Production in South African foundries is down about 35% as a result of the global financial crisis, reports the National Foundry Technology Network (NFTN). Many foundries are only working three days a week or are alternating production one week on, one week off.

These levels of decreased production are not as severe as in other parts of the world, such as, India which has seen the closure of 150 foundries in the past year. Production in India's foundry industry has decreased by 50%, while the US' foundry industry has decreased by 80% since the beginning of the global financial crisis.

NFTN project leader Richard Beän, says that despite the current bleak state of foundry production it is the appropriate time to invest. "Now is the time to invest, to improve processes, to try and do as much as we can...so that when the market picks up we will be ready to take advantage of the opportunities."

Benchmarking
The NFTN has embarked on a benchmarking programme aimed at assessing pre-selected foundries in South Africa and providing individual progress plans to assist the foundries to build their strengths and resolve their weaknesses.

To date, all of the high-pressure die-casting companies have been benchmarked and have received feedback. Sand and gravity casting companies will be benchmarked over the next few months and the NFTN hopes to have the benchmarking exercise completed by June or July of this year. The Department of Trade and Industry (DTI) is also looking at providing incentives for the implementation of benchmarking plans.

"The reason we're doing the benchmarking is to give us a good idea of where all the foundries stand in relation to each other, within South Africa, but also internationally," says Beän. The benchmarking is being conducted in collaboration with the Australian Cooperative Research Centre for Cast Metals Manufacturing (Cast) and is aligned with the the United Nations Industrial Development Organisation supplier development project.

Prior to the impact of the global economic crisis, challenges facing South African foundries included that the majority of foundries were not big enough to produce high volumes, that input metal quality was poor and that a weak link between research providers and industry. Also, China and India were providing landed goods at a lower price than South African foundries could buy raw materials.

Scrap Metal
One of the factors that could make South African foundries more globally competitive in the future would be the implementation of the government's proposed duties on exported scrap metal.

Duties on the export of scrap metal would encourage scrap metal dealers to keep scrap in the country rather than sell it on the international market . South African Institute of Foundrymen president Mark Potgieter explains that "by keeping scrap locally, like China does... we reduce the price of scrap which will ultimately make us more competitive both locally and internationally and obviously enhance and build the foundry industry".

However, the implementation of the proposed limit of scrap exportation has many stumbling blocks in its path, says Potgieter. These include international free-trade agreements, which South Africa has signed, demands on the national treasury and the fact that South Africa is a member of the World Trade Organisation. Potgieter says that "we need to bring all of these into play... and prove by way of a business model that it's going to be beneficial to initiate export duties. Research will need to show that more jobs will be created and furthermore that the foundry industry is going to become more competitive."

Economic consulting company, Econex, has recently completed a study on the effect of proposed export on scrap metal on behalf of the National Recyclers Organisation (NRO). The results are currently under review by the DTI together with reports produced on behalf of the Metal Recyclers Association of South Africa (MRA) and other stakeholders. DTI director of metals in the Enterprise and Industry Development Division Gerhard Nicolaus says the DTI is "looking at all the submissions that have been made by the various stakeholders and will fill in the gaps to make sure that the department can come up with the best possible policy options."

One of the opportunities for the South African foundry industry is that it should be able to service international markets in niche areas where production numbers are low and which have a competitive price and profit margin, says Beän. He says that South Africa's cost structures are significantly lower than most other nations.

Potgieter agrees that although the current landscape of foundry production is difficult, there is, nevertheless, hope and opportunity for the future of the industry.