tons of casting a year. One foundry alone employs over 375 000 people. South African companies have to be more flexible and look for opportunities in niche markets, where their ability is valued,” says Krieg.
Afsa fully supports free market principles, but states that trade must not only be free but also fair and sustainable, which is not the case.
He explains: “Some countries have export duties on their scrap metal while other countries have resorted to banning the exportation of scrap metal because they recognise the importance of scrap metal as a strategic resource.”
Krieg feels the export of scrap is an important topic that Afsa has been dealing with for the past 11 years. He says the federation has been lobbying government for control over the export of scrap metal for years.
He emphasises it is important that Southern African governments support local manufacturing industries.
Plans to build new power generation plants and plans to renew State-owned Transnet’s rolling stock are some of the major economic stimuli that could benefit the local aluminium industry.
All the products and expertise needed for these projects can be imported; however, the challenge at hand is to manufacture such products locally, which will assist in growing the manufacturing industry, increase economies of scale and generate investment, says Krieg.
There are initiatives that have been set up through the Department of Trade and Industry’s Industrial Policy Action Plan to support the aluminium industry. One such initiative is the National Foundry Technology Network (NFTN), the culmination of a government and industry association-led effort to develop a globally competitive South African foundry industry.
NFTN project leader Adri El Mohamadi says that, because foundries are seen as possible job creators, it is important for government to have input in this industry.
NFTN provides many services to aluminium foundries, including skills development and technology transfer innovation, which involves upgrading the foundry industry by focusing on specific subjects, such as energy or waste management, which will help to improve the industry’s competitiveness.
It also aims to ensure that information sharing takes place between foundries.
Afsa has been impressed by the success of the NFTN programme and has proposed that a similar scheme be set up for the welding industry. “Welding is a scarce skill vital for a successful fabrication industry if it is to be capable of producing safe, high-quality fabrications such as structures, vessels and vehicles,” says Krieg.
Edited by: Chanel de Bruyn© Reuse this Comment Guidelines (150 word limit)
Other Aluminium News
After a R1.5-billion impairment charge resulted in Hulamin reporting negative earnings per share (EPS) of 422c for the 2013 financial year, the aluminium supplier said on Monday that EPS and headline earnings per share for the 2014 financial year were expected to...
The Steel and Engineering Industries Federation of Southern Africa (Seifsa) warned on Friday that the metals and engineering sector could contract by between 2% and 3% in 2014, owing primarily to the fallout from a month-long strike in July. The sector, which made...
Owing to the continuous expansion of its specialised services in the aluminium industry, local furnace and industrial services company Dickinson Group of Companies has registered a 60% increase in business from this industry in the past 20 years. “We can now offer...
Updated 13 minutes ago Russian nuclear energy group Rosatom confirmed on Friday that it had canvassed funding options with South African government officials during a recent “nuclear vendor parade workshop” held in the Drakensberg on October 23. The company said the options discussed were...
Updated 17 minutes ago The shortfall on South Africa's trade account narrowed sharply to R2.91-billion in September from a revised R16.75-billion in August, as the import bill nearly matched that of exports, data from the revenue service showed on Friday. Exports in September rose by 18.2%...
Updated 51 minutes ago Energy utility Eskom and the South African Local Government Association (Salga) have signed a memorandum of understanding (MoU) aimed at fostering an active partnership to ensure a cooperative and collaborative working relationship. The MoU, which was signed by Salga...
Recent Research Reports
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
This Week's Magazine
In the next 20 years, it was expected that, in Africa, more people would live in cities and towns than in rural areas, United Nations Habitat executive director Dr Aisa Kirabo Kacyira said at the Human Settlements Indaba that took place earlier this month in...
Tough-talking Human Settlements Minister Lindiwe Sisulu has committed government to building 1.5-million low-cost houses over the next five years, telling the Human Settlements Indaba in Johannesburg on Wednesday that the State would achieve this target through the...
Over the past 20 years there has been persistent concern about deindustrialisation in South Africa, as well as the fact that locally produced manufactured products have been increasingly displaced by imports.
Financial agreement for Ghanian independent power producer (IPP) Cenpower Generation Company’s $900-million, 350 MW combined-cycle gas-turbine power plant was finalised earlier this month, paving the way for the project’s construction to begin before 2015 in Tema,...
The revenue implications for South Africa of ‘base erosion and profit shifting’ by corporate taxpayers are firmly in the crosshairs of the Davis Tax Committee (DTC) and Judge Dennis Davis hinted last week that recommendations were being considered to “detect and...