Greater localisation of OEM supply needed

19th February 2021 By: Darren Parker

Greater localisation of OEM supply needed

STONEY STEENKAMP Why should we require a pandemic for customers to localise?

Despite the pandemic being a strong motivator for original-equipment manufacturers (OEMs) to localise procurement, rubber products manufacturer Hudson Rubber MD Stoney Steenkamp believes that too many local OEMs still lack the drive to do so.

“Although many customers made huge efforts to localise some of their requirements – albeit because of import problems – many still don’t have the same drive. Some OEMs have indicated that they do not have the desire to start the localisation process because of the effort.”

This preference for international procurement continues to occur despite some local suppliers being more competitive because of their having higher broad-based black economic-empowerment ratings, not requesting any kind of financial investment and having the means to create new jobs.

“Why should we require a pandemic for customers to localise and for government or other institutions to support local manufacturing?”

Although some OEMs remain stubbornly attached to imports, there has, nonetheless, been a general increase in localisation that Steenkamp says highlights what is possible when there is a “real will” to do so.

“There are many negative sentiments in South Africa, but there are also some positive people who want South Africa to succeed. South Africa’s success will be achieved if its citizens are the primary contributors to its economy.”

Steenkamp adds that the volatility in the exchange rate over the past year has contributed negatively and positively to the rubber manufacturing sector, but that it continues to be a balancing act for local manufacturing, considering that little is manufactured locally in terms of raw materials. 

He notes that the pandemic has impacted on many facets of Hudson Rubber’s business process, including the supply and cost of raw materials. However, overall, the business fared well under the circumstances.

“Raw material shortages, exchange-rate volatility and fuel increases, among other factors, have an impact on our cost base. As such, we are continually looking for offsets to minimise these impacts.”

Steenkamp adds that, unfortunately, a lack of large volume orders in some cases is curtailing these efforts.   

The pandemic and consequent lockdowns ensured a decrease in activity for all sectors, from Hudson Rubber’s perspective. However, Steenkamp highlights that specialised construction and mining industries performed particularly well.

“The onset of Covid-19 has highlighted how dependent South Africa is on imports. As imports continue to be hampered, many companies were forced to turn to local suppliers for solutions. Unfortunately, in many cases, the local manufacturing sector’s capability was limited in terms of capital equipment.”

On a positive note, Steenkamp highlights the abundance of human capital in South Africa – albeit limited in terms of education and skills.

He hopes that the pandemic has reminded customers that they are vulnerable to imports and that investing in local capacity and capability should be a key strategy for finding a healthy balance.

“This will not only secure valuable jobs and provide economic benefits to the country but also provide hope for the local manufacturing sector.”

Hudson Rubber continues to be committed to earnestly pursue the local OEM market, despite the significant barriers to entry, Steenkamp concludes.