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While the first quarter of the year saw new-vehicle sales inch up from the same time last year, domestic vehicle production, exports and employment all moved into negative territory.

This is according to the first-quarter business review on the automotive industry, published by Naamsa | The Automotive Business Council.

The report notes that first-quarter new-vehicle sales inched up 1.6% over the same quarter in 2022. However, passenger-car sales were down, as well as heavy-truck sales.

Some good news is that hybrid and electric vehicle sales increased by 18.8% in the first quarter, up from 1 401 units in the first quarter of 2022, to 1 665 units in the first quarter of this year.

The first quarter also saw new-vehicle exports decline by 4%, to 84 811 units, compared with the 88 363 units exported in the same quarter last year.

Domestic vehicle production also dropped by 1.1% compared with the corresponding quarter last year.

Naamsa reports that employment at vehicle manufacturers declined by 85 jobs, to 33 392 people, compared with employment numbers at the end of 2022.

Employment at vehicle importers also saw a decline of 208 jobs, to 7 402 people, compared with the end of last year.

More bad news than good for the auto industry in Q1 (engineeringnews.co.za)

Creating increased demand for South African stainless steel within key sectors such as mining, automotive and food and beverage is a key area of focus for the Southern Africa Stainless Steel Development Association (Sassda) in 2023. This was the view of Sassda Executive Director Michel Basson in a recent webinar on the ‘State of the Stainless Steel Nation’ where he provided a comprehensive local and global overview of the sector.

Basson stated; “The local industry is well-positioned to supply African markets with a variety of world-class stainless-steel products that can rival other global competitors. This presents significant opportunities for local fabricated products including industrial capital equipment for mining, agricultural applications, food processing and health applications,”.

Sassda has therefore put measures in place to strengthen the industry, provide access to new opportunities and capacity in other sectors, and stimulate local demand.

Basson elaborated; “Local demand can also be stimulated through the designation of local products in infrastructures at all government levels. We see many projects where there’s a definite contract requirement for 100% local supply; these companies require exemption from the dtic.”

Punting the use of local stainless steel

In pursuit of its mandate, Sassda is also exploring opportunities to replace numerous applications where galvanized metals are currently being utilised with 3CR12, the world’s most specified 12% chromium utility stainless steel. Sassda has various partnerships in place to facilitate localisation in industries such as food and beverage, medical, automotive, cutlery, travel, and containers in multiple countries, providing a range of opportunities for the local stainless steel market.

Sassda has also been assisting with evaluating various government-funded projects and has seen definitive growth in municipal undertakings in certain provinces. “Unfortunately, we are currently constrained by a number of restrictions; however, we are working on these together with our private partners via the Steel Masterplan.”

This type of engagement with government forms part of Sassda’s broader mandate of engaging in key lobbying efforts for its members. For example, Sassda was able to lobby the dtic to exclude stainless steel from the recently announced ban on scrap export regulations.

A global view

Basson also provided a broader view of the current state of the stainless steel sector globally and locally. He reported that despite various global issues over the past few decades, stainless steel has maintained a steady annual compound global growth rate of 5.8%, which is more than double the growth rate of copper, and 30% more than aluminium. He also highlighted the fact that between 2005 and 2021, China experienced rapid growth in stainless steel production, while South Africa remained stable at approximately 13% of global production.

Basson stated; “Locally, the COVID-19 pandemic significantly impacted the industry over the past three years, resulting in a negative trend in local production and export shrinkage in 2022. Nevertheless, the South African stainless steel industry is still regarded as a world-class supplier. The sector displayed remarkable resilience in bouncing back from the pandemic-induced restrictions.”

The power crunch

Locally, stainless steel production and fabrication are currently facing their biggest hurdle to date: loadshedding. This challenge overrides all previous issues, as the total loadshedding hours have already exceeded those of 2021 and 2018-2019 combined. The effects of loadshedding include diminishing staff safety, motivation, productivity, and increased living costs, contributing to a visible decline in apparent consumption during 2022. The South African Reserve Bank has identified this as a huge future risk that could result in social unrest, straining socio-economic stability.

