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Press Release - 2015/04/08:BUSINESS AND LABOUR REPRESENTATIVES TO DELIBERATE ON SUSTAINABLE SOLUTIONS FOR METALS AND ENGINEERING SECTOR

The five-month-long strike in the platinum belt, which brought the mining industry to its knees and crippled South Africa’s already reeling economy last year, and a subsequent four-week-long strike in the metals and engineering sector are examples of the impacts that a dysfunctional relationship between business and labour can have on the country and its economy.

But, will labour and business ever work co-operatively together in South Africa’s interest?

That is the topic that will be debated robustly at the last plenary session of the inaugural Southern African Metals and Engineering Indaba scheduled to take place on 28 and 29 May.

Answering that question and sharing their insights on the topic will be speakers and panelists:

• NUMSA General Secretary Irvin Jim;
• SEIFSA Operations Director Lucio Trentini;
• Solidarity General Secretary Gideon du Plessis;
• Former NEDLAC Executive Director Alistair Smith;
• Duys Engineering Executive Chairman Henk Duys;
• And MEIBC General Secretary Thulani Mthiyane.

The high-calibre panel, made up of revered players in the South African economy and the labour relations landscape, will dissect the topic and debate everything related to labour relations in Southern Africa in general and the manufacturing sector in particular. Panelists will also field questions from the floor.

The Southern African Metals and Engineering Indaba will be attended by policy and decision makers, business owners, senior executives and other stakeholders in the metals and engineering sector in the Southern African Development Community region. It will focus on the following topics, among others:

• Does Manufacturing Have a Future in Southern Africa?
• Striking a Healthy Balance Between International Competition and Dumping
• Transformation in the Metals and Engineering Sector
• International Competitiveness and Intra-African Trade
• South Africa and the National Development Plan
• Southern Africa and the Huge Infrastructure Backlog – How To Finance It?

Organised and hosted by SEIFSA, the Indaba is aimed at encouraging growth in the sector, which has under-performed over the past five years.

by SEIFSA .

Manufacturing in South Africa is in serious trouble

If nothing is done by our policy makers, the situation is certain to be even worse in 2023 when, as a country, we will be expected to have created many more job. This is a recipe for disaster, especially if the rand should continue its downward spiral against major currencies like the US dollar.

Concretely, what are the challenges facing manufacturing? The answer is that a growing number of manufacturers, but especially companies within the metals and engineering sector, are simply unable to compete against the deluge of cheap imports flooding our country. They can’t compete not because they lack experience, are not sufficiently sophisticated or rely on antiquated technology. Instead, they have a variety of factors working against them.

For a start, much of the international competition facing them is unfair in nature and the playing field is uneven. Many of the Asian imports against which they compete are directly or indirectly subsidised by governments whose primary concerns are creating jobs for their citizenry and improving their balance of payments. Generally, their input costs are also much lower than those faced by their South African counterparts who are lumbered with, among other things, relatively higher labour costs for the same calibre of unskilled or low-skilled employees and ever-spiralling administered costs.

In the metals and engineering sector in particular we have seen a growing number of smaller, mostly family-owned companies closing down over the past few years. Formal employment levels have declined from 413 515 in 2007 to 374 959 in 2014.

Before the dawn of democracy in 1994, South Africa was a pariah among civilised nations, with few countries openly trading with it. Its economy was insular, with high tariffs in place to protect local business. Being part of the civilised international community presented South African business with an opportunity to access new markets abroad, but it also opened the thitherto-sheltered local business up to aggressive international competition.

Full membership of the international community and its structures like the World Trade Organisation (WTO) meant that the high protective tariffs that had been in place to shelter the local economy had to be jettisoned or reduced to WTO-approved levels. Regrettably, in most cases South Africa moved from one extreme to another, with high tariffs eliminated altogether instead of being reduced to internationally accepted levels.

As a result, as of 2014 local manufacturers exported an estimated 35% of their production, while imports had captured nearly 45% of the domestic market. In the metals and engineering sector, 60% of the products were exported and imports accounted for the same percentage of the domestic market. Current indications are that imports are gaining the upper hand, at the expense of local producers and their employees and, therefore, at the expense of the local economy.

