Efficient Engineering calls for more support from State-owned enterprises

The success of local content designation depends on active support by public and private sectors. The implementation and verification of compliance with government’s local designation rules across both public and private sectors is pivotal to the success of the policy.

More and more local companies are voicing their opinion with the lack of support by state-owned enterprises for the Local Procurement Accord that has been put in place through NEDLAC. Efficient Engineering has joined the growing list of South African companies that believe that they are competing under inequitable conditions while adhering to government policy but are not getting the support from government entities and state-owned enterprises’ procurement departments. This is despite the fact that it has been widely reported that government’s drive to support manufacturing development by specifying the percentage of local content required when government entities and state-owned companies procure products.

“It is disheartening that we continue to lose contracts to Chinese and Indian competitors. And while we have limited leverage over our private-sector clients, we do believe that the state-owned companies should take more of a lead in supporting those local companies that have made the effort to invest in transformation,” says Vees Moodley, Executive Director for business development at Efficient Engineering.

Another major recent project that the company has been involved in and that is now nearing completion is the supply of stationary pedestal and rotating yokes for the antennas being used as part of the MeerKAT radio telescope project, in the Northern Cape. The company was awarded the contract to manufacture all 64 pedestals and yoke sections over a period of 36 months and this needed to be completed by the end of 2016

“Ownership is but one, albeit important, component of the transformation process, which we have and many other companies have embraced. Skills development, preferential procurement, employment equity and corporate social responsibility activities, all of which the Efficient Engineering Group have put in place, are others.”

“The transformation process costs companies vast amounts of money to implement all these requirements that are aimed at having a positive outcome for the country as a whole. As a result it does put a local company at a disadvantage because it is reflected in the price.”

“Besides not having to implement all these requirements it is commonly known that companies in India and China employ engineers and labour at vastly lower rates than we are required to pay locally and, they are more productive. A lead engineer in India will earn R6000.00 a month, which does not compare to what we have to pay.”

“On top of that, in China for example, companies enjoy government subsidies and government support.”

“This has resulted in the emergence of a number of ‘tenderpreneurs’ who are now getting government contracts but are not supporting local manufacturing. They are ordering from China and India and supplying government departments even though local content designation rules are in place.”

“Local content designation is a sound principle and can be a boost in investment and job creation. However, sustainable long-term success of local content designation needs not only public sector compliance but also active private sector support.”

“The group’s empowerment journey supports government policy and all that we are asking is that we get the support in return, as do many other companies in South Africa.”

“All three business units in the Efficient Engineering Group have been verified as level 1 broad-based black economic empowerment (BBBEE) companies under the South African government’s new codes. These include heavy engineering and fabrication company Efficient Engineering, as well as liquid-bulk tanks constructor Efficient Trotech and energy solutions company Efficient Power.”

“We achieved the verification last year and is as a result of the stewardship of a new board, who embraced transformation as a way of improving the company’s competitive positioning in its traditional mining market, we have begun targeting new sectors.”

Efficient Engineering has gone from purely mechanical design and manufacture, to include electrical design and fully fitting out and testing of modular power control, electro houses and generator sets

“The group’s BBBEE rating has been secured through the Shalamuka Trust, which owns 49% of the business. Shalamuka, whose beneficiaries are mostly black women, is associated with RMB Corvest, which itself owns 26% of Efficient Engineering. The balance of the company shareholding is held by executive management (20%) and Algep (5%), representing the founding Cimato family.”

Efficient Engineering was established in 1968 by Italian immigrant Giuseppe Cimato in a 3m² working area, in which he began manufacturing buckets for underground diggers. The small general engineering shop soon focused its attention on heavy engineering and is now a preferred supplier to some of the largest names in the local and international mining, material handling and engineering industries. Cimato’s son Tony joined him in 1983 and took over the running of the company after Giuseppe’s retirement in 2000.

Initial transformation of the company began in 2010 when Shalamuka Capital, which at the time was a private equity company set up to benefit the Penreach Whole School Development Programme, acquired a 29 per cent share in Efficient Engineering, in a broad-based black empowerment transaction. In the same transaction RMB Corvest, a private equity business in the FirstRand Group acquired a 26 percent share in the company.

In 2015 Efficient Engineering diversified into electrical design when the company established Efficient Power. Started as a one-off project within Efficient Engineering, Efficient Power has now developed into a standalone business that answers a very specific set of challenges in Africa: Addressing the challenges of building modular solutions in remote regions. Efficient Power now designs, manufactures, tests and fits modular power control cabins and generator sets that make a tangible and sustainable difference to Africa’s energy and utilities sector.

In 2015 Efficient Engineering also purchased Trotech Engineering, a liquid-bulk tanks manufacturer, which is now known as Efficient Trotech.

The diversification of the company also saw the beginning of the restructuring of the company. The group is headed up by Executive Chairman Tony Cimato, with previous Operations Director Mike van der Walt as its CEO. Lenny Govender is the CFO and Vees Moodley, the Executive Director for business development, who was previously MD of Trotech Engineering. The Group has also divested from companies not core to its business.

The restructuring has been associated with a rapid diversification of the company’s customer base, with mining equipment currently comprising about 50 per cent of the group’s order book, having previously made up over 90 per cent of sales.

The 600 employee company that has 29 000m² of workshop area in Ekurhuleni and Durban, is now increasingly active in the electricity and oil and gas markets, having recently fabricated the initial five 74 metre long “bullets” (LPG vessels) for a liquid petroleum gas terminal being developed at Saldanha Bay, in the Western Cape.

Another major recent project that the company has been involved in and that is now nearing completion is the supply of stationary pedestal and rotating yokes for the antennas being used as part of the MeerKAT radio telescope project, in the Northern Cape. The company was awarded the contract to manufacture all 64 pedestals and yoke sections over a period of 36 months and this needed to be completed by the end of 2016. Each pedestal and yoke section is eight metres tall and 2.5 metres wide at the base, and they weigh approximately 12 tons without the backup structure.

The Group has also recently completed some successful projects in the petrochemical and chemical manufacturing industries with the manufacture and supply of vessels, reactors and heat exchangers.

“The Group is now continually looking to diversify it’s manufacturing capabilities by seeking contracts in other industrial manufacturing areas that require precision heavy engineering, both in the public and private sectors. At the same time we are continuing to develop our staff and the company is currently training beyond its own internal requirements, with a big focus on the development of female and youth welders,” said Moodley.

“We have had to adapt to the drop in commodity prices and we are now focused on identifying ways to complement Efficient Engineering’s initial equipment manufacturing, repair and refurbishment offering from nearly five decades ago, in order to remain agile in a market that is constantly changing.”

For further details contact Efficient Engineering on TEL: 087 310 1767 or visit www.efficient.co.za