“But we need to be optimistic about the future, and this is possibly the time to rethink what we do and how we do it. The energy issue might be an opportunity to make the industry more energy efficient and less energy dependent,” says Basson.

Enhanced access

Against the backdrop of these challenges, Sassda’s focus has been on adapting its processes by providing enhanced tools to facilitate easier access to its members’ stainless steel products, together with the expansion of the association’s education and training programmes. This training includes several accredited CPD presentations that can also be customised.

Sassda also offers a broad range of tools for every level; those relevant to government, partners, the broader industry, and even to non-technical consumers. These tools provide technical advice and guidance.

Basson concluded; “Despite challenges facing the industry, Sassda is optimistic about the future of the South African stainless steel sector, and based this optimism on our industry’s cohesive ‘strength in numbers’. With these collaborative efforts and the resilient nature of our industry, we remain a strong global competitor in 2023.”

To find out more, watch the full webinar here or email michel@sassda.co.za to find out more.

While all investments contribute to economic growth and job creation, investments in the digital economy particularly will propel the country into a new era of innovation and progress, said President Cyril Ramaphosa.

In his weekly letter to the nation, he said that not only was the digital economy important for growth, but it was also vital to the provision of key services such as education, social services and health care.

He said South Africa already had among the highest rates of iInternet penetration in Africa, adding that several recent tech surveys indicated that higher speeds and improved mobile and fibre infrastructure were helping to narrow the digital divide.

“This is the result of stepped-up investment in the digital economy in recent years. Since the first South Africa Investment Conference in 2018, investments in digital economy have grown exponentially. Over the past five years, we have seen total investment commitments of R200-billion in our country’s telecommunications network by Vodacom, MTN, Telkom, Rain and Liquid Telecom,” he pointed out.

Ramaphosa explained that the fifth South Africa Investment Conference, held in Johannesburg last week, provided a huge boost to the country’s digital economy.

He said in addition to significant investment commitments in data and telecommunications infrastructure, there were also announcements about investments in the mining, manufacturing, energy, property, logistics and food and beverages sectors.

“These announcements took the total amount of investment commitments made over the first five years of our investment drive to over R1.5-trillion. This exceeds the target of R1.2-trillion we set in 2018,” he explained.

He highlighted that faster fibre and fifth-generation rollout made the country’s economy more competitive as more connectivity solutions help businesses emerge and expand.

Ramaphosa noted that, according to a recent report on Africa’s Data Centre Market, South Africa is fast becoming a hub for cloud hosting, with the manufacturing, financial services and health care sectors among the major data centre investors.

The report further noted that undersea cables were supporting the growth of the local data centre market.

“To take advantage of this inward investment and see it increase, we have to urgently resolve the electricity crisis and the theft and destruction of ICT infrastructure. These were among the issues raised by investors and mobile network operators at this year’s investment conference. We are working with business and other social partners to address these challenges and improve the operating environment,” he said.

He said government was also forging ahead with the structural reforms that were so critical to efforts to improve the country’s economic competitiveness.

Ramaphosa says digital economic investments will propel SA into new era of innovation (engineeringnews.co.za)

To boost productivity in South Africa, four key business factors need urgent and significant attention, namely increasing energy security, increasing government spending on infrastructure projects, ensuring compliance with local procurement policies and using South Africa’s competitive advantage to the benefit of local businesses, Trade, Industry and Competition Minister Ebrahim Patel has said.

Speaking at the Proudly South Africa Buy Local Summit on March 27, he admitted that, although “energy has become now the central preoccupation of the country”, energy availability is critical to localisation and to drive industrialisation.

“Our success in assuming a localisation effort is going to be dependent on the speed with which we are able to bring enormous quantities of additional energy into our grid,” said Patel.

The second major obstacle in jobs creation and government contribution to gross domestic product was slow movement in getting major infrastructure projects off the ground – spending on which peaked in 2014.

