Economy / 8 September 2016, 07:25am / Kabelo Khumalo and Manyane Manyane
Johannesburg - Danish valves producer AVK Southern Africa on Wednesday opened a R200 million valve manufacturing plant in Alrode, in southern Gauteng, after getting local content designation assurances from the Department of Trade and Industry (dti).
AVK’s plant has a 1 200m² training centre, 4 500m² of office space and 2 000m² logistics and warehouse space.
In 2014 the company acquired a majority stake in Johannesburg-based Premier Valves Group (PVG).
PVG’s products continue to be marketed under its own brand. Paul Hubbard, chairman of AVK, said the investment they made on the plant was hugely distilled in the government’s 75 percent local content designation policy for sate-owned entities (SOE) to procure locally manufactured products.
“We met with the dti director-general (Lionel October) in 2014 and he gave us absolute assurance that designation was real, that’s when we made a decision to build this plant.”
Hubbard said the opening of the plant was in line with their strategy to grow their business in South Africa and the southern African region.
“We have seen a lot of population growth in the southern African market, the stress on water and energy made us realise that there is a gap in the market for AVK,” Hubbard said.
The company also has operations in Zambia, Mozambique, Botswana and Namibia.
The Preferential Procurement Policy Framework Act act empowers the dti to designate specific industries where tenders should prescribe that only locally manufactured products with a prescribed threshold for local production will be considered.
In 2014, the department put a 70 percent local threshold on valves products
DTI deputy director general responsible for industrial development, Garth Strachan, last month told Parliament that there was very little traction being made in gaining private sector support for localisation despite commitments made by government.
Peter Thomson, PVG managing director, said designation and the change in relative prices had allowed them to be competitive in a tough global market but cautioned government to follow through in their monitoring of the designation policy.
“Designation is supposed to give us the price protection we need to grow our business and create employment,” said Thomson.
The new plant had already created 114 permanent jobs and 150 indirect jobs. AVK said it hoped to train a further 1 500 people in how to install valves correctly at their academy in this financial year.
Malebo Mabitje-Thompson, deputy director general responsible for incentive development and administration at dti,said plans were afoot to ensure that they monitor and implement the 75 percent local content policy, with a major focus on SOEs. “We want to work with the office of the auditor general to make sure that designation is an auditable item - it must be part of the audit outcome,” said Mabitje-Thompson.
Mabitje-Thompson encouraged companies to report non-compliance of the designation policy as to allow the department to proactively ensure compliance.
Trine Rask Thygesen, Denmark's ambassador to South Africa, said the opening of the plant presented an opportunity to further strengthen bilateral trade between the two countries. “We have increased our sector co-operation in South Africa in water, energy and research, we will continue to mobilise private sector support to invest in this countries economy,” Thygesen said.