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Foundries must collaborate, cooperate to combat industry challenges
The local and international foundry sectors need to work together to deal with the challenges that affect the industry, as every foundry faces these challenges, says industry-led, government-funded National Foundry Technology Network (NFTN) project leader Adrie El Mohamadi.
South African Institute of Foundrymen (SAIF) CEO John Davies agrees and notes that the challenges in the industry pertain to environmental legislation compliance, the lack of artisanal skills in the foundry sector and, in some cases, a lack of management skills.
In recent years the low uptake of new technology and high input costs, such as increasing energy prices, have and continue to be challenges that affect all foundries.
He notes that the 8% electricity tariff increase recently granted by the National Energy Regulator of South Africa to State-owned power utility Eskom does not bode well for the industry. Even though Eskom did not receive the 16% increase it lobbied for, the increase will still have a significant impact on the industry.
El Mohamadi says, during the third Brics Foundry Forum, held in the North West in March, a comparison among Brics countries Brazil, Russia, India, China and South Africa revealed that South Africa’s energy costs are one of the highest.
The study was commissioned by the NFTN, which hosted the Brics Foundry Forum with Saif to draw important comparisons between the various countries, focusing on iron-casting foundries. The results of this study also indicate similar export patterns across all the Brics countries, with most products destined for domestic markets. Further, the dominance of the automotive industry as a consumer of the foundry industry is not as pronounced in South Africa, where mining dominates.
Also, when viewed as a percentage of production costs, labour costs in South Africa, at 33.5%, are the highest among Brics countries, followed by Brazil at 32%. The other countries have reported labour costs ranging between 8% and 20%.
However, despite the challenges, El Mohamadi and Davies agree that there are many local growth opportunities for the South African foundry industry. Davies says the State-owned enterprise procurement programme is the biggest driver and a significant buyer of castings and adds that government has assured the industry that it is not a one-off initiative.
Davies adds that the weakening rand, owing to the trade deficit, also presents a greater opportunity to export products.
He says the traditional export markets of North America and Europe are currently depressed because of the current economic situation and exports to new areas, such as South America and Africa, present growth opportunities for South African foundries.
The growth rate in Africa has been exceeding 5% in recent years and El Mohamadi says South African foundries have a competitive advantage because the country has an abundance of mines, and she believes that South Africa is not exploiting this sector and the opportunities it presents enough.
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