AHEAD FOR FOUNDRIES

The trou­ble started af­ter the 2008 eco­nomic down­turn, but China’s re­cent mar­ket de­cline has com­pounded the prob­lems for the in­dus­try

CityPress - - Business - XOLANI MBANJWA Busi­ness@city­press.co.za

The coun­try’s 170 foundries face a tough road ahead if they are to re­main in busi­ness. At least 100 com­pa­nies in the sec­tor have closed shop since 2003 and pro­duc­tion has slowed by 43% since 2007. The tra­vails within the sec­tor were laid bare last week by the South African In­sti­tute of Foundry­men (SAIF) when it re­ported on the poor state of the met­als fab­ri­ca­tions sec­tor to Par­lia­ment’s Port­fo­lio Com­mit­tee on Trade and In­dus­try.

SAIF chief ex­ec­u­tive John Davies said the con­trac­tion in the in­dus­try, which has con­tin­ued to shed jobs since the 2008 eco­nomic down­turn, was also caused by in­ef­fi­cien­cies in energy sup­ply and in find­ing al­ter­na­tive power sup­ply.

Davies’ out­look echoed in­put to Par­lia­ment by the Na­tional Foundry Tech­nol­ogy Net­work, the Alu­minium Fed­er­a­tion of SA, the Tool­mak­ing As­so­ci­a­tion of SA and the Na­tional Tool­ing Ini­tia­tive of SA on the gloomy state of the in­dus­try.

Davies told the com­mit­tee that train­ing pro­grammes sup­ported by the gov­ern­ment – in­clud­ing the Na­tional Foundry Tech­nol­ogy Net­work, the depart­ment of science and tech­nol­ogy, and the Man­u­fac­tur­ing, En­gi­neer­ing and Re­lated Ser­vices Seta – had had a pos­i­tive im­pact on ad­dress­ing the skills short­age af­fect­ing the in­dus­try.

Davies has called for more train­ing in the sec­tor be­cause, de­spite the in­ter­ven­tions, con­straints per­sist. These in­clude im­port leak­ages which re­sult in re­duced or­ders and low com­pet­i­tive­ness; rapidly ris­ing energy costs and energy in­ef­fi­ciency; the cost of com­pli­ance with en­vi­ron­men­tal reg­u­la­tions; and lim­ited ac­cess to cap­i­tal.

He also said re­cent tech­no­log­i­cal de­vel­op­ments in the in­dus­try re­quired spe­cial skills.

But the depart­ment of trade and in­dus­try said the in­dus­try had the po­ten­tial to pros­per if it fo­cused more on Africa and South Amer­ica to stim­u­late growth.

Thandi Phele, chief di­rec­tor of me­tal fab­ri­ca­tion, cap­i­tal and rail trans­port equip­ment at the dti, said the foundry in­dus­try played a vi­tal role in the econ­omy as all other man­u­fac­tur­ing sec­tors were de­pen­dent on it for the tools, cast­ings, com­po­nents and sys­tems used to op­er­ate or build ma­chin­ery in min­ing, rail, elec­tric­ity gen­er­a­tion and other sec­tors.

Phele said op­por­tu­ni­ties ex­isted in the public in­fra­struc­ture build pro­grammes for the foundry in­dus­try, both in the lo­cal and the African econ­omy.

“The pro­grammes re­main the sin­gle largest op­por­tu­nity to stim­u­late the in­dus­try, as well as min­ing turnkey projects in South Africa, the rest of Africa and South Amer­ica,” Phele told the com­mit­tee.

The re­cent de­cline in the Chi­nese mar­ket, which tra­di­tion­ally pro­duced met­als for its own use, meant Chi­nese firms were of­fer­ing cheaper prod­ucts to the in­ter­na­tional mar­ket. South African foundries were thus “squeezed” out of these mar­kets which led to shrink­ing de­mand for lo­cal met­als.

“Do­mes­tic de­mand will be raised by the lo­cal­i­sa­tion pro­grammes. Gov­ern­ment is max­imis­ing lo­cal­i­sa­tion within its own pro­cure­ment pro­cesses to stim­u­late de­mand in the in­dus­try,” said Phele.

Steve Jar­dine pro­ject leader at the Na­tional Foundry Tech­nol­ogy Net­work (NFTN), a gov­ern­ment ini­tia­tive to re­vi­talise the in­dus­try, said the rapid de­cline of the in­dus­try re­quired high lev­els of in­vest­ment in cap­i­tal equip­ment to pre­vent more clo­sure of foundries.

At least 15 foundries had closed shop and 1 080 jobs had been lost since 2010, of which 850 were in the past 12 months.

Jar­dine told the com­mit­tee that foundries lacked the vol­umes to achieve man­u­fac­tur­ing economies of scale and had aged in­fra­struc­ture for cap­i­tal equip­ment parts.

“This de­cline is due to high vol­umes of im­port prod­ucts, per­ceived cost and qual­ity gaps, lo­cal­i­sa­tion of cast­ings, poor trans­parency of the buy-sell trans­ac­tions in the sup­ply chain, lim­ited op­por­tu­ni­ties cas­cad­ing down to foundries and poor busi­ness con­fi­dence.

“Foundries are find­ing it dif­fi­cult to com­pete for new busi­ness, and the global com­pe­ti­tion has had a di­rect im­pact on cast­ings sourced in South Africa. Tra­di­tional mar­kets are also chang­ing and neg­a­tive mar­ket trends, such as in the min­ing sec­tor, are neg­a­tively im­pact­ing the foundries,” said Jar­dine.

The NFTN, said Jar­dine, was es­ca­lat­ing its as­sis­tance pro­gramme to 20 more foundries, af­ter help­ing 31 oth­ers with sup­port pack­ages to ad­dress, among other things, ac­cred­i­ta­tion and com­pli­ance needs, prod­uct de­vel­op­ment and in­no­va­tion.

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