A number of sub-sectors in the metals and engineering industries continue to shrink, with devastating consequences for business owners and their employees. Companies that were previously manufacturers now import and on-sell a fair percentage of products that they used to produce themselves. One such company, with a 33% capacity utilisation because of low demand and our relatively small market, now manufactures only 40% of its own products and imports 60% of what it sells domestically.

“If we can manufacture it competitively, we manufacture it. However, if we cannot do so, then we import it,” said the business owner.

The veteran manufacturer – a member of our Federation who has been part of the family business and has worked in no other sector throughout his life – added ruefully that some of his imported products are landed in South Africa for less than half the price that it costs him to manufacture them here. Like many others, he felt strongly that “the Government has no clue what manufacturing is about or what is going on”.

Regrettably, although the Department of Trade and Industry is doing its best to support business, with its Manufacturing Competitiveness Enhancement Programme being a commendable initiative, it would appear that there is little or no policy coherence at national Government level – sometimes within the same ministry. Instead of a single-minded determination to accomplish a particular goal, we sense at times the existence of different – and sometimes conflicting – priorities between and among some departments and ministries.

What are some of the challenges facing manufacturing? The aforementioned business owner captured it as follows: “Our biggest problem in South Africa is volume. The unit costs are quite high because we are not able to use our factories 24 hours a day. We use our factories for only a third of the time.”

The main cost factors, he said, are raw materials (he manufactures hand tools) and labour costs. He pointed out that while he and other local manufacturers have to comply with the South African Bureau of Standards’ quality specifications, many of the imports competing with his products are not of the same standard.

It is unfortunate that, in terms of the Budget presented by Finance Minister Nhlanhla Nene last month, over the next few years non-energy-intensive sectors like tourism will receive priority. That means that manufacturing, which is a vital part of any growing economy, will continue to struggle and lag behind.

Compounding matters for manufacturing is our state of industrial relations. For instance, the five-month-long strike in the platinum mining sector and the month-long strike in the metals and engineering sector last year affected many companies badly. After all, this is a sector that supplies to the mining, construction and auto-manufacturing industries, with instability in anyone of those industries affecting the metals and engineering sector directly.

Despite the challenges, the businessman was still optimistic that solutions can be found to the numerous challenges facing the country in general and manufacturing in particular. Concluding our meeting, he said to me: “I think that there are still many opportunities in South Africa, but we just need to work together.”

I concur. This is such a beautiful country with so much potential, but it will not realise that potential until such time that all stakeholders pull together in the same direction, putting South Africa’s interests first. That requires that all of us – the Government, business and labour – put our differences aside and rise above our respective selfish interests. It requires that we engage openly, robustly and yet constructively in the interests of South Africa and future generations.

The Southern African Metals and Engineering Indaba taking place on 28-29 May at Emperors Palace is an opportunity for such an engagement. We look forward to the participation of all three stakeholder groups in the search for lasting solutions.

Kaizer Nyatsumba is the CEO of the Steel and Engineering Industries Federation of Southern Africa.

by SEIFSA .

Press Release - 2015/03/26: INTERNATIONAL COMPETITIVENESS AND INTRA-AFRICAN TRADE CRITICAL IN REALISING AFRICA’S GROWTH POTENTIAL

Speaking ahead of the inaugural Southern African Metals and Engineering Indaba scheduled to take place on 28 and 29 May, Mr Nyatsumba said that international competitiveness and intra-African trade were critical in realizing Africa’s growth potential.

“Turbulent economic conditions that the world is currently experiencing make it even more necessary for African countries to trade with one another in order to boost economic growth, create employment and ultimately eradicate prevalent poverty in the continent.

“Africa is the last frontier for growth owing to its rich mineral resources. This is evident in the number of international companies conducting exploration and mining activities in the continent,” Mr Nyatsumba said.

He added that mining activities create opportunities in other economic sectors such as retail and manufacturing. Therefore, it was of critical importance that African countries create and enhance opportunities for intra-African trade.

Mr Nyatsumba said that although intra-African trade has increased over the years, a lot still needed to be done to improve in this regard.

According to various research findings, exports by African countries to their peers on the continent have surged by 32% since the 2008 economic downturn, compared to growth of just 5% in exports to the rest of the world. Nevertheless, in 2011 intra-African trade accounted for merely 9% of the continent’s total trade with the world, compared to 25% for Latin America and almost 50% for Asia.

