Tough times ahead for foundries | Fin24
 
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Tough times ahead for foundries

Aug 23 2015 15:00
Xolani Mbanjwa

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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