I am often asked what the current state of the South African foundry industry is. It is a difficult question as when you do not have any defining statistics to refer to, you are generally guessing. Despite this you do get a feeling from what you observe while out in the ‘field’ and networking with foundrymen and suppliers.
My stock answer is that there are mixed messages out there. Non-committal yes, but at the same time guarded. However, I always like to give a positive outlook on our industry and will highlight the constructive and encouraging signs in the foundry industry, and these are not just islands of excellence as some may refer to them. Sure, I cannot be blind to the fact that there are some stressful situations, but in the main there are upbeat signs.
Prior to the beginning of the second decade in the 21st century there was not much investment that had taken place in the South African foundry industry. I specifically refer to capital equipment, processes and those that work in the industry. It became all too familiar to read reports from experts in the industry bleating consistently that the industry in South Africa was in dire straights and we needed investment on all fronts.
I could agree with them that there was a need for an upliftment of the skills base, and a very successful short course programme which was instituted was embraced by owners and employees alike. This initiative took traction and was gaining even more momentum until the funding was stopped. Education and training of the workforce, no matter how small, can only uplift all those involved in the industry and the many more that are associated with it.
Four years ago I reported on a R61 million investment in the aluminium die casting industry, and I can confidently say now that there have been a number of large capital equipment investments by the foundries in South Africa, both by large foundries, and the smaller ones. One large foundry group has spent, I believe, over R200 million on a new foundry in the last 12 months. Then there is my report in this issue where aluminium furniture manufacture has been relocated back from China, and next month I attend an opening where the foundry has spent close to R10 million on a new sand reclamation plant and is planning more investment.
I mention all these and the other investments that have taken place or are currently being implemented, to the enquirers. And I tell them that I believe that capital expenditure in the last four years far exceeds the previous 25 years in the foundry industry in South Africa.
A good gauge is also to mention how a foundry supplier listed on the JSE, Insimbi Refractory & Alloy Supplies Ltd, mentions in its latest results: “The foundry division grew operating profit by 19.9% and operating margin increased from 4.2% to 4.6% largely as a result of strong profit increases in the foundry and refractory divisions, despite a decreasing revenue base but it seems like the industry has stabilised and we anticipate that we will see a slight increase in demand towards the second half of this financial year.”
The previous six months the company reported: “The foundry segment has performed well generally and despite continued competition both locally and from abroad, it achieved revenue of R366.8 million, a 4.5% or R15.7 million increase on the previous period under review. This segment is traditionally a “barometer” of how well the economy is doing and it appears to have reached a comfortable level of sustainability.”
This company is also currently purchasing the AMR Group, a company that is involved in the aggregation, processing, recycling and sale of scrap metal.
There are also numerous investments taking place in the automotive industry. The OEMS are spending billions of rands on upgrades, new tooling and production lines. We are constantly reading about these investments.
Despite the naysayers and the apathy within reports there is positive news out there notwithstanding a recent announcement that a foundry has gone into business rescue.