Tooling sector to benefit from DTI’s MCEP

19th October 2012

By: Sashnee Moodley

Senior Deputy Editor Polity and Multimedia

  

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Tool, die and mouldmaking (TDM) companies in South Africa will bene- fit directly from the Department of Trade and Industry’s (DTI’s) Manufacturing Competitiveness Enhancement Programme’s (MCEP’s) cost-sharing grants for activities undertaken within their operations, DTI chief director of the competitiveness cluster Tsepiso Makgothi tells Engineering News.

She adds that TDM companies will also benefit indirectly from opportunities created by activities undertaken with the support of the MCEP by their clients in the manufacturing sector.

The MCEP is aimed at encouraging South African manufacturers to upgrade their production facilities to sustain employment and increase value addition in the short to medium term.

The MCEP is extended to South African-registered entities involved in the manufactur- ing sector, as well as certain engineering services and conformity-assessment companies that service the manufacturing sector.

Makgothi states that the domestic manufacturing sector faces poor global market demand, declining investment in critical manufacturing sectors, a depressed local market, high input costs, such as electricity and transportation costs, as well as the pressure of cheap imports from countries such as India, China and Brazil.

This has led to a growing negative trade balance in manufactured goods.

Further, Makgothi points out that the sovereign debt crisis and the slow growth from trading partners, such as the eurozone, the UK and the US, have created economic uncertainty.

There is also a lack of appropriately skilled people, owing to people migrating, an ageing skills base and a lack of effective skills development programmes.

“There was, therefore, a need to come up with a comprehensive support package that counteracted the pessimism that might be engendered by the current economic environment and that encouraged firms to make investments that would sustain their medium- to long-term viability.

“In this regard, the MCEP provides manu- facturing firms with cost-sharing grants,” she says.

The grants are expected to persuade enterprises to upgrade their production facilities, processes and products, upskill their workers and increase production volumes and employment.

The MCEP seeks to include small and medium-sized enterprises (SMEs) in the Industrial Development Corporation’s (IDC’s) funding facility and reduce distressed enterprises’ cost of capital.

Lastly, the MCEP aims to reduce the price of working capital for exporters and businesses participating in government infrastructure programmes.

Makgothi says the TDM sector lies at the heart of South Africa’s manufacturing industry and statistics show that up to 50% of any manufactured component’s cost competitiveness is governed by tooling.

She believes the supporting activities of the MCEP will promote enterprise competitiveness and job retention in the tooling sector, which will improve firms’ capacity to manufacture globally competitive products in terms of quality, processes, price and the environment.

Makgothi notes that this will create and expand markets for South African products locally and internationally. This, in turn, will lead not only to the retention of existing jobs, but also to the creation of new jobs, as required under the MCEP.

Further, she states that the success of the manufacturing sector relies on a technologi- cally advanced and well-organised tooling industry.

While the local TDM sector has been in decline over the past few decades, resulting in the loss of key manufacturing capacities and capabilities, government and industry are combining efforts to improve some of South Africa’s manufacturing competences and meet the challenges facing this sector.

A shortage of skilled designers, artisans, engineers and project managers, as well as job losses, are two of the major challenges facing the sector.

The skills requirements for the production of tooling have also changed, with the introduction of computer-aided design and manu- facturing, and the sector has seen a decline in the technical skills development system, states Makgothi.

Another challenge has been the decrease in locally manufactured content for the auto- motive, energy, medical, rail and marine industries, coupled with a lack of investment into recapitalisation in the tooling sector over the past 25 years.

“Industry demand is growing, driven by growth in the automotive, packaging, mining and agroprocessing industries. The global demand for tooling in 2009 exceeded €64-billion and the European tooling industry contributed €14-billion (22%) of the total demand.

“Local demand for tooling currently peaks at around R6-billion a year, depending on new automotive launch-capacity requirements,” Makgothi notes.

She notes that the South African TDM industry supplies less than 20% of the local demand for tooling, which is largely driven by the automotive sector’s procurement of all high-specification tooling from international suppliers.

This is contributing to the decline in the ability of local TDM companies to meet delivery capacity and timing requirements, owing to a lack of competitiveness and the loss of work to China, Brazil and India, she points out.

Focused and applied research and development to support niche competences within the sector are also lacking.

Further, Makgothi states that broad-based black economic empowerment is lacking in the TDM sector, adding that the investment in empowerment remains insignificant, while some start-up SMEs find it difficult to generate capital.

To help alleviate the difficulties facing the sector, firms under the MCEP in the tooling industry will be able to conceptualise and implement customised competitiveness improvement programmes that correspond with their own specific needs.

The MCEP comprises an incentive scheme managed by the DTI and a loan facility managed by the IDC.

The incentive-scheme subcomponents comprise capital investment, green technology and resource-efficiency improvement, enterprise-level competitiveness improvement, feasibility studies and cluster competitiveness improvement.

The loan facility deals with the pre- and post- dispatch working capital facility, the distress funding interest make-up facility and the niche fund facility.

“The MCEP provides each firm, or firms participating through the cluster support programme, with the opportunity to access financial support grants and loans, assist in recapitalisation, improve energy efficiencies, promote cleaner production, obtain international quality accreditation, conduct feasibility studies for production capacity expansions and develop new markets,” Makgothi says.

The MCEP will assist in increasing exports and reducing export leakage in the manufacturing sector. Companies that invest in the improvement of their competitiveness will now improve their chances of surviving the current challenging economic environment and of prospering when the world economy recovers, she asserts.

“So far, 20% of the MCEP applicants are from the metals sector, a large consumer of tooling products and services,” says Makgothi, adding that the DTI hopes the MCEP will play a positive and important role in revitalising the tooling sector.

Other Support Initiatives
Meanwhile, the National Tooling Initiative, which was formed by government and the Toolmaking Association of South Africa, aims to deal with the challenges facing the tooling sector.

It is through this partnership that government, through the DTI, was a significant promoter of the international AfriMold trade fair, which focuses on tooling, precision engineering and mouldmaking. It was held at the Gallagher Convention Centre, in Midrand, earlier this month.
The DTI also funds a toolmaker skills development programme, which was launched in 2010 and which currently has more than 400 students enrolled for a toolmaking appren- ticeship course at 12 sites in six provinces.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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