Owing to the new valves designation policy, local valves manufacturer and supplier Premier Valves will continue to invest in significantly increasing its capacity for local valve production during this year, says company CEO Peter Thomson.
The valves designation policy, which is managed by the Department of Trade and Industry (DTI), requires that a minimum of 70% of valves bought by State-owned enterprises have to be locally produced. The instruction notice for this designation was issued by the National Treasury in February and came into legal effect at the beginning of March.
“The Premier Valves Group (PVG) is committed to investing another R5-million in support of valve designation, having already invested more than R6-million in associated equipment over the last three years,” he says, adding that most of the money will be spent on equipment needed for the volume production of small valves and improvements to PVG’s 22 000 m2 Alrode factory premises.
Further, the company will focus on increasing skills development by training and employing more individuals to manufacture the valves, Thomson says.
However, he warns that the recent period of substantive dependence on valve imports has damaged South Africa’s indust- rial base.
“As a result of the price-driven flood of imports and predominantly from China, Premier Valves – along with many other valve manufacturers – had to temporarily stop its manufacturing of many of its smaller commodity item valves and downsize to survive,” he explains.
Although it will now likely require several years to increase and strengthen the local valve manufacturing capacity back to its original state, Thomson notes, that Premier Valves is fortunate as it has managed to retain the core manufacturing competencies and product knowledge required to rapidly increase its production.
As part of its focus on increasing its manufacturing capacity for smaller commodity type valves, Premier Valves also expanded its workshop space, and installed a new assembly and testing facility at the beginning of the year, Thomson says, stressing that the company will soon restart the local manufacture of a range of smaller valves, such as small bore wedge gate valves, resilient seal gate valves, rubber-lined butterfly valves, swing-check valves and air-release valves.
Thomson notes, however, that there are various challenges that need to be overcome before the valves industry, and the country in general, can fully benefit from the designation policy. One specific challenge is the local foundries’ poor cost competitiveness and limited capacity, as it is largely the cost of castings that causes the cost of locally manufactured valves to be significantly higher than that of imported valves.
“If, on the brink of designation, the necessary investment can be secured, the cap- acity of local foundries can be both increased, and made more efficient for increased production. Manufacturing production efficiency will also improve, owing to economies of scale. These factors should significantly and sustainably reduce the cost of locally manufactured valves,” he explains.
More time will also be needed to refine and enhance the new valves designation certification policy, which has been delegated by the DTI to the South African Bureau of Standards (SABS), Thomson says.
“The concern, in the short term, is whether the new rules are workable in their current form, and whether the SABS has the cap- acity to manage the process,” he says, noting that discussions to resolve these “teething problems” were already under way between the Valve and Actuator Manufacturers Cluster of South Africa and the SABS.
PVG took over the core business of the old Cementation Engineering last year as part of its ongoing strategy to build up its local prod- uction capabilities.
Under PVG, Cementation Engineering will concentrate on the manufacture of its range of proprietary valve products for mining and general industry, while also supporting other PVG companies by using its computer numerical control machine and other equipment to machine, facilitate and coat various valve components on site at PVG.
He concludes by warning that, although the policy has the potential to revive the local valve manufacturing sector and support the general country, the economy by fostering industrial growth, it will need to be consistently implemented for at least five years before valves manufacturers can hope to receive a reasonable return on investment that companies like PVG are committing to the industry.