Railways AfricaTM

Issue: 4 - 2018

State Of Emergency In The South African Rail Sector

The Rail Road Association hosted an emergency industry meeting on the 12 July, to discuss the state of the industry as a spike in section 189 (retrenchments) threatens de-industrialisation.

Despite designation and major contracts in place in South Africa, the local rail industry is not coming first, in fact, it has come to a complete standstill! The picture painted on the current state of industry is dire.

I want to add that the impact has not only affected local companies but also international companies that have invested in South Africa.

The Department of Trade and Industry (dti) has asked for more time, but the money is gone, the jobs are gone, despite the policy.

Retrospectively this situation cannot be fixed. For a good few years now, industry ( rail sector, valve manufacturers, foundries, buses, energy, in fact, all sectors in the manufacturing environment) individually, as clusters as organised business platforms, have meet with all and sundry to raise the many, many issues, and the response from all key stakeholders has been slow to none! And now, look at the mess.

The SABS, the verification agency for local content, according to the dti only recently received the relevant contracts to review. Personally I am not sure what their process is, but I do know it’s going to take some time and there is no more time. No more time to save those that have already closed up shop, for those that are about to close and for those jobs in jeopardy and those already gone.

Irvin Jim, General Secretary NUMSA, spoke at this event and he asks a good question… “what is the agenda?”

My question, is very simple, who is responsible? Industry (all, not just rail) saw this coming, “we” have meet with all the powers that be. Who, is responsible for designation and the social impact of designation not materialising? Who is responsible for ensuring that South African industry despite all the amazing policies and wonderful talk, has crashed?

The fantastic success articles written in dti’s Industrial Policy Action Plans (IPAP) from iteration 1 to 10 – although I think it is in its 11th iteration... success stories only for a moment – why, because without vigorous support and monitoring, the investments made by private sector are worthless.

If Government who holds the check book and the power to place the orders through their respective State owned Entities and Ministries, refuse to recognise the decrees in terms of policy to stimulate the country’s economy, refuse to place orders locally, refuse to recognise the capability and capacity of the “home” industry, then we are only talk and the actual agenda is something else entirely...

I remember clearly many years ago the talk started, it went along the lines of “We are going to be investing in rail and power, ready your factories, build the skills, ensure that as South Africa we create capability and capacity, government will ensure that there is funding to assist South African businesses invest. These will be the biggest orders ever seen in our history” And boy, did “we” go to town, accessing MCEP funding, TILU finding, IDC money, you name it and “we” revamped factories, put in new equipment, and now, for those that are lucky, we run on short time for those not so lucky, gone.

I want to point out that it was not only South African businesses that invested heavily on the premise of the order book potential. International OEM’s took the risk as well, there are a number of international businesses across industry sectors that have invested in factories, equipment and skills development. Ministers attended their openings, lauded their faith and investment in South Africa and well, they sit in exactly the same dire state. All the fanfare for naught! Success stories only for a moment.

Yet across industries, government calls for the private sector to do more and for more private sector investment and participation.

Irvin Jim is right “We have a duty to be in business, but we also have a duty to be patriotic!”

That patriotism includes international companies that have invested in South Africa, be patriotic to the markets you are serving, because you are now local.

So, let’s stop for a second and consider another tropic. The topic; transformation and ownership in the manufacturing environment. This is something that has come up time and time again.

I want you to step back for a second and look at the landscape. It’s a dire landscape, it is starting to look a bit like a desert with a few tumble weeds. Let’s get real for a second. There is no growth, there are no orders, return on investment might be in 40 years or at this rate, never, who wants to own a piece of that?

Yet we continue to ask why transformation in the manufacturing sector is so slow! Anyone else need a map to get drunk in this brewery?

One example that comes to mind, as it is still fresh from the recent Africa Rail event, Naledi Foundry, which have just bought DCD Ringrollers, 100% black owned, go listen to his interview that we did at Africa Rail, a 100% totally transformed manufacturing business, who is not getting business!

This is not a brown envelope business that Irvin Jim and many others reflect upon, this is a state-of-the-art business, this is an actual plant, a business that has invested in plant, facilities and people, with all the necessary certifications and meeting all the required standards, and, well, he too is voicing his opinion, passionately. Watch the video interview we did at Africa Rail.

So getting back to “what is actually the agenda?”, it is clear that the powers that be are talking one thing and doing another... talking about industrialisation, job creation, calling for transformation in the manufacturing sector, getting everyone excited about the money that is to be spent, and yes spending it, but where?

So as Irvin Jim put it at the meeting held:

“On the issues that we are handling here, we must be clear, we must meet the economic cluster, we must meet with dti, economic development, public enterprise, we must meet with presidency. We must demand! It can’t be that we go around promising heaven and earth, but we are destroying jobs that will never come back, the meeting should include all social partners in the industry and call everybody who is interested in defending the current capacity of manufacturing and make sure we challenge this and government must come to the party to deal with the problems that are confronting us here today.”

He continues “We need to work together, we will be discussing as NUMSA what form of action needs to be taken, the message I will be taking back is that you are going to be retrenching our members. Workers don’t run factories they work, your role as mangers is to work out scenario planning and so forth. So we can’t wait till such time you retrench them. One of the things we need to be clear about, is the question you are asking, who is responsible for this? Once that question is answered it must be a center of gravity, of yourselves and workers, this is not a talking meeting. We must occupy those institutions, and demand answers that these problems that are being cited here today must be resolved, because if we don’t…”

So, let’s talk scenario planning. I have been saying for a while that the rail sector needs to look to Africa for opportunities, well actually survival, but at the time, I perhaps sugar coated it, because I don’t think I used the word survival!

I appreciate that the text books say that one only looks to the export market when one’s home market is secure, and, well, I think this statement needs reflection, or to be amended drastically, whichever you prefer! But, by now we have discovered that it is not business as usual and before you jump to the conclusion of China is everywhere and there is no point, stop!  Transnet is aggressively pursuing an Africa Agenda. In some instances, on their own, in competition to you, because they too need to support the local industry that they work in. In other instances as a conglomerate of entities, to the extent, that they have formed a dedicated Business Unit.

There is so much more to say, but at some point, we need to stop complaining and start doing. So, who is up to exploring opportunities in Ethiopia? I will be at the Ethiopian Rail Summit, and I hope to see you all in Kenya for the East Africa event and let’s not forget West Africa and if you don’t have the budget to exhibit at these events, advertise in Railways Africa or send me articles to include in Railways Africa, because the one thing we do, at Railways Africa is talk, to your customers, weekly!