DCD Group has sold its share of the R536m DCD Wind Towers joint-venture plant in the Coega industrial zone to the Industrial Development Corporation (IDC) for R1, as a lack of policy cohesion between government departments and state entities continues to ravage SA’s renewable energy sector.
Such carnage comes amid more widespread industrial failures at a time when the domestic economy is barely growing. State empowerment and local procurement policies have been disrupted by evidence of corruption at state-owned enterprises and fading investor sentiment.
That said, the Department of Trade and Industry is lauding the launch of SA’s first "internationally owned forged wheel-manufacturing facility". Italian company Lucchini has invested R200m in the factory. The plant imports blank railway wheels from Italy and adds value in SA. Lucchini is a recipient of the department’s 12i tax allowance incentive to the value of about R36m and a further training allowance of about R1.6m. The investment supports the government’s plans for job creation and the localised manufacture of railway products.
Lucchini has been in SA for some time, in a joint venture arrangement with DCD heavy engineering group subsidiary DCD Ringrollers in Vereeniging. DCD Ringrollers was until a few years ago the exclusive distributor in southern Africa of low-noise railway wheels from Lucchini, complementing its own forged steel railway tyre products. Now it seems Lucchini has seen a market opportunity of its own in the region.
DCD Ringrollers’s forged railway tyres are sold worldwide, with about 30% of production also going to Transnet and the Passenger Rail Agency of SA. It has long been a black-empowered company, with the former Mvelaphanda group as a 25% shareholder.
But as one foreign-owned industrial group invests a relatively small sum in the country, the DCD group — which is 48% black-owned — is fighting for its survival across numerous fronts. It is closing parts of its heavy engineering operations in Gauteng’s Vaal Triangle industrial hub, as a result of the depressed global mining sector.
Its DCD Marine subsidiary, with facilities in Cape Town, Walvis Bay, Saldanha, Ngqura, East London and Durban, is in business rescue because of poor global shipping and oil and gas markets. Most tellingly, though, and despite the government’s firm plans for job creation and the localised manufacture of industrial products, DCD sold its stake in DCD Wind Towers to joint venture partner the IDC for R1. The facility was opened in 2014.
This is because of Eskom’s refusal to sign agreements to buy power from SA’s renewable energy sector. The state-mandated Coega Development Corporation is also a joint venture partner.
"It’s shocking — absolutely shocking," DCD group CEO Digby Glover says. "The entire [renewable energy] industry is collapsing." He says the state has more to lose than DCD, as the Coega Development Corporation owns the land and buildings that house the plant.
Glover says he "applauds" the IDC for taking up DCD’s stake. But he also says that there is a lack of alignment between the IDC, the Department of Trade and Industry, Eskom and the Coega Development Corporation.
The Manufacturing Circle says it is concerned about the latest quarterly jobs data from Statistics SA. Unemployment climbed in the first quarter from 26.5% to 27.7%. But the industry body also notes the "more encouraging" purchasing managers’ index, which rose in May to 51.5 index points, from April’s 44.7.
"The [index] confirms our own research, which shows a resilience in the manufacturing sector, despite tough times," Manufacturing Circle executive director Philippa Rodseth says. "It seems that the sector is being buoyed by orders and by export prospects … the outlook is mildly encouraging for the medium term."
The Federation of Unions of SA says unemployment was last this bad in September 2003. "With only two-and-a-half years left to reach the National Development Plan’s vision of an unemployment rate of 14% by 2020, that dream is certainly a far cry from the current realities," says the union federation’s acting president, Chris Klopper.
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