Power prices hit foundries hardest
The trade and industry committee was barraged with input from industrialists on Friday who told MPs in no uncertain terms that more electricity cost hikes would kill jobs, drive some jobs abroad and close down companies.
MPs were told that, according to a survey of 40 foundries, 1 132 jobs had already been lost because of massive Eskom power increases since 2007, which were made worse by municipal mark-ups of up to 700 percent. Eskom has threatened another 15 years of above-inflation increases.
The National Foundry Technology Network’s Adrie El Mohamadi listed seven foundries that had closed in the last three years. “Employment is estimated to have reduced by between 10 percent and 15 percent since 2008,” she told the committee. Foundries are believed to employ about 15 000 workers countrywide.
The foundries – factories producing metal castings using aluminium, cast iron or steel – that had closed included Eclipse West Plant, part of the Scaw Metals Group, which had closed in 2010 and resulted in 500 lost jobs. The same year Eclipse East Plant partially closed its plant. Last year Eclipse Dimbasa in the Eastern Cape closed with 350 jobs lost.
Scaw Metals Group, which has operations in South America, Canada, Australia, Namibia, Zimbabwe and Zambia, produces steel and alloy iron castings, alloy cast iron and forged steel grinding media, chain, steel wire rope, strand and wire products for the construction, railway, power generation, mining, cement, marine, engineering and agricultural markets.
South African foundries mostly tend to supply the automotive and mining sectors and are concentrated in Gauteng, Western Cape, Free State and Eastern Cape.
Last year, 22 jobs were lost when Krynie Brothers in Fordsburg, Gauteng, closed, while Belmec Die Casting in Uitenhage in the Eastern Cape, closed with 70 jobs lost. It was part of the Bel-Essex Corporation. It specialised in the production and machining of high pressure die cast components for Ford, Volkswagen and Audi.
Only last week Crown Cast in Boksburg closed its doors with 130 jobs lost. It manufactured a large range of cast components used in the manufacturing of pumps, valves, hose fittings and pipe couplings for the mining industry.
It is understood that there are a number of foundries across the country that are teetering on the brink.
On Wednesday, two Nelson Mandela Bay foundries will be calling on the trade and industry committee to put a stop to above-inflation increases for power tariffs. They are Borbet, which makes automotive metal parts, and Shatterprufe, a subsidiary of the PG Group which makes automotive safety glass.
According to Nelson Mandela Bay Chamber of Commerce chief executive Kevin Hustler, all would argue that rocketing electricity costs were putting their jobs in danger.
Shatterprufe financial director Trevor Thomas said that costs of electricity to power its Port Elizabeth plant had rocketed from R24 million to R50m last year.
The municipality charges a mark-up of about 540 percent on the Eskom price.
“Through our benchmarking we have worked out we are paying more for electricity than in Europe,” he said.
David Mertens, of the National Foundry Technology Network and also the chief executive of Autocast in Port Elizabeth, said there were 2 500 power tariff regimes in the country. “We [industry] are the milk cows of municipalities.”
In Nelson Mandela Bay electricity revenue was R3 billion a year.
None of that money was reinvested in electricity.
Mertens cited an example of an industrial company with a turnover of R200m. It would pay about R32m a year for electricity. If it relocated to Cape Town, with lower municipal mark-up rates, it would save R4m of that.
If it was supplied directly by Eskom, it would save R10m a year.
He noted that competing businesses in Germany faced stable prices for the next three years and could plan accordingly. In South Africa the price of electricity was about four times higher than in Germany.
National Energy Regulator of SA regulatory specialist Charles Geldard had previously told MPs that electricity prices, especially with municipal top-ups, were reaching “a tipping point”.