What good news is there in the manufacturing industry in South Africa? Well, despite news of supposed investments and new strategies, which are yet to create the jobs the country desperately needs, the news is not all that good. South African manufacturing is still a shadow of its former self and jobs are scarce with many companies looking to work around political uncertainty, labour unrest, currency fluctuations and more by automating and finding ways to cut costs.
Of course, those are the companies that are still manufacturing in the country and have not moved to safer shores. And we can’t forget to mention the economy either. Whatever positive sentiments the past year brought have yet to materialise in real benefits for the manufacturers’ or their staff. So we wait in anticipation.
That’s a bleak overview, which is partly right and partly wrong. There are problems the manufacturing industry has to face on a daily basis, but the good news is that there are also success stories out there, including in the security business where one can be forgiven for thinking that competing against the huge Asian companies that are supported and encouraged by their governments, is a fool’s game.
Hi-Tech Security Solutions decided to find out what three of our security manufacturers are doing and what their experience of the market is. We also wanted to find out what their gut feel is concerning manufacturing operations in the country.
Creating a niche
One of the challenges security manufacturers (and other manufacturers) face is stiff competition from overseas where products can be manufactured, imported and sold at low prices. Bruno Felicidade Jones from BFR Digital, a company that designs and manufactures various products for the security and other markets, says that overseas competition is always a challenge, products can be really cheap and while some are of a poor quality, some are made really well and function reliably.
He adds that it’s hard for local manufacturers to compete because of the volumes produced in South Africa. The economies of scale are a fraction of the larger international companies and competing on price is therefore challenging.
BFR’s solution to this conundrum is to focus its manufacturing on niche markets where it has been able to see growth and sustainable margins. One of these areas is in surge protection, where most overseas products are simply unable to meet the needs of local conditions. Built for South Africa’s increasing lightning seasons, Jones says BFR’s products do the job well. In fact, one installer criticised BFR for making their products too well and reducing his repeat business.
Other products the company offers include PoE (Power-over-Ethernet) and industrial switches, fibre cabling and PoE injectors. BFR is also producing solar powered equipment and it seems that a new growth area for the company is in the lighting arena where BFR makes its own range of illuminators.
Despite broader concerns, Craig Sacks from Turnstar Systems, is excited about the prospect of the future of South Africa, especially in the age of Ramaphosa. 'Cautious optimism' is how he describes the general feel of the market right now.
Innovation and support
Sacks says the threat of cheaper imports is “always knocking on our door, but we have been able to innovate in terms of technology. The fact that we make the products ourselves enables us to customise the product and control the quality.” He also believes Turnstar’s customers feel more secure with the company’s products as they are made locally and substantial local support is available.
“We also continue to invest in capital equipment in order to stay competitive with the latest metal-working technologies and to keep up with production,” he adds. “Our next purchase is likely to be a CNC plasma cutter and a new CNC press brake. Last year we purchased a number of conventional lathes, milling machines, a surface grinder and a CNC lathe.”
Zyteq is another local manufacturer that operates two businesses. The one is a contract manufacturing business that develops solutions specifically for local clients; the other is a fire detection equipment manufacturer that used the recent Securex Expo as a launchpad for its detectors, which received a lot of interest from other African countries as well as local attention.
BFR has also had interest from countries like Kenya and Mozambique, with Jones saying there could be good growth potential from the region. BFR is also active in Dubai.
As an aside, proving that local products are good enough for any market, Sacks says Turnstar’s largest market over the past two years has been in Europe.
Zyteq’s Mark Mundell says local companies can handle the cheaper international products if they are able to adapt and operate differently. In Zyteq’s case, the company embraced lean manufacturing to work more efficiently and productively, while maximising its labour. Innovation is also key to making it in a very price sensitive market.
The result for Zyteq has been year-on-year growth and a strong business. This is also due to the buy-in it gets from its employees. Zyteq set up an employee trust that makes the employees co-owners of the company and able to profit when the company does well. As shareholders, they are kept up-to-date on what is happening and are very aware of issues such as quality and productivity.
BFR has invested in equipment to assist in automation, and Jones says the company has a very low turnover rate – most of the company’s employees have been with BFR for many years. The only real problem the company has in terms of labour is when there is a taxi strike or some demonstration that hinders them from getting to work and home again.
The question of skills
One can’t talk about staffing without addressing the issue of skills. The three companies we have spoken to have made the effort to create a working environment that employees are attracted to, hence the low turnover rate. Mundell says Zyteq strives to make its staff feel valued and to become part of the journey the company is on, not simply resources.
The most positive comment on the skills issue comes from Sacks, who notes that while the metal-working industry has shed thousands of jobs over the last few years, Turnstar is able to find skilled welders, fitters and turners and boilermakers, 'without too much trouble'; he has also found the engineering skills the company requires.
Jones, on the other hand, had trouble finding engineers who have a passion for the electronics industry. It seems young people today get into the industry because they think they will make money or climb the ladder quickly rather than because it’s a passion – which makes a difference in designing products.
Mundell agrees that access to these engineering and design skills is becoming harder. He says the country needs to put an emphasis on training and bringing new people into the market. Zyteq trains its own staff, but it is difficult to take someone with no skills and train them to a high level.
While the outlook for these companies is generally positive, they all see challenges and recognise the need for a national drive to grow the economy faster than the poor growth of the past few years. It seems that their focus on quality and productivity, as well as creating a positive working environment has stood them in good stead to keep going and winning new business both in South Africa and beyond. Now if the government could lend a hand with the economic, political and security stability, who knows what could happen?
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