AS THE government ramps up efforts to buy more local industrial products, scores of manufacturers are benefiting from millions of rand in support from a Department of Science and Technology initiative to increase domestic productive capacity.
Last month, Science and Technology Minister Naledi Pandor disclosed in her budget vote speech that her department had invested R105m since 2011 through its Technology Localisation Programme to support 147 manufacturing firms. The initiative helped 20 firms to land contracts worth R162m.
Administered by the Council for Scientific and Industrial Research (CSIR), the programme provides funding and technology support to enable more local firms to supply goods to state-owned entities (SOEs).
Minimum local content thresholds have been set for 16 designated industrial inputs, with a further five awaiting designation by the Treasury. The support assists individual firms and targeted sectors to buy technology and fund internships.
Ashley Bhugwandin, who heads the CSIR’s technology localisation unit, says at least 20 projects carried out by his unit have helped original equipment manufacturers to buy items that were previously imported, locally.
A further 10 companies supplying traction transformers to ABB SA for the railway sector are being supported, he added.
Bhugwandin says 90% of the firms the unit assisted were able to supply SOEs with products that meet specification after receiving support. In addition, seven to 10 firms have begun exporting, and a further 20 are export ready.
"Most clients we work with say it’s probably the best programme that government has launched," he says.
Firms are identified by the unit and an original equipment manufacturer that is looking to localise content.
The CSIR unit works with service providers including international experts, to tailor solutions. Areas of focus include tooling support, technical and management training, design software, and product development.
While most firms stay in the programme for a year to 18 months, the unit follows participating firms for five years to ensure that help is dispensed effectively.
Bhugwandin says only firms that show an ability to supply are supported — there is no political interference in the selection process. While many of the firms assisted are black-owned or small firms, the focus is on developing local suppliers’ capability.
The unit has a database of about 3,750 suppliers that equipment makers can refer to, and it is growing by about 150 firms a month.
The programme can also tackle skills shortages or challenges in firms in areas identified by the Department of Trade and Industry.
Bhugwandin said sector-wide support, often involving the setting up of a shared facility, is offered by the unit, usually in partnership with an industry association.
These include 26 projects since the middle of last year to assist the foundry sector to access simulation software. An electrical-testing service is being provided to help electrical engineering firms, while a valve-testing centre is now being developed.
More than 250 students have been placed as interns at assisted companies since 2014, and 45% of these have since been employed.
In 2014, the CSIR helped local wind-power firm Adventure Power to acquire modelling software worth R1.4m from Siemens to test its 300kW turbines, which has enabled the company to supply power domestically.
The funding also saved the company the cost of conducting testing in Germany, which would have cost more than R7m.
Wayne Dunn, an executive of Adventure Auto SA, said sister company Adventure Power has signed a contract with a local industrial park to supply power for non-revenue-generating activities. He expects power supply to begin by the end of the year.
The company is exploring the possibility of exporting its turbines within five years.
Larry Schewitz, the CEO of light-fitting manufacturer Prism Illumination, said his company had received about R1.5m last year to buy design software and tooling for a corrosion-free light fitting.
Schewitz said Prism was selling fittings to a customer that formerly imported the item, and there was interest from Australia and the US.
Another success story is railway axle manufacturer Swasap, which has picked up R5m a year in new exports to Australia and Sweden after the department helped fund a battery of tests in Germany.
Swasap MD Derek Anderson said the company has added about a half a dozen jobs with the new business. This could grow to R33m a year in new exports.
The certification allows the company to supply most European countries.
Yet, while localisation may help boost manufacturing and job creation, it does risk creating behemoths that could dominate their markets and stifle local competition.
Simon Roberts, the director of the Centre for Competition, Regulation and Economic Development at the University of Johannesburg, said the key was for the government to support a number of rival firms, as rivalry would stimulate companies to improve products, providing wider benefits.