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Jun 22, 2012

Industry’s future dependent on full implementation of antidumping duties

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South African Fasteners manufacturers Association chairperson, Rob Pietersma, discusses the state of the South African fasteners industry. Camerawork and Editing: Darlene Creamer and Shane Wiliams.
 
 
 
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The future of the fasteners industry depends heavily on the recent provisional antidumping duties being fully implemented, South African Fasteners Manufacturers Association (Safma) chairperson Rob Pietersma tells Engineering News.

Last month, the International Trade Administration Commission of South Africa (Itac) imposed a hefty antidumping duty of 104.5% on the importation of fully threaded set screws with hexagonal heads, excluding stainless steel screws from China.

This followed an investigation by Itac, which found that these imported screws had caused local manufacturers to lose business.

In July last year, Safma submitted evidence of dumping to Itac. This showed undercutting, depression, and suppression of prices by China, resulting in a decline in capacity use, output and profit for local manufacturers and an increase in inventory levels.

Pietersma says the association brought the application on behalf of two large South African set screw manufacturers, CBC Fasteners, of which he is MD, and Transvaal Press.

These measures are seen as an extension of existing antidumping measures against Chinese and other Far East nut and bolt manufacturers.

The provisional duty will remain in force until November 2, by which time it is expected a full investigation by Itac would have been finalised.

Pietersma says that to understand the current state of the fasteners industry, it is important to consider the past.
“Imports really came into South Africa in the early 1990s and, at that point, they were coming in by the hundreds of tons. South African manufacturers were enjoying a big share in the local market and also had a stable export market,” he says.

However, he notes that, during the last 20 years, the growth of Chinese manufacturing and dumping has been a worldwide phenomenon.

“Since the 2008 global recession, imports have continued to increase and South African manufacturers tended to decline in numbers. The net result is a reduced manufacturing base,” he says.

He adds that, in the South African domestic market, imports have now escalated into the thousands of tons and, as a result of international competition, the country’s export market has been decimated.

“Another factor significantly influencing our position in the market has been the strength of the rand. Although we have seen times of weakness, there have been more times of strength,” he says.

In addition, he states that one should consider that some duties that were at about 19% in the early 1990s were reduced to 10% by the late 1990s, a factor that also fostered imports.

“So, my estimation of the reduction of employment in this relatively small industry is a 20% drop during the past three to four years.

“Manufacturing’s contribution to South Africa’s gross domestic product has also declined – 16% was the previous low and it is now at about 14%. It should be at 25%, where it has been historically,” he says.

Moving Forward

“The recognition by government that the manufacturing sector needs its assistance to grow and recent developments in the right direction to support growth are aimed at correcting imbalances in the industry, because it is through manufacturing that the country will be able to really create growth and jobs,” he says.

It is important to remember that South African manufacturers have not been, and are still not, assisted in any form by government, states Pietersma.

“That is why one has to look at manufacturers in the East. It is not just China that is exporting large volumes of goods to South Africa. These other countries in the East are also faced with a weak currency, as well as incentives and rebates to export.

“Those incentives and rebates are strongly supported by their governments and they are the factors that we are competing against, besides cheap labour,” he states.

Nevertheless, Pietersma is optimistic about government’s attempts to assist the local industry.

“The Department of Trade and Industry, in terms of its new Manufacturing Competitive Enhancement Programme (MCEP), has recognised the need to assist the manufacturing sector to gain the strong economic presence the sector used to enjoy,” he says.

The MCEP is aimed at inducing manufacturing firms to upgrade production facilities, sustaining employment and maximising volume addition in the short term.

Another significant contributor to the industry’s future is patriotism, asserts Pietersma.

“We find that many importers in the country are actually foreign-owned and/or foreign- managed; so the patriotism around creating South African jobs is minimal and such import distribution is actually supporting Chinese jobs as opposed to South African jobs.

“Safma represents South African companies that are locally owned,” he says.

Local businesses, like project and mining houses, which are huge consumers of fasteners, have a responsibility to buy products locally and support the local industry, he states.

“The only areas of growth for the fasteners industry of late have been power station activities. In spite of this, the industry is still smaller than it used to be.

“The prospects for the future of the industry rely on the antidumping duties being able to stick,” he says.

Pietersma adds that any implemented duties also need to be policed. He notes that Safma and CBC are willing to play any role they can to ensure that such policing happens.

“A lot of time, effort and money have gone into trying to secure these much-needed duties and it needs to be effective. Laws must not only be put in place, they also need to be policed. If you don’t police and levy the duties on the dumped goods properly, then you have nothing,” says CBC Fasteners financial director Israel Bender.

Pietersma emphasises that Safma is confident about the duties being permanently implemented.

“It is, of course, too early to say whether or not the duties will definitely be implemented, but Safma is confident, owing to the fact that we were able to submit strong prima facie evidence of dumping,” he says.

Edited by: Chanel de Bruyn
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