“Infrastructure, red tape and boarder frictions are but some of the serious challenges currently halting intra-African trade from thriving. These challenges need to be addressed and ultimately eradicated in order for trade among African countries to thrive,” Mr Nyatsumba said.

Concerning international competitiveness, SEIFSA Chief Economist Henk Langenhoven said that South Africa needed to modernize production capacity and stabilize the labour market, among other things, for South Africa to be more internationally competitive.

“The African market is very highly competitive at the moment. This is due to the fact that the rest of the world is experiencing stagnation as far as economic growth is concerned. For us to benefit from the rising African demand, we need to make sure that we are internationally competitive by using new technologies to do more with the capacity that we have and to reduce production costs by, among other things, stabilizing our expensive labour market,” Mr Langenhoven said.

He said that it was of pivotal importance, therefore, that various stakeholders within the Southern African Development Community (SADC) region get together and deliberate on strategies aimed at ensuring that intra-African trade takes place and that businesses are internationally competitive and geared towards taking advantage of the growth opportunities emanating from the rest of the African continent.

International competitiveness and intra-African trade will be one of the main topics for discussion at plenary session 4 of the inaugural two-day Indaba scheduled to take place at Emperor’s Palace outside Johannesburg.

Sharing their insights on this important topic will be:

• Business Unit South Africa Chief Executive Officer Ms Khanyisile Kweyama,
• Africa Project Access Managing Director Mr Paul Runge,
• Scaw Chief Executive Officer Mr Markus Hannemann,
• and Independent Director of Companies Mr Mike Spicer.

The Southern African Metals and Engineering Indaba will be attended by policy and decision makers, business owners, senior executives and other stakeholders in the metals and engineering sector in the SADC region, and will focus on the following topics, among others:

• Does Manufacturing Have a Future in Southern Africa?
• Striking a Healthy Balance Between International Competition and Dumping
• Transformation in the Metals and Engineering Sector
• International Competitiveness and Intra-African Trade
• South Africa and the National Development Plan
• Southern Africa and the Huge Infrastructure Backlog – How To Finance It?

Organised and hosted by SEIFSA, the Indaba is aimed at encouraging growth in the sector, which has under-performed over the past five years.

by SEIFSA .

Press Release - 2015/03/27: PPI READING TELLS A TALE OF TWO HALVES FOR THE METALS AND ENGINEERING SECTOR

Speaking after the release of the figures, SEIFSA Economist Tafadzwa Chibanguza said that while a lower inflationary environment is generally beneficial to domestic producers from an input cost point of view, most of the companies in the metals and engineering sector manufacture intermediate goods, hence a lower producer price reading also suggests lower earnings for these companies.

The final manufactured goods index recorded an annual 2.6% increase when February 2015 is compared to February 2014, down from the annual 3.5% recorded a month earlier. The intermediate manufactured goods index increased 1.5% in February 2015 when compared to February 2014, down from the annual 3.4% recorded in January 2015.

Mr Chibanguza said that producer inflation can be viewed as a proxy for domestic activity.

“It is very evident that the disinflationary pattern in these indices is, in addition to other factors, a function of weak domestic demand. This is the tenth consecutive disinflationary reading for the final manufactured goods index. Counting back takes us to April 2014 with the platinum strike, the metals and engineering strike and the beginning of load shedding all having impacted domestic demand over this period,” Mr Chibanguza said.

He added that the pattern was the same for the intermediate manufactured goods index, with only one reading higher than it was during the same period last year.
“As the metals and engineering sector, we watch this index very closely, given that the sub-industries that make up the metals and engineering sector constitute 70% of the make-up of this index. However, we anticipate that this could be the lowest point of this year for the final manufactured goods index, with upward pressure expected as soon as the next reading, particularly driven by the very weak rand against the dollar in March, and the impact this has also had on the Rand price of fuel, in addition to the fuel levies expected in the next few months,” Mr Chibanguza said.

The upward trajectory will, however, be limited to an extent by weak domestic and global demand. This will be evident particularly in the intermediate manufactured goods index, where commodity prices are anticipated to remain depressed for the remainder of 2015.

