NO MORE IF, BUT WHEN: Eastern Cape engineering sector may experience a major boom
The Eastern Cape has long been regarded as a textbook example of a lost economic agenda. Reports of rampant poverty, corruption, high unemployment and poor infrastructure have often only served to deepen this pessimism.
But a major economic revival, with huge growth prospects for the province’s engineering sector, is already underway - buoyed by increasing private and foreign direct investments (FDIs) as well as more public infrastructure spending by government.
“There are a lot of big private and public projects that have been planned or are already happening across the province. Most of these projects require engineering skills and products; hence, I foresee a major turning point in this sector on the horizon,” describes Engineering Council of South Africa (ECSA) Committee Member, Ken Ramjee, speaking in his personal capacity.
Noqobo Bongoza, Civil Engineering Technologist at Consulting Engineers South Africa (CESA) and Young Professionals Forum (YPF) Chairperson for the Border-Kei region, agrees; “There will be major growth in the Consulting Engineering sector that is involved in the first step of development of projects, which is mainly the planning stage, design stage where sustainable and innovative designs are produced.
“I believe it will be in the development of the Eastern Cape towns and villages, which have been neglected in terms of Housing, Roads, Transportation, Water, Sanitation, Electricity and then the economic connectedness between these in terms of transportation and communication.”
Once a key sector when the country needed to manufacture all its needs during the years of economic isolation, engineering growth stalled as the new government prioritised on social programmes and as global production chains were readjusted.
Executive Director of the Border-Kei Chamber of Business, Les Holbrook, says the local engineering sector has been 'surviving'.
“The challenge is, as in schools in urban areas, we have enough capacity – until one really big project comes along. Then we battle,” he describes.
Conservative research indeed shows potential for growth in the sector. There are more than 450 light and heavy engineering companies spread across the Eastern Cape handling anything from the manufacture of vehicle components and locomotives to overseeing the servicing and building of public and private infrastructures.
“The Eastern Cape has huge engineering potential; there are some very talented engineers and some dynamic firms with the ability to do some extraordinary work,” agrees Andrew Young, Engineering Director at eNtsa an award-winning Technology Station of the Technology Innovation Agency (TIA), situated at the Nelson Mandela Metropolitan University (NMMU).
With comparative advantages in cost, market knowledge, technology and creativity, local Project, Mechanical, Electrical and Civil engineers have been particularly successful in advancing the Province’s automotive and construction industries - and the trend is set to continue with potential for expansion into other fields.
The automotive cluster, based in Port Elizabeth and East London, dominates manufacturing in the province with assemblies for General Motors, VW, Ford and Mercedes Benz as well as around 304 vehicle component manufacturers, 220 vehicle frame and equipment suppliers and 192 vehicle body builders.
In 2012, automotive exports comprised 12.1% percent of South Africa’s total exports or a total of R86.9 billion in vehicles sales to 152 countries around the globe.
Then there is the often forgotten, Transnet Rail Engineering’s (TRE’s) workshops in Uitenhage, one of the largest wagon building and refurbishment plants in Africa employing over 1 500 people. The plant is currently fulfilling an order for 560 salt wagons for Botswana Rail, earning the country around R420 million. In June last year, the plant also completed a US$20 million Brazilian order.
Several other downstream engineering activities, including machine tools, electrical machinery and electronic equipment, exist in the local manufacturing space, albeit at a smaller scale.
In January, the Provincial Department of Economic Development, Environmental Affairs and Tourism (DEDEAT) expected growth in the Eastern Cape construction industry to continue. Construction is a major customer for project and civil engineering companies.
“The Eastern Cape Construction sector is a growing industry that is mainly characterised by provision of basic services to the communities… infrastructure development plays a vital role in the economic development of the province,” says Bongoza.
Some key developments within the sector
Inevitably, the tipping point for the province’s engineering sector will result from the various inward investments that are set to drastically transform the province’s landscape. Many of these investments are as a result of government’s efforts, through incentives and tax incentives, to get global manufacturing and engineering companies operating at the East London and Coega industrial development zones.
China’s First Automobile Works (FAW) is currently building a R1 billion truck and passenger car plant at the Coega IDZ – which presents significant growth opportunities for the local mechanical and electrical engineering cluster.
The construction of a R4.2 billion ferromanganese smelter by Kalagadi Manganese, in the Coega IDZ, will not only boost metals production in the province but requires the engineering sector to aid in the realisation of the project.
Industrial gas suppliers, Afrox and Air Products SA, are setting up R300 million air separation units and in the Coega IDZ. Both plants will produce a variety of industrial gases that are crucial in the automotive, food processing and medical sectors.
The current construction of the R2 billion Baywest Mall in Port Elizabeth has also been a significant boost for local project, electrical and civil engineering services.
Importantly, government appears to be giving impetus to local engineering through direct investments and mega infrastructure developments in the energy, petrochemicals and construction sectors.
Government’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), which aims to generate 3725 megawatts (MW) from renewable energy sources, has presented significant opportunities for growth in the engineering sector.
The DEDEAT’s Sixolile Makaula was quoted in the Daily Dispatch saying that; “The Eastern Cape has been awarded 12 utility-scale wind farms and one utility-scale solar farm. Many of these wind and solar farms are valued at over R1 billion [each], with some being more than R2 billion.” That is more than R21 billion in investment value on the 13 projects.
