Times of uncertainty lie ahead

I don’t normally like to get into the depth of negativity when writing an article for my publications – even more so when it is my Editors Comment. But the reality of the current tough manufacturing conditions hit home hard a couple of days before I left to visit EMO Hannover 2019 in September. The news that I received was that Robor Steel, one of South Africa’s biggest and oldest steel tube and pipe manufacturers had closed its doors, with the loss of 900 jobs. Industry chatter was that they were surprised that it had taken so long. Maybe I am naïve but I never thought such a big company was in trouble.

The news was particularly sobering especially as I had just heard that SA Ladder and Segals Metals had been liquidated, Steeldale and Besaans Foundry were in business rescue and Metso Foundry in Isithebe had been closed. And now I have heard that Zealous Pressure Casting has been liquidated after being in business rescue for some time. These are just a few of the well-known names in the metals industry that I know of.

And then there are all the closures of branches and the retrenchments taking place in industry. It has been reported that before the end of this year, Macsteel, one of South Africa’s biggest steel suppliers with more than 7 000 customers, will close at least eight of its 40-odd branch offices, losing about 300 jobs in the process. Macsteel last year sold its tube and pipe division to Robor. Currently the Aveng Group is trying to sell off the Trident Steel division. Trident Steel has already closed its tube and pipe division. Paolo Trinchero, CEO of the Southern African Institute of Steel Construction reported that: “About 10 000 jobs have been shed just by five to six companies.”

According to Stats SA the total number of liquidations increased by 14.5% in the three months ended August 2019 compared with the three months ended August 2018. A year-on-year increase of 13.5% was recorded in August 2019.

The total number of liquidations increased by 13.6% during the first eight months of 2019 compared with the first eight months of 2018.

The estimated number of insolvencies increased by 35.9% in the three months ended July 2019 compared with the three months ended July 2018. A 79.7% increase was estimated in July 2019 compared with July 2018.

I am not too sure of the reasons for most of these liquidations and closures but I suspect that the state of the South African economy could be a big influence. However, I believe a big factor in the metals industry is the Chinese threat, and many others concur, although industry bodies like Neasa argue that the Chinese imports are beneficial.

A number of issues specific to Robor were outlined in the SENS statement issued by Tiso Blackstar, which owned almost 42% of the manufacturer. These include the margin-eroding effect of cheaper Chinese imports, delays in the signing of Independent Power Producer agreements with the South African government and the well-publicised financial demise of Eskom.

The hardest hitting statement in the report comes from Mike Benfield, CEO of Macsteel, and it can apply to most industries in South Africa, whether it is retail, manufacturing or whatever: “The Chinese businesses have come in with ridiculous pricing, often below production cost, just to buy the market. The writing was on the wall when we, as the largest reseller of tube and pipe found we could buy product cheaper than the base cost of production. There is a war out there to achieve the next sale.” I certainly can agree.

To end on a positive note there are a number of encouraging stories in this issue such as Press Dynamik, Qinisa Steel, Bystronic investing in the country and Aerosud Aviation. The EMO Hannover 2019 exhibition revealed lots of exciting technological opportunities and trends to make use of going forward. Let us hope that 2020, the start of a new decade, will have its emphasis on the start of a real manufacturing growth period in South Africa.