According to Mr Chibanguza, there is some positive news to read from today’s figures – and that is the benefit to downstream producers. A lower inflationary environment creates a classic case of lower input costs in an environment of a weak exchange rate, thus increasing the competitiveness of domestic producers internationally and improving the margins producers can earn, barring electricity supply as a constraint.

“We are of the view that the intermittent electricity supply remains the country’s most significant threat. Simply put, without energy, meeting export demand is impossible, and this negates some of the upside brought on by the lower inflation,” Mr Chibanguza said.

He added that, going forward, some upward pressure was anticipated. The primary driver of the upward pressure will be the inflationary pass-through from weaker currency and the shortage in the harvest of maize production caused by the drought. The latter was anticipated to put upward pressure on the final manufactured goods index.

However, weaker global and domestic demand is likely to offset the aggressiveness of the increase, mainly due to weaker mineral commodity prices.

“Given the dynamics highlighted above, the weaker inflationary environment and the very recent relative strengthening of the Rand to below $1/R12, it was widely expected that the South African Reserve Bank would keep the repo rate on hold,” Mr Chibanguza concluded.

by SEIFSA .

Press Release - 2018/03/18: SEIFSA WARNS OF POSSIBLE END OF INFLATION REPRIEVE

Speaking after the release of the CPI figures by Statistics South African today, SEIFSA Economist Tafadzwa Chibagunza said that given the dynamics at play, there is a possibility that the falling CPI had reached the bottom of the trend and an upward pressure in the index could be anticipated from now on.

The CPI recorded a year-on-year increase of 3.9% in February 2015, which is down from the year-on-year 4.4% recorded in January 2015.

“This reading and continual easing of inflation was to be expected given the 93c/litre decrease in petrol for February 2015. The rand against the US dollar also traded in a fairly sideways pattern in February, opening the month at $1/11:62, strengthening down to about $1/11:35 and finishing the month at $1/11:65, all in all averaging $1/11:57 on a trade-day weighted basis,” Mr Chibanguza said.

In terms of contribution to the annual increase, the other sub-components of the index either did not move or moved marginally. The combination of these factors is in line with the lower reading.

“However, the real story about consumer inflation is what will happen from now on. We anticipate upward pressure in consumer inflation in the very near short term, ending the short-lived reprieve consumers have enjoyed so far,” Mr Chibanguza said.

He added that the weaker rand posed significant direct and indirect upside risks to the components in the CPI. Against the dollar, the local unit has depreciated 7% from the end of February to date. The impact of the currency was cross cutting across most of the components in the CPI.

There is an expectation of a R2/litre increase in the price of petrol in the coming weeks. This is the result of a relatively stronger oil price, a significantly weaker exchange rate and the fuel levies announced in the national budget. Transport makes up 16.43% of the index.

Mr Chibanguza said that, in addition, the drought in farming regions has significantly affected the harvest and that lower supply will cause food prices to rise and imports to supplement this weaker supply at current exchange rate levels will also contribute upward pressure to food prices. Food and non-alcoholic beverages make up 14.2% of the index.

Lastly, the alcoholic beverages and tobacco portion – which makes up 5.43% of the index – will also contribute to upward pressure in the CPI, given the increase to sin taxes announced in the national budget.

“All in all that sums up to 37% of the components of the CPI with a direct risk of increasing, not to mention second-round effects of both fuel price increases and a weaker exchange rate on the other components of the index,” Mr Chibanguza said.

by SEIFSA .

Press Release - 2015/03/17: INFRASTRUCTURE DEVELOPMENT KEY TO UNLOCKING SADC’S ECONOMIC POTENTIAL

Mr Nyatsumba said that Governments’ spend on infrastructure development not only provides a stimulus to a country’s economic growth, but it can also crowd in private sector and foreign direct investment (FDI). He said that countries that boast highly- developed infrastructure tend to do better than their less-developed counterparts when it comes to attracting private sector investment as well as FDI.

Mr Nyatsumba said that over the years South Africa’s world-class infrastructure, among other contributing factors, has played a crucial role in positioning the country as the entry point to the rest of the continent.

“In order to fast-track economic growth in South Africa and the rest of the Southern African Development Community (SADC) region, countries within SADC have to develop infrastructure and transport logistics that would enable them to compete globally.

Accelerated growth necessitates road and rail links that are continually improving,” Mr Nyatsumba said.

