Project Presentation to Parliamentary Portfolio Committee on Trade and Industry Steve Jardine

1. Project Presentation to Parliamentary Portfolio Committee on Trade and Industry Steve Jardine Project Leader 11 August 2015

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3. Introduction • The National Foundry Technology Network (NFTN) has a mandate to enhance the competitiveness and transformation in the casting industry sub-segment, through focused interventions, designed to enable industry. • The NFTN has been in existence since 2008, is funded by the Department of Trade and Industry (the dti), and is hosted by the Council for Scientific and Industrial Research (CSIR) who ensure compliance to the PFMA. • The NFTN management structure includes an Executive and a Steering Committee. 2

4. Vision & Mission Vision • To increase the global competitiveness of the South African foundry industry through the provision of appropriate services in order to reduce import leakage, increase local production, and increase investment in the sector. Mission • The NFTN will provide program management, coordination, and facilitation to support and enable the revitalisation of foundries in the metal casting industry through appropriate skills training, technology transfer, and diffusion of state of the art technologies. 3

5. Desired Outcome Impact A transformed and competent casting manufacturing industry sub-segment in SOUTH AFRICA, consisting of globally competitive and sustainable businesses • Growth in core manufacturing • Economies of manufacturing scale • Cost competitive products • Engineering design and innovation • High volumes of locally cast products • Culture of continuous improvement • Upliftment of skills • Job Retention and Job Creation • New Entrepreneurial Enterprises • Export opportunities exploited 4

6. Scrap Metals Conversion Compliance Products 5

7. Foundry Industry Profile Concern: Identified as a key manufacturing industry sub-segment for revitalisation Challenges: • Industry is in decline • 15 foundries have closed since 2010 • 1080 jobs lost since 2010, 850 of which were in 2014/2015 • Lack the volumes to achieve manufacturing economies of scale • Aged infrastructure for capital equipment parts • High levels of capital investment needed • Low capacity utilisation at many foundries • Local buyers are offering ad-hoc low volume orders • Limited collaboration in the industry to develop the collective capacity and capability 6

8. Foundry Industry Profile Sectors • Total companies: 170 • Total Jobs (direct): 10 285 • Characterised by: • 74% of the companies have been in existence for more than 20 years • The majority of companies are privately owned small businesses, employing less than 50 employees • High use of scrap metals as a primary material input (the industry is a secondary economy); • Segmentation by: • Economic sector focus • Processes used • Material • Capacity to manufacture in designated sectors • Company categorisation ranges from small to export ready 7

9. Ranking of foundries in relation to the sophistication and competitiveness of their capabilities. Assessment Process Small Capable Accredited Export Focused • Robust management systems, particularly in areas of health, safety and environment. • Some in-house engineering capabilities. • Some lean and quality systems implemented and mastered – however, not at world class benchmarks • Adequate specialized equipment to deliver on customer needs. • Narrow focus on national market. • Not cost competitive in global market. • Over twenty employees • Can demonstrate substantive technical capability and delivery record in narrow area. • Some management systems (e.g. HR, Finance) in place. • Have reasonably equipped facility. • Limited quality and lean production systems and associated skills in place. • Very dependent on a few customers. • World class lean and quality production systems in place with culture of continuous improvement. • Continuous benchmarking against world’s best competitor companies. • High levels of collaboration with suppliers to bring down costs. • Strong engineering capabilities to make design easier to manufacture. • Less than twenty employees • Very limited investment in plant. • Weak balance sheet • Limited organizational structure and management systems. • Very limited technical capability and track-record.. • Often dependent on one customer. 8 .

10. Enterprises at different stages in development cycle require different types of technology transfer and support. Small Capable Accredited Export Focused Key Development Intervention (2) Key Development Intervention (1) Key Development Intervention (3) • Building of world class in-house engineering capability. • Comprehensive supply chain audit to identify where suppliers can improve and implementation of improvement initiatives. • Additional expert driven productivity interventions. • Special financial support and incentives required. • Detailed plant visits by experts to support companies to improve productivity and quality through: • Re-engineering production processes (and possibly plant layout). • Implementation of lean production and quality control systems. • Continuous upskilling of work-force. • Support to establish basic business systems that will enable the business to scale up. • Ensure all legal compliance policies and systems are in place. • Quality management training to enhance production. • Finance to upgrade plant (when this is required). • Marketing support to expand customer base. 9 .