East London IDZ’s Ayanda Ramncwana was also quoted in the same article saying they had secured an investor to build the largest solar panel manufacturing plant in Africa at the IDZ.
Meanwhile, Trade and Industry Minister, Dr Rob Davies, and Energy Minister, Dikobe Ben Martins, commissioned two projects – the DCD Wind Tower facility and the Agni Steels mill – valued at R700 million at the Coega IDZ on 9 March.
PetroSA has signalled its intention to build a mega oil refinery, Project Mthombo, in the Coega IDZ – an investment of US$70 billion into the region. Eskom also recently touted 2017 as the year that it plans to get its R180 billion Nuclear 1 project off the ground at Thuyspunt south of the province.
In November last year, President Jacob Zuma announced that Transnet would invest R26 billion to expand infrastructure in the Eastern Cape over the next seven years. It will also spend R1.55 billion on the province’s three ports - East London, Port Elizabeth and Ngqura, during the 2014/15 financial year.
Last year, Water and Environmental Affairs Minister, Edna Molewa, also outlined an R8 billion first phase dam and water reticulation programme for the Umzimvubu catchment area.
Furthermore, in December 2013, the DEDEAT launched the two-year, R16 million, first phase of shale gas exploration across four district municipalities – the Cacadu, the Amathole, the Joe Gqabi and the Chris Hani district municipalities.
The developments above exclude spending by local municipalities and other agencies on housing and roads. There is optimism about growth in the engineering sector.
However, Ramjee cautions that several things will need to occur before this boom can happen.
There are challenges
Although the climate seems conducive, there are some challenges that could curtail the potential for growth in the local engineering sector.
Bongoza added; “There are many opportunities of development in the EC, however, there appears to be a lack of coordinated planning between key role players. One of the major challenges in the consulting industry is tendering which may lead to a decline in the value of engineering services.
“The discounting of tenders may eventually lead to poor quality work, lack of innovative engineering solutions and lack of training opportunities for young professionals as the firms are working on tight profit margins.”
“Without question is the skills issue,” explains Holbrook, adding; “There are too few properly qualified and registered engineers and artisans and as a result the few that we do have are hopping jobs just for the sake of a few thousand Rand.
“The oil refinery project, as an example, will require something like 1 000 welders. We don’t have that many welders in the country – let alone for one specific project. So, unless we address this we will not grow as we ought to.”
A 2012 Infrastructure Sector Research Survey conducted by Landelahni Business Leaders Amrop SA, supports this. It found that 74% of South African companies were struggling to fill engineering positions. It also said that of 511 564 enrolments in engineering disciplines from 1998 to 2010, only 70 475 graduated. And of the 183 529 enrolled in university engineering disciplines, only 29 280 graduated.
Other social factors, such as the HIV/AIDS pandemic, aging technicians and the migration of technical skills abroad, have also had a negative impact on the industry.
“Challenges facing this industry also include the cost of raw materials and low productivity which makes our production costs high. Infrastructure development and support to maintain services to support industry by local government and Metro’s are perceived to be poor by external stakeholders,” says Professor Danie Hattingh, Director at eNtsa.
Young agrees, adding that “a labour market with a pre-disposition to strike will also influence success in this sector.”
Support also remains a major challenge for the smaller firms which struggle to gain access to the large automotive and construction contracts – which are historically too big for one company to handle alone. Coupled with rocketing energy and fuel costs as well as rising industrial wage settlements and unreliable electricity supplies, one begins to get the picture.
The road ahead
Prof Hattingh and Young urge government to pursue favourable regulatory policies, fight corruption and remove bottlenecks to realise potential in the engineering sector.
“We must urgently start incentivising employers to revive the apprenticeship scheme. We need to find ways of convincing capable artisans to work beyond the age of 65 – even if they function as mentors,” says Holbrook.
“More training centres should be set up – teaching artisan-type skills to people that cannot go through the apprenticeship process. We must cease from lowering pass rates to process numbers and the former Technikon’s must improve the standard of their curriculum in the technical / engineering sector.”
Stakeholder partnerships can also have an immense impact. eNtsa, as an example, is well-equipped and has a number of highly skilled engineers who are available to support local industry with product development and design, advanced engineering support at very competitive rates.
“The value of consulting engineering services should not be based on the financial value offered but on the quality and innovation of service that is offered. This will require partnership between the key role players in determining what is good quality and innovation for the service to be procured and different strategies for determining appropriate methods of procurement,” says Bongoza.
Young concludes; “We are lucky to be situated close to the sea with a good harbour, I think our products and engineering skills, including project management, can be easily exported to supply the expanding Oil, Gas and Mining industries in Africa. I think Africa is the next big thing and the Eastern Cape is conveniently positioned to be part of it.”
- Ford Kugas Burning: Early data shows lack of coolant circulation is the cause says Ford SA
- Another fuel price hike predicated at the end of January
- Stolen electronics valued at R80 000 and destined for PE intercepted in Alexandria
- Over 61 800 speeding tickets issued in Bay during summer season
- Case against New Year's Day rape accused postponed to Thursday