However, current turbulent economic conditions make raising money to finance SADC’s huge infrastructure backlog difficult.

“African countries in general and countries within the SADC region in particular are in dire need of FDI. Infrastructure development has the potential to play a positive role in attracting FDI and private sector investment, but the difficulty in raising finance for infrastructure development poses a threat to accelerating economic growth within SADC,” Mr Nyatsumba said.

He added that without reliable infrastructure, it is almost impossible for any developing economy to prosper.

“It is, therefore, of pivotal importance that various stakeholders from government, labour and business get together to deliberate on strategies aimed at unlocking SADC’s economic growth through infrastructure development, among other things,” Mr Nyatsumba said.

The topic of SADC’s huge infrastructure backlog and how to finance it will be the main focus of attention at break-away session three of the inaugural two-day Southern African Metals and Engineering Indaba scheduled to take place on 28 and 29 May at Emperor’s Palace outside Johannesburg.

Sharing their insights on this important topic will be:

• The Industrial Development Corporation’s Executive for Mining and Manufacturing, Mr Abel Malinga;
• SADC Regional Integration Deputy Executive Secretary Dr Thembinkosi Mhlongo;
• International Finance Corporation Infrastructure Manager Mr Ram Madhidhara;
• and Standard Bank Corporate and Investment Banking Head of Power and Infrastructure Mr Ntlai Mosiah.

The Southern African Metals and Engineering Indaba will be attended by policy and decision makers, business owners, senior executives and other stakeholders in the metals and engineering sector in the SADC region, and will focus on the following topics, among others:

• Does Manufacturing Have a Future in Southern Africa?
• Striking a Healthy Balance Between International Competition and Dumping
• Transformation in the Metals and Engineering Sector
• International Competitiveness and Intra-African Trade
• South Africa and the National Development Plan
• Southern Africa and the Huge Infrastructure Backlog – How To Finance It?

Organised and hosted by SEIFSA, the Indaba is aimed at encouraging growth in the sector, which has under-performed over the past five years. The conference, which will take place at Emperor’s Palace in Ekurhuleni, will bring together business owners, trade unionists and policymakers from across the SADC to deliberate on turn-around strategies.

by SEIFSA .

Press Release - 2015/03/13:PRODUCTION DATA DRIVES HOME CONTRACTION IN METALS AND ENGINEERING SECTOR

Not only was January production lower than January 2014, but the sector contracted by 3,3% on an annual basis.

Speaking after the release of the manufacturing production figures, SEIFSA Chief Economist Henk Langenhoven said that the only flicker of light was that January production was slightly higher (0,7% seasonally-adjusted) than that in December.

“But, this was mainly due to recovery in the basic iron and steel (4,9%), and household appliances industries (17,8%) together having a 24% weight in the overall index for metals and engineering,” Mr Langenhoven said.

The recovery in the basic iron and steel industry was mainly due to one of the large producers bringing their plant up to normal capacity after a long period of maintenance during the second half of 2014. The latter is therefore not an indication of true recovery.

Mr Langenhoven said that this was indeed a sad state of affairs; most of the other industries making up the metals and engineering sector contracted by much more than the overall performance indicated on a 12 month seasonally-adjusted basis;

• Rubber products -8,9%,
• Plastics -4,2%,
• Non-ferrous -5,1%,
• Structural steel -8,2%,
• General purpose machinery -11,9%,
• Special purpose machinery -3,6%
• Electrical machinery and equipment -1,2%

SEIFSA earlier stated that it did not foresee any growth for the sector during 2015. The statement by the Minister of Finance during his budget speech that only low-import and electricity-light sectors would be supported by government over the medium-term seems to be a serious point of departure for policy for the foreseeable future.

Mr Langenhoven said that with domestic economic uncertainties, the balance of payments and budget deficits as well as the renewed strength of the dollar, it seemed as if a weakening currency may indeed hold the only hope for better export earnings from the sector if sufficient electricity was available to produce the products.

“It seems as if the sector finds itself at the centre of contradictory forces, policy choices and constraints, a difficult position, indeed.” Mr Langenhoven concluded.

by SEIFSA .

Press Release - 2015/03/11: INDUSTRY TRANSFORMATION AND THE ABSENCE OF WOMEN TO TAKE CENTRE STAGE AT THE UPCOMING METALS AND ENGINEERING INDABA

The manufacturing industry in general and the metals and engineering sector in particular are in dire need of not only transformation, but also female leadership.

