The continued increase of cheap tyres being ‘dumped’ from Far East Countries like China into South Africa through customs under-declarations, lack of service delivery, high electricity costs, increasing transport costs and the huge waste tyre fees have recently shed light on the challenges facing the five South African tyre manufactures*.
There are also additional issues such as one-sided labour laws and custom, the pending carbon tax, the high cost of tooling imports due to the weak Rand and reduced productivity that influence local manufacturing. But what is the true state of the industry?
Despite many challenges, the local tyre manufactures have been operating successfully, some for over 85 years, contributing close to R20 billion to the South African economy annually and providing decent direct jobs to at least 6,500 people nationally.
It is further a key contributor to the provincial economies including the Eastern Cape, KwaZulu Natal and the North West Province through its production of tyres for highway use, agriculture, mining and industries. Therefore the sustainability of this manufacturing industry is vital for the real growth of the South African economy, as approximately 32,000 indirect jobs benefit from the operations.
Manufacturing in SA is what really drives the economy.
In response to current challenges, the South African Tyre Manufacturers Conference (SATMC) is advocating for the maintenance of industry standards geared towards protecting human health and safety, conserving the business environment and fair trade based on reliable measurements to counteract the unbalanced market.
“The South African tyre market is fiercely competitive with many suppliers and a shrinking pool of customers due to the economy being basically in recession,” says Dr Etienne Human, Chief Executive Officer of SATMC. “South Africa is seen as a springboard to sub-Saharan Africa and is therefore a popular market for exporters, especially from the Far East, wanting to expand.”
As the expert voice of the South African tyre industry, the SATMC is changing gears, working closely with the Department of Trade and Industry’s (dti), the National Regulator for Compulsory Specifications (NRCS), The South African Bureau of Standards (SABS), the South African Revenue Service (SARS) and the International Trade Administration Commission (ITAC) to stimulate a fair trade base. Work is also progressing with the Department of Environmental Affairs (DEA) to rectify the extended producer responsibility issues and costs regarding waste tyres in SA.
“In order to be efficient an average of only 14% of all tyre volumes on offer by the five local tyre manufacturers in South Africa are imported from their international companies. This allows for longer production runs of the large volume items in the local tyre factories leading to improved quality and lower costs,” says Human.
“Over 85 years South Africa has developed an established tyre manufacturing base that has shown its resilience and potential to compete in the global market,” says Human. “Similar to what is happening in the USA, South Africa is also dealing with Chinese tyre dumping and wanting to restore even playing fields. The SATMC does not want to create barriers to entry for reputable competing manufacturers, but are rather aiming to promote a healthy competitive market based on sound standards and practices.”
By creating an equal playing field, the SATMC aims to create a bigger demand for tyres designed and manufactured for local conditions, which will stimulate South Africa’s economic growth, will prevent job losses and will help to create more service provider opportunities to the factories.
“Locally manufactured tyres are specifically designed for the South African road and climate conditions, which make them safer and more durable. Very few items are as tough as a tyre dealing with what it has to endure on our roads,” says Human.
A big concern is also the huge number of passenger casings imported into South Africa every month. Although these tyres are by law required to be retreaded only, the majority of these tyre casing never see a retreading factory and are believed to be sold as second-hand tyres, many without proper inspections, to the unsuspecting public. ITAC Import-Export Control, a division of the dti, is to control the import permits issued only to operating retreaders.
“Unroadworthy second-hand tyres are the cause of unnecessary deaths on the road,” says Human. “It is estimated that the majority of all tyre blow outs can be attributed to defective second hand tyres fitted or tyres improperly repaired.
“It is an art to make a tyre that complies with such strict international specifications. Tyre builders are experts in what they do and have been trained over many years. The cost today to establish a tyre factory will exceed R1 billion with annual upgrades of around R100 million per annum to keep up with developments. Trends in the Western world indicate that once a tyre factory closes it will never open up again”.
The SATMC made a recent calculation and found that in generic terms, the cost increases mentioned in the introductory paragraph, far exceed all the incentives government endeavours to assist the industries. A good example is the waste tyre fees to fund an elaborate system that was instituted without involving the entire tyre industry. In the end it is reducing the viability of factories and straining the consumer who ultimately foots the bill without solving the real issues of job sustainability and creation.
*The South African tyre manufacturers are Apollo (formally Dunlop), Bridgestone, Continental, Sumitomo and Goodyear.