11. Foundry Needs – Surveys 2015 2011 Challenges • Human Capital Development • Access to market / Off-take Commitment • Cost, availability, and quality of Scrap Metals • Energy Management • Competitiveness • Environmental and Waste Management • Technology and Innovation • Capital for Investment into new plant and equipment 10

12. Interventions – Off-take Commitments Concern: Foundries are a key link in the value chain for most metals related manufacturing processes and are closing due to lack of business opportunities Challenges : • High volumes of import products • Perceived cost and quality gaps • Localisation of castings • Poor transparency of the buy-sell transactions in the supply chain • Limited opportunities cascading down to foundries • Poor business confidence • Foundry volumes in key sectors (ie: Automotive) disproportionately low in South Africa versus other BRICS countries 11

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14. Interventions – Off-take Commitments Concern: Foundries are closing due to lack of business opportunities Intervention(s): • Evaluation of foundries to assess where they are in the development cycle. • 65 foundry assessments done to identify gaps to international best practice benchmarks. • Industry survey between BRICS countries conducted on foundries producing iron products. • Industry survey with India (similar challenges) conducted to understand variances to SA. • Collaborative partnerships created with key stakeholders to address identified challenges and constraints. • Access to international specialists provided as needed, membership to and participation in the activities of the World Foundry Organisation and BRICS Union enabled for industry. Future activities: • Conduct additional benchmarks in steel and non-ferrous industry sub-segments. • Create collaborative partnerships to unlock identified opportunities in individual foundries, on a case by case basis. • Facilitate industry forums to address specific technical needs. 13 Stakeholder Map

15. Interventions – Human Capital Development Concern: Foundries do not have the required skills to grow and capitalise on the opportunities Challenges: • South African foundry skills lag other BRICS countries and the world • Optimum training model for key skills Skills upliftment programs: • Artisans: melter, moulders, pattern makers • Foundry skills: workers • Professional skills: technicians and engineers Regional training centres: • Gauteng • KZN 14

16. Benchmark - Training of Foundry Management and Trades Moulder Senior Management Middle Management Fettler 15

17. Interventions – Human Capital Development Concern: Artisan skills Challenges: • Insufficient qualified artisans for current needs • Training capacity expansion required for key regions Learnership programme • 18learners enrolled to pilot in 2010. • 14 learners completed their qualifications in 2013. • Trade tests to be facilitated in 2015. • The learnership programme has been replaced by an artisan learning program. Artisan Training programme • Focused on melter, moulder, and pattern maker • Training Centre established at Ekurhuleni East College (Kwa Thema) • Feasibility study for training centre in KZN to be completed in November 2015 Future Activities • Open additional training facilities if feasible 16

18. Interventions – Human Capital Development Concern: Artisan skills Gauteng Foundry Training Centre Challenges: • 66% of the foundries in South African are in Gauteng • Not yet part of the DHED funding structure Partnership: • NFTN; GDED; EEC Operations: • Launched in 2013, and opened for student enrolment in 2014 • Trade Test accredited for Moulder and Pattern Makers • Staff of 3 • Training provided to 23 artisan learners, 11 in Y1 and 12 in Y2 • All students are registered with MerSETA 17

19. Interventions – Human Capital Development Concern: Foundry skills Challenges: • South African foundries rely heavily on the skills trained on the job Skills Development Training Programme • Consists of certificate training modules towards a ‘diploma course’ (NQF 2-4 level), On site – on demand customised courses, and seminars and workshops. • 25 ‘diplomas’ have been presented to those who have successfully completes at least 6 out of the 8 certificate training modules. • Over 500 workers have attended certificate training. • On site training provided to 17 different foundries. • 44 Advanced technical skills courses presented. Future Activities • Accreditation of the courseware by the MerSETA • 2015 Survey of the industry training needs 18

