South Africa – composites market update Anthony Grant provides an overview of the South African economy and profiles the current state of play of its composite industry, based on data provided by the Polymeric Composites Institute of South Africa (PCISA).
he South African composites market is relatively mature and offers good potential for inward investment both for raw materials manufacturers and composite fabricators. With their relatively low labour costs, South African composites component producers are likely to have for the foreseeable future significant export opportunities in both North America and Europe. In addition South Africa provides a stable gateway to sub-Saharan Africa and also has a home market of some 42 million consumers that are likely to steady growth in their net income over the coming years.
The economy South Africa is by far the largest economy in the continent. Its gross domestic product (GDP) is four times that of its Southern African neighbours and represents 25% of the GDP for the whole of Africa. The country’s major economic strengths are its infrastructure, mineral resources, a growing manufacturing sector and a burgeoning tourist industry. In terms of industrial output South African industry represents 40% of the continent’s total. South African mineral production is 45% of Africa’s output and it generates more than half of the continent’s electricity. Economic activity is primarily in four metropolitan areas: Johannesburg and its surrounds (Gauteng Province); the coastal Durban/Pinetown areas (KwaZulu-Natal); the Cape Peninsula (that includes Cape Town); and the Eastern
Cape province (the Port Elizabeth/ Uitenhage area). Prospects for growth look good with the figure for 2005 expected to be 3.6% and 4% in 2006. At the same time inflation has declined and is currently running at 5%. However, unemployment remains high (around 40%) and the country is a major casualty of the HIV/AIDS pandemic. Standard & Poor (a leading provider of independent credit ratings, risk evaluation and investment research) has re-rated South Africa as A-/Stable/A-2 BBB-/Stable/A-3. This is due to the fact that the South African government has implemented prudent fiscal policies and has managed to bring spending under control. The country has also decreased its deficits and its external debt burden.
In terms of industrial output South African industry represents 40% of the continent’s total. Business environment In terms of regulatory law and commercial practice, South Africa’s economy has much in common with those of North America, Europe and Australasia. Free enterprise is the norm, although there are a number of important economic sectors (such as transport, telecommunications, electricity and water) that have
been or continue to be wholly or partly government-owned and controlled. The government’s policy is to promote the commercialisation, restructuring and privatisation of certain governmentowned enterprises. South African entrepreneurs and business professionals are generally highly educated, skilled and competitive.
Composites industry overview The South African composites industry is characterised by many small, medium and micro enterprises (SMMEs) with about 12 000 people directly employed in the industry. It currently consumes around 25 000 tonnes of resin and about 10 000 tonnes of reinforcement. Raw material sales are estimated at Rand (R) 1.1 billion. This compares with raw material sales in the French and UK markets of around R7 billion and R1.5 billion respectively. The total value of composites finished products is estimated at R4 billion (1 Rand = 0.13 or 0.17US$). Despite being home to a major producer of thermoplastic resins (Sasol), thermoplastic composite usage is virtually non-existent. Polyester resin and gel-coats are manufactured in South Africa by four companies – market leader NCS Resins, Cray Valley (second largest producer), Scott Bader (third), and independent KZN Resins. At present Owens Corning is the only ‘local’ producer of glass fibre CSM for structural reinforcement applications. The balance is imported, mainly 0034-3617/05 ©2005 Elsevier Ltd. All rights reserved.
South Africa – composites market update
Recreation & leisure 9% Electrical 5% Construction 35%
Aerospace & armaments 5% Marine 8%
Chemical 7% Other 8% Transport 23% South African composites industry by application.
from the USA, Taiwan and China. Other major resin and glass producers such as Reichhold and Vetrotex rely on distribution arrangements. There are a number of ‘local’ weavers which convert glass fibre into fabrics, rovings, stitched unidirectionals and mats for both home and export markets. There is a local catalyst producer, Peroxide Chemicals.
The thermoset composites industry has been growing at 3-5% a year since 2001. The biggest user of composite materials by industry classification is the construction industry (35%), which includes sanitaryware, piping and roof sheeting, followed by transport (23%). The trend in South Africa towards supply chain integration was accelerated in 2003 when Cray Valley Resins South Africa and Harveys Fibreglass (South
Africa’s largest composite materials distributor) effectively merged, leaving very few, small independent distributors. The other major distributor is NCS Resins which, in addition to its own products, supplies Reichhold, Jotun, Dow and Owens Corning products.
The future The South African thermoset composites industry has been growing at between 3-5% a year since 2001 (this compares to a global figure of 3%) and there is every reason to believe that this can be maintained and even accelerated in the future providing that the country remains politically and economically stable. International composite companies could bring their expertise to South Africa, and take advantage of the low operating cost environment to manufacture for overseas markets, with little fear of significant local competition. The South African Department of Trade and Industry (DTI) offers a wide range of incentives to attract overseas capital
investment, particularly where the end product is primarily destined for export. Although the domestic market is small by European or North American standards, it is growing and can provide a useful test market vehicle prior to selling to larger overseas customers. Typical enterprises could include: yachts and commercial craft, piping and other construction products for infrastructure development in sub-Saharan Africa and the Middle East. ■ More information on the opportunities that the South African market has to offer can be obtained by contacting the Polymeric Composites Institute of South Africa (PCISA). As well as promoting the composites industry, PCISA organises the bi-annual conference Composites Africa (the next event is scheduled for 17 May 2006). PCISA, together with leading South African composite companies, will also have a presence in the South African pavilion (stand numbers K92/L101) at the JEC Composites Show in Paris on 5-7 April. South Africa will also play host to the 15th International Conference on Composite Materials (ICCM-15) from 27 June-1 July 2005. This international conference and exhibition will be held at the International Conference Centre in Durban and will present the latest developments in composites, smart materials and nanocomposites. For further information on the South African industry please visit the following websites: PCISA; www.pcisa.wits.ac.za. ICCM; www.iccm15.com. South African DTI; www.dti.gov.za. Owens Corning; secure.owenscorning. net. Cray Valley Resins SA; www.crayvalley. com. Scott Bader; www.scottbader.com. NCS Resins; www.ncsresins.com. Harveys Fibreglass; www.harveysfibreglass.co.za.