Cheaper imports force Mpact to retrench nearly 400 workers

Packaging manufacturer Mpact has issued retrenchment notices in its carton board business, which has been overwhelmed by cheaper imports and the strengthening rand, with nearly 400 jobs on the line.

The JSE-listed Mpact, which was hived off from the Mondi Group more than a decade ago, on Tuesday said it was unable to compete with carton board imports that have flooded the market.

It is not looking at mothballing Springs Mill, which is owned and operated by its subsidiary Mpact Operations and employs 377 people. The mill, which is set to be discontinued in March, is South Africa’s only producer of cartonboard.

“Due to significant overcapacity in the global cartonboard market, a condition expected to persist for the foreseeable future, and the current value of the rand, the mill’s largest customers are able to import cartonboard at prices about 20% below the mill’s cost of production,” the company said.

“This has led to a decline in demand for the mill’s products, and in January the mill’s largest customer notified Mpact that it will no longer procure its cartonboard requirements through the mill and will instead procure through imports in the future.

“Despite extensive efforts, Mpact is unable to bridge the cost gap and unlikely to secure sufficient demand from other customers at sustainable prices.”

Mpact becomes the second manufacturing company this year to say it will cease local production and resort to imports, with South Africa’s manufacturing capacity dwindling further.

British American Tobacco last month said it was closing its only manufacturing plant in South Africa in a move that will shed thousands of jobs, with the group overwhelmed by the proliferation of illegal cigarettes.

The decision by the London- and Johannesburg-listed company will see the group not manufacturing cigarettes locally for the first time in more than 50 years, resorting to imports to serve the South African market.