20. Interventions – Human Capital Development Concern: Professional skills Challenges: • Young leaders and future managers need to gain a rounded experience to prepare them for promotion • South African foundry skills lag foundries in other BRICS countries in middle and senior management New Foundry Generation Forum programme • Network for young professional under the age of 45 • Platform for networking and learning • Current programme has curriculum for Y1 only, including: • 1 module presented on root cause analysis and problem solving • 3 modules presented on front-end technologies and functional design • Interactive feedback sessions with industry to showcase learnings and associated projects • 14 participants completed year 1 in 2014 • 15 participants enrolled to year 1 in 2015 Future Activities • Y2 curriculum to be added in 2016 to focus on leadership and management skills. 19

21. Interventions – Competitiveness Improvement Concern: Foundries are finding it difficult to compete for new business Challenges: • Global competition has a direct impact on castings sourced in South Africa • Traditional markets are changing • Negative market trends (ie: Mining sector) are negatively impacting the foundries Intervention(s): • Assistance has been provided to 31 foundries • Support packages include assistance to address: • Accreditation and compliance needs • Product development • Product / Process innovation Future Activities: • Continued assistance to 20 foundries enrolled to the Competitiveness Improvement Program (CIP) annually • Provide assistance to 20 new foundries enrolled to the CIP annually 20

22. Interventions – Competitiveness Improvement Concern: Foundries are categorised as small or capable by buyers and are not being considered for new business Challenges: • Original Equipment Manufacturers (OEM’s) have basic requirements to qualify supplier capacity including compliance and certification to market norms • 39% of all foundries are accredited to an accepted quality standard Intervention - Certification and Accreditation • ISO 9001: Requirement to access capital equipment market locally and internationally • TS16949: Requirement to access automotive sector locally and internationally • PED Directive: Requirement to access high pressure capital equipment market locally • IRIS: Requirement to access certain rolling stock markets internationally Future Activities • Facilitate assistance for foundries to achieve relevant accreditations 21

23. Interventions – Competitiveness Improvement Concern: Differentiation by product – Natural and competitive advantages Challenges: • Limited access to engineering skills is constraining flexibility • South Africa does not have many design engineers to develop new products Intervention - Product Development • Engineered solutions to improve the metals yield • ‘EffSAfound’ collaboration project with German Ministry of Research and Education to simulate characteristics of high chrome white irons • Improvement of product quality (ie: performance and aesthetics) • Root Cause analysis • Introduction of front end engineering tools • Product innovation • Product differentiation • Provision of developmental resources Future Activities • Facilitate continued access to engineering resources for foundries 22

24. Interventions – Competitiveness Improvement Concern: Low levels of productivity and efficiency – competition on price Challenges: • Many of the foundries provide a process and continue to struggle to compete on price with low cost imports • Foundries typically specialise in a number of core process and are often reliant on a collective of other manufacturers in the supply chain to produce final products • Jobbing foundries manufacture a diverse and complex range of products Intervention - Process Innovation • Engineered solutions to improve the process flows and the availability of materials • Addition of alternate processes into the foundry operations (ie: machining) • Optimisation of product mix and associated foundry processes • Introduction of new degassing tool (aluminium) • Sand reclamation and sand management practices • Provision of developmental resources Future Activities • Continued facilitation of access to engineered process innovation solutions g 23

25. COMBINED COST STRUCTURE % Days per annum that foundries operate 24

26. Interventions – Competitiveness Improvement Concern: Foundry reliance on electricity as primary source of energy Challenges: • Availability of electricity is constraint • Sporadic blackouts • The cost of electricity is rising rapidly • The availability of alternate energy sources for melting Intervention: Energy Management • Assessments are being done to evaluate energy reduction opportunities • Special attention is being paid to electricity conservation and to implement energy management systems Future Activities • Alternate sources of energy (gas; wind; sun) are being researched 25

27. Interventions – Competitiveness Improvement Concern: Foundry compliance to environmental legislation Challenges: • The cost of compliance – up to R5 million (large hurdle for small foundries) • The risk associated with non-compliance include potential foundry closure Intervention - Environment, and Waste Management • Testing and analysis to profile the different types of sand used by foundries in manufacturing • Testing and analysis to understand the effect of pollutants in foundry waste sand • Assessing the quality of air emissions and its impact on the surroundings • Engaging with GDARD and local municipalities • Intervening to implement corrective actions at individual foundries on an as required basis Future Activities • Industry conferences and workshops 26