In this regard, he said a big part of government’s localisation efforts had recently gone into increasing infrastructure spending, which stood to benefit labour-intensive industries such as the steel, construction, chemicals and machinery production companies.

“All of those have been boosted by infrastructure spending.

“Infrastructure spending is a key driver of growth, and of opportunities for locals.

“It has taken time to get the ‘ship-of-infrastructure-spending’ turned around; but this is an area now where we believe we are able to make significant progress,” said Patel.

The third challenge is procurement policies and a lack of adherence thereto within the State and in the private sector.

“I am pleased to say that, over the last number of years, we have been able to demonstrate that a new procurement strategy by the State is having a positive effect.

“I have opened up a number of factories where those business people have assured me that the logic of them setting up an operation and expanding it is that they now have greater assurance of getting orders from the State,” he stated.

However, Patel said boosting local procurement was an uneven task, “not without its challenges”.
He said slippages in procuring locally made products occurred from time to time, especially with big procurement orders, where sometimes, products were sourced from primarily Asia.

“We have got to be vigilant. You have got to recognise the slippage and deal with [it] as [such incidents] come about,” said Patel.

He added that the private sector experienced a “very significant shift” in attitudes towards procurement.

In terms of competitiveness, Patel pointed out that South Africa had a good standing on the global stage, with many of its locally made products being highly sought-after.

However, he said that to take better advantage of its competitiveness, South African manufacturers needed to find ways of adding or boosting their value add to products, which will serve to further boost competitiveness and lead to customers seeking out South African made products more.

Source: Patel highlights challenges faced by South African manufacturers, notes govt efforts (engineeringnews.co.za)

Companies in the metals and engineering sector have seen production decline by 34.2% over the past year, and production in the sector is estimated to contract by 5.3% this year, industry organisation the Steel and Engineering Industries Federation of Southern Africa (Seifsa) reports.

Seifsa undertook a loadshedding impact survey of its members to measure the impact of the energy crisis on them between February 2022 and February this year.

Employment in the sector has mirrored the production trends, contracting by 1.1% over the year and contributing to the country’s unemployment crisis.
“The employment losses over the period indicate some very concerning trends, although these losses are mostly attributable to companies responding to the energy crisis over the year period,” it said.

Specifically, one-quarter of companies indicated that they had had to reduce headcount in response to the electricity crisis, some by as much as one-quarter of their employment, equating to 9 432 people. One-third of the respondents indicated that they were working short-time owing to the electricity crisis.

“An even more concerning outcome is the fact that half of the companies that are implementing short-time have already reduced headcount.

“We assign the status of vulnerable to these companies because, while the other half of companies have not reduced headcount, short-time is a good leading indicator to track for potential future job losses,” Seifsa highlighted.

Further, 42.6% of the companies that responded have cancelled investment and/or expansion plans, owing to the uncertainty presented by the electricity crisis.

The value of these investments amounts to R2.64-billion with the potential of creating 1 620 new jobs. Of the cancelled investments, 3% were in greenfield, 41% in brownfield and 56% in sustaining projects.

“The long-term implications of this energy crisis to the future prospects of the sector are devastating. Over the past 15 years, net investment into the sector has been on the decline, which has led to the value of fixed capital stock deteriorating at a 0.3% compound annual growth rate, and threatening the competitiveness of the sector,” Seifsa said.

In terms of input costs, companies reported increases in monthly operating costs of up to 24.9% from the extensive use of generators. This does not bode well for a sector whose total input costs were 17.6% higher year-on-year in February.

“Further, factoring in the results of the survey to the input cost model shows that input costs increased by 1.7 percentage points to 19.3% for the sector.”

The crisis not only has implications for the immediate survival of companies but also for the investment prospects of the country, Seifsa said.

“The crisis has been particularly damaging on the metals and engineering sector, which is the backbone of industrialisation and for which electricity, particularly baseload electricity, is fundamental to its survival.”