This is the case not only when it comes to general business ownership, but also with regards to occupation of senior leadership positions.

“While there are commendable exceptions in some companies, most companies in our sector continue to be among the poorest performers when it comes to transformation,” Steel and Engineering Industries Federation of Southern Africa Chief Executive Officer Kaizer Nyatsumba said.

The 2013 BEE Survey conducted by KPMG ranked the manufacturing sector the second-worst performer, after mining, as it struggled to adhere to the codes on employment equity, skills development and transforming management control.

“As a sector, we need to embrace change and advocate transformation. Not only is it in South Africa’s interest for that to happen, but it is also fundamentally in business’s long-term interest,” Mr Nyatsumba said.

As far as the absence of women is concerned, Mr Nyatsumba said that the sector needed to achieve a critical mass of women to take the industry to new heights.

“It is of critical importance that a concerted effort is made by the sector towards creating meaningful opportunities for women to play crucial roles in taking our industry to new heights,” Mr Nyatsumba said.

Sharing their insights on the important topics of transformation and the absence of women in the sector will be:

• NUMSA General Secretary Irvin Jim;
• Transman Chief Executive Officer Angela Dick;
• Progressive Professionals Forum President Jimmy Manyi;
• B&D Solutions Chief Executive Officer Dr Namane Magau;
• Department of Labour Acting Deputy Director-General Thembinkosi Mkalipi;
• Ernst and Young Director and Black Management Forum Deputy President Koko Khumalo;
• MerSeta CEO Dr Raymond Patel;
• and Transnet Human Resources Group Executive Nonkululeko Sishi, among others.

The Southern African Metals and Engineering Indaba will be attended by policy and decision makers, business owners, senior executives and other stakeholders in the metals and engineering sector in the Southern African Development Community (SADC) region, and will focus on the following topics, among others:

• Does Manufacturing Have a Future in Southern Africa?
• Striking a Healthy Balance Between International Competition and Dumping
• Transformation in the Metals and Engineering Sector
• International Competitiveness and Intra-African Trade
• South Africa and the National Development Plan
• Southern Africa and the Huge Infrastructure Backlog – How To Finance It?

Organised and hosted by SEIFSA, the Indaba is aimed at encouraging growth in the sector, which has under-performed over the past five years. The conference, which will take place at Emperor’s Palace in Ekurhuleni, will bring together business owners, trade unionists and policymakers from across the SADC to deliberate on turn-around strategies.

by SEIFSA .

Press Release - 2015/03/10/ SEIFSA INTENSIFIES FIGHT AGAINST SKILLS SHORTAGE

The SEIFSA apprentice bursaries were offered to 10 young men and women to undergo a 26-week, merSeta-accredited institutional training at the SEIFSA Training Centre (STC) in Benoni, followed by on-the-job training at SEIFSA member companies for 18 months.

SEIFSA Human Capital and Skills Development Executive Mustak Ally said the South African manufacturing sector has been facing considerable competitive pressure to become more productive and compete successfully in export markets, and the existing skills shortage – especially in technical trades – has not helped matters.

“It is against this backdrop that SEIFSA continues to drive the skills development agenda within the metals and engineering sector,” Mr Ally said.

The trades offered to the apprentices include electrician, boilermaker, welder, as well as fitter and turner, among others. In order to be eligible for a SEIFSA apprentice bursary, applicants must be South African citizens between the ages of 18 and 28 and have passed with at least 50% four N3-level subjects aligned to the chosen trade.

In addition to the 10 apprentice bursaries, SEIFSA has also offered 10 tertiary education bursaries to first-year students studying towards electrical, civil, industrial, mechanical and metallurgical engineering qualifications in Universities and Universities of Technology across South Africa.

Every year SEIFSA awards apprentice bursaries as well as tertiary education bursaries to individuals pursuing studies in the engineering sciences in the steel and engineering environment.

In addition to funding students fees, SEIFSA also places the students with SEIFSA member companies upon completion of their studies.

“It is only when we all work together that we will really succeed in eradicating not only the current skills gap, but also unemployment and ultimately poverty,” Mr Ally concluded.

by SEIFSA .