28. Interventions – Scrap Metals Concern: Cost and availability of scrap metals as a primary input material Challenges: • Availability of scrap metals should be a national strategic advantage • Raw materials used as alternative to scrap are energy intensive to melt, and less environmentally friendly • High quality materials needed by foundries are scarce • The dollar value of South African scrap is highly favourable for importers Intervention(s): • Development of alternate alloys that require less usage of scrap metals as a primary input • Product development to improve efficiencies and yield in manufacture 27

29. Interventions – Technology and Innovation Concern: South African manufacturing use multiple technologies often lagging behind overseas competitors Challenges: • Limited R&D - foundries have limited access and understanding of new technologies • OEM’s contracted to provide products into the local market are not able to advise the foundries on the technologies and skills required specific to their products Intervention(s): • Focus on specific technology localisation through science councils and universities and strategic international partnerships (ie: EffSAfound Project) • Use of front end engineering (ie: simulation) and advanced engineering methods • Host to the 2017 WFO Technical Forum Future Activities: • Conduct feasibility of cooperatives – centres of innovation for skilled entrepreneurs • Work with universities to localise technology, science council to develop the processes, and foundries to industrialise products. 28

30. Interventions– Technology and Innovation Concern: South African / Africa has unique challenges and opportunities Intervention: World Foundry Organisation (WFO) Technical Forum • Technical Forum to be hosted in South Africa in March 2017 • Participation by local and international specialists • Platform for presentation of local technical papers • Opportunity to show-case South African capabilities Opportunities • Collaboration with industry and academia • Collocation of local conference and exhibition 29

31. Interventions– Access to investment capital Concern: South African foundries have not invested into capacity suited to market needs Challenges: • Limited investments made are not necessarily rewarded by business • Uncertainty • Lack of business confidence Intervention(s): • Facilitate access to Manufacturing Competitiveness Enhancement Programme, IDC, and other funds as needed • Facilitate access to new investors as needed Future Activities: • Engage stakeholders – quicker access to project related funds 30

32. Future activities • Support the SOC’s to unlock the potential in the core manufacturing sector on new infrastructure and fleet renewal projects • Support interventions to unlock the potential in private foundries • Enable and empower growth and development by engaging and supporting individual foundries (foundry by foundry approach) • Competitive Improvement interventions are to be continued • Provide coordination and management for ongoing and new projects identified by industry collectives 31

33. Case Studies– Material Reduction • Challenges faced: • High percentages of excess materials to be scraped • Quality of the tooling Intervention(s): • Product development from solid to hollow bar castings for production of specialised products in the automotive sector Outcomes (ROI) • Material Savings (-37%) • Machine times (-33%) • Consumables (-40%) Opportunities • Revised pricing • Increased order book (now 100%) 32

34. Case Studies– Resource support Challenges: • Foundry too small and layout not compatible with volume production • Resources to develop new products • Recognition in formal supply chains Intervention(s): • Product Development of prototype castings for designated railway products for new locomotives • Process re-design Outcomes (ROI) • Foundry successfully relocated to new facility • TE technical approval of products and contract award worth R10 million. Opportunities • The foundry is now able to tender for larger contracts (current tender of R72 million) 33

35. Thank You www.nftn.co.za

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37. Support / Collaboration Partners Public Sector and Government: DST, DSBD, EDD, DHET, NT, MerSETA Academia: • Universities: (ie: CPUT; UJ; UP; VUT; Wits) Parastatals and Implementation units • Council for Scientific and Industrial Research (CSIR) • Council for Mineral Research (Mintek) • National Cleaner Production Centre • Technology Localisation Implementation Unit • Technology Stations: (ie: MCTS; VUT; CUT; TUT) SOC’s • Eskom • Transnet Private Sector: • Original Equipment Manufacturers • Industry clusters • Companies seeking assistance to develop new enterprises in their supply chain Industry: • Associations • Individual foundries • Subject Matter Specialists International: • AFS • GIZ • IfG • WFO 36 Back

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