The metals and engineering sector has been in a structural recession since the global financial crisis of 2008/9, with production recording a 1.2% contraction on a compound annual basis over this 15-year period.

ENERGY INVESTMENTS
Of the companies that responded, 79.2% indicated that they have had to install alternative electricity sources in the past 12 months to counter the pressing challenge presented by the electricity crisis.

“The combined value of this investment is R985-million. This number is considerable when considering that it accounts for 37% of the value of investments cancelled. This, again, highlights that companies are sacrificing scarce long-term capital to fulfil an immediate survival need, presenting long-term adverse implications for the sustainability of the sector,” Seifsa emphasised.

Further, it is not surprising that, given the relatively intense electricity consumption nature of the sector, the most practical alternative energy sources are generators representing 67%.

Solar accounts for 20% of the investment made. However, the 125% tax incentive afforded to companies in the February 2023 National Budget should result in an increase in the uptake of solar as an alternative source, but the electricity consumption profile of the sector remains a limitation to solar being a full-scale option, the organisation added.

“On aggregate, the companies have a generator installed capacity of 116 MW, while solar is 36.2 MW.”
Additionally, the respondents highlighted that they had a very limited ability to feed in any excess electricity generated from their solar installations, largely owing to the fact that the solar installations have been put in as a marginal hedge or top-up to their baseload needs.

This picture may well change given the 125% tax incentive, although to a limited degree, as the sector’s electricity consumption pattern is the main determinant for the technology deployed, Seifsa said.

The metals and engineering sector constitutes 26.5% of the manufacturing sector, based on output, and 2.6% of gross domestic product on a value-add basis. In December 2022, the sector employed 374 496, of which 217 618 are factory workers.

Loadshedding destroying production, growth, jobs in the metals and engineering sector (engineeringnews.co.za)

17TH MARCH 2023

BY: NADINE RAMDASS – CREAMER MEDIA REPORTER

Owing to the highly solvent-intensive processes associated with active pharmaceuticals ingredients (API) manufacturing, a single batch of APIs can use and generate significant amounts of waste. These solvents are also costly to procure and dispose of.

API manufacturers continuously investigate and implement suitable alternative materials that are safer for handlers and do not have detrimental environmental effects.

Pharmaceutical corporation Fine Chemicals Corporation GM Hilton Mentor says the disposal of APIs is complex, and sourcing suitable disposal methods and service providers can pose certain challenges. Therefore, it is beneficial to establish ways of recycling and reusing solvents in production processes.

Mentor says efficient processes result in higher yields and less waste, and also contribute towards a lower carbon footprint. “Continuous process improvements and sustainability go hand in hand.” Mentor explains that the chemical manufacturing sector has to contend with unique health and safety challenges such as more fire risks and higher levels of product containment requirements, which result in unique operator-protection requirements.

Further, as pharmaceutical raw materials and finished goods are hazardous, they are subjected to specialised transport regulations throughout the supply chain. Stringent quality systems apply because of the specialised nature of the product and its being consumed by either humans or animals.

Therefore, changes or deviations at any time during the manufacturing process are subject to very onerous risk assessments and regulatory pathways, he adds. “There are many highly hazardous operations and conditions in the API environment and it’s critical for operators to understand these risks and also why mitigation measures have been implemented.”

Mentor explains that Fine Chemicals Corporation aims to build an active safety culture within which employees are encouraged to speak up and report unsafe conditions and “near misses”. He asserts that safety is viewed as being “everyone’s responsibility”. “Leaders lead by example through taking action to remove identified obstacles and closing the loop with employees who have reported them.”

The company’s Serious Injury or Fatality programme emphasises identifying and reducing incidents that could potentially result in serious consequences, serious injuries or fatalities on site. The company also implemented Gemba Walks – a Japanese concept that entails a workplace walkthrough aimed at observing employees, enquiring about their tasks and identifying productivity gains.

“These walks, together with our 5S – sort, set in order, shine, standardise and sustain methodology – Initiative, aim to improve frontline worker engagement and generate visible leadership,” says Mentor.

