A new Industrial Policy Action Plan (Ipap) focused on supporting the agroprocessing and metals industries, including foundries and the casting sector, will be released in April, Department of Trade and Industry (DTI) director-general Lionel October said at the Metal Casting Conference, in Kempton Park, on Wednesday.
"We are aiming to strategically support the foundry and casting industries as the core of broader manufacturing activities, if the new plan is adopted by Cabinet," October said.
The foundry and casting industries are core to various other manufacturing industries, including the automotive, valves, construction and rail industries.
The DTI aimed to draw lessons from Germany and China about what they did to maintain, revive and support their metals industries, he revealed.
The need for a mix of supply-side and demand-side support is addressed in the new Ipap - the ninth iteration. However, the biggest part is focused on the demand side of the industry. There will be supply-side incentives in research and development (R&D) for instance, but the core initiative for the industry must be focused on the demand side, October said.
The designation of valves, which are strategic components in various industries, for local production using procurement protocols that large State-owned enterprises must abide by has had a good impact on the valves manufacturing industry, with fewer exemptions granted to companies to import valves.
Simultaneous support to enable manufacturers to meet international original-equipment manufacturers' (OEMs’) quality requirements has also enabled this, he said.
"The government is committed to local production and we must support local industry. We have designated rail rolling stock, valves and now steel as products that must be produced locally. Parastatals must buy these products locally, which creates base demand for the industry."
October avers that the government has the buy-in of large international OEMs, as evidenced by new investments in automotive manufacturing plants. Direct links between automotive manufacturers and local metals industries, such as the local aluminium industry, have been forged to ensure that the industries produce components and materials to the required international standards.
There is a strong emphasis on local component manufacturing and the creation of strong backward links to the broader sector to ensure that the entire supply chain is supported to meet the required standards of production and quality.
The DTI is cooperating with the Council for Scientific and Industrial Research (CSIR), the National Foundry Technology Network (NFTN) – hosted at the CSIR, and majority funded by the DTI – and the Department of Science and Technology, as well as mining research organisation Mintek, to expand supply-side support for local metals and components manufacturing as the manufacturing industry moves into the fourth industrial revolution.
"In the next Ipap [version nine], we are emphasising the importance of preparing for the fourth industrial revolution and supporting the metals and casting industries to modernise and upgrade. Information and communication technologies, the Internet of Things and three-dimensional printing technologies are part of the major convergence of technologies in the sector.
"We need to support and collaborate with the CSIR and research and development organisations to train the youth and provide strong support for human resource development and research and development support, as well as [other] strong supply-side support, specifically in the form of incentives for the metals and agroprocessing industries, to modernise and grow.
This, along with demand-side initiatives, such as local procurement designations, will help to grow demand for products from these industries," said October.
NFTN manager and CSIR technology localisation implementation unit manager Ashley Bhagwandin highlighted on Wednesday that the NFTN and local R&D organisations benefited greatly from the attendance of and interactions with international delegates at the Metal Casting Conference, which included the hosting of the World Foundry Organisation’s international conference.
"We are trying to foster an environment where more research and development linked to the metals sector is undertaken, which will foster greater efficiency and help to develop or adopt new casting methods and thereby ensure innovative products and processes in the industries. The World Foundry Organisation general assembly [held yesterday] enables us to understand what support is available internationally.
"In the South African context, the cooperation of academia, industry and government is important to ensure that the foundry industry is effective, competitive and able to deliver on procurement designation and State procurement needs. The international links are important for technical knowledge and understanding where the industry is moving to and the latest trends in the global environment, so that we remain current and competitive.
"We aim to increase the global competitiveness of the South African foundry industries as a key subsector of manufacturing that must be revitalised. Twenty-five foundries closed between 2010 and 2015, which cost the country about 1 700 jobs, with 635 jobs lost in the past financial year alone.
“South Africa has about 170 foundries directly employing about 9 500 people, and they are also mostly small and medium-sized enterprises, which means that compliance with new regulations, such as air emissions standards, put a strain on these companies."
Some of the contributors to the decline of the foundry industry include a lack of offtake agreements, which reduce the manufacturing economies of scale, and aged infrastructure and capital equipment, which means commensurate high levels of capital investment are required.
The NFTN, through the DTI, aims to make funding available for recapitalisation and to address the low capacity utilisation through technical and regulatory support, engaging local buyers and developing the industries' collective capacity and capabilities.
The desired outcome is to have a competent foundry and casting segment that is globally competitive and sustainable. The objective is foundry capacity building, providing technical and revitalisation support through state-of the-art technology transfer and diffusion and the development of appropriate skills to ensure their effective use when these technologies are implemented, noted Bhagwandin.
"Some of these issues we have already started to address. We have a competitiveness improvement programme that has been rolled out to 52 foundries in South Africa, which also includes accreditation and compliance improvements, cleaner production and health and safety standards. We aim to support about 20 foundries a year, and develop skills and high-end technology development through our network of partners, including most South African universities and research organisations," he said.
The foundry industry in South Africa is a mature industry and many foundries have the capacity and capabilities to produce for designated sectors, including those that export, and the NFTN aims to grow this capability. A lack of sufficient demand to fill foundry production capacity is thus a key area for intervention.
Improving capacity utilisation includes a comprehensive supply chain audit to provide greater understanding of the supply chain and what the needs and demands of the links in the supply chain are so that foundries can be directed to fill those gaps or take opportunities.
The NFTN support focuses on key areas of basic business systems support including scaling up companies’ production, standardisation, quality management training, technology upgrades to meet demand and achieve price-points that customers demand, and marketing.