Considerations Throughout Innovation

Innovation in the pharmaceutical industry is increasing at a rapid rate, which results in many new “molecules of interest” as developers assess future patient and clinical needs.

Mentor says selecting which molecules to develop is significant; therefore, developers take into consideration various factors, including new or existing generics, the applicable therapeutic category, and at which stage of clinical-trial development participation will start.

“Pharmaceutical development is a lengthy process, with many ‘gates’ to consider throughout the process, from laboratory to commercial production, which could take three to five years,” he explains.

During the development, important considerations include deciding which synthetic route and manufacturing process to develop, whether production steps are economically or scientifically viable, and ensuring that customer requirements and expectations are met.

Sustainability in a VUCA World

Mentor says the world is Volatile, Uncertain, Complex and Ambiguous (VUCA), resulting in an ever-changing macro environment within which companies operate. This state is largely owing to geopolitical tensions, as well as uncertain and unstable economies in developed and developing countries. He adds that the impact of the prevailing VUCA world results in tangible inflation plus increases in manufacturing input costs, particularly in relation to energy, supply chains and labour.

Further, there are increasing reliability concerns around global supply chains placing stable raw material supply at risk, along with increased reluctance downstream in the value chain to accept the passing down of price increases. South African manufacturers also have to contend with additional challenges. This includes a shortage of specific, highly experienced technical skills, as well as the security of utilities and services such as the reliable supply of water and electricity. He adds that, to combat or mitigate these challenges, supply chain operations need to be increasingly resilient and agile while adopting a continuous improvement approach to every metric governing performance.

Mentor elaborates that it is important to quantify how well businesses are prepared to ensure exceptional customer service. This should also be evaluated against leading industry benchmarks for orders that are delivered on time, in full, and meet the highest quality standards at a competitive price.

It is essential that the business provides exceptional service embedded within a foundation of safety and quality standards, which is achieved when harnessing the full potential of the team on site.

“Only businesses that are renowned for a high performance culture will produce industry-leading results in a sustainable manner,” he concludes.

Safety, sustainability at forefront in pharmaceutical manufacturing (engineeringnews.co.za)

Stats SA reports that South African manufacturing production decreased by 3.7% in January 2023 compared with January 2022.

The largest negative contributions were made by the following divisions: petroleum, chemical products, rubber and plastic products (-10.8% and contributing -2.5 percentage points); motor vehicles, parts and accessories and other transport equipment (-7.6% and contributing -0.7 of a percentage point); and basic iron and steel, non-ferrous metal products, metal products and machinery (-3.7% and contributing -0.7 of a percentage point).

Seasonally adjusted manufacturing production increased by 1.1% in January 2023 compared with December 2022. This followed month-on-month changes of 0.5% in December 2022 and 0.9% in November 2022.

Seasonally adjusted manufacturing production decreased by 1.0% in the three months ended January 2023 compared with the previous three months. Five of the 10 manufacturing divisions reported negative growth rates over this period.

The largest negative contributions were made by the following divisions: motor vehicles, parts and accessories and other transport equipment (-7.7% and contributing -0.8 of a percentage point); wood and wood products, paper, publishing and printing (-4.0% and contributing -0.4 of a percentage point); and basic iron and steel, non-ferrous metal products, metal products and machinery (-1.8% and contributing -0.4 of a percentage point).

Sales results

Seasonally adjusted manufacturing sales decreased by 0.5% in January 2023 compared with December 2022. This followed month-on-month changes of 2.0% in December 2022 and 3.1% in November 2022.

Seasonally adjusted manufacturing sales increased by 2.3% in the three months ended January 2023 compared with the previous three months. The largest contributions were made by the following divisions: motor vehicles, parts and accessories and other transport equipment (12.0% and contributing 1.8 percentage points); and basic iron and steel, non-ferrous metal products, metal products and machinery (1.7% and contributing 0.4 of a percentage point).

SA manufacturing output falls 3.7% in January (bizcommunity.com)