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Introducing the Electrical, Electronics, Electro-Mechanical and Software Cluster

Ai2SA PTY LTD and sources as referenced within

Introducing the Electrical, Electronics, Electro-Mechanical and Software Cluster

As documented before, I have been looking at how we can grow the local SouthernAfrica Control & Instrumentation (C&I) market for some time now as part of respective studies undertaken and believe the EEE-M&S Cluster being established has the best chance to succeed however it will require support of broader “C&I” community.

Abstract

This article provides a brief history of related works undertaken to date and aims to provide some statistics for consideration. It continues to elaborate on the envisaged model and why it may be successful. Total reading time excluding 3rd party references estimated to be +/- 3 minutes. If pressed for time please scroll to summary.

Background

This article assumes reader is familiar with what “C&I” entails, if not feel free to clarify or see: https://en.wikipedia.org/wiki/Automation or: https://www.youtube.com/watch?v=6f-uChX5CVc

Internationally information is available which quantifies the size of “C&I” spend down to respective vertical industries, see (intentional) low resolution rd party image below for China (example). Unfortunately for SADC this information seems unavailable. The Industrial Instrumentation Group (http://www.saimc.co.za/iig/) who consist out of product suppliers (mostly international) undertook studies previously re topic.

Based on my own high level calculations using a previous IIG study and an international one and combining this with declines in Mining and Manufacturing it is estimated the local market is valued between three (3) to five (5) Billion annually. Unfortunately this does not appear to be available per industry as per above nor does this include present and aging install base estimated to be worth billions…

When counting the number of C&I companies who are listed in 2016 Instrumentation Buyers Guide and extrapolating it further it is estimated that there are +/- 700 companies who trade within the C&I market locally. The breakdown below across “C&I” value chain is assumed, not thoroughly researched. In terms of challenges and needs the companies will obviously be difficult and to address this last year I had hoped to start an “Industrial Trade Association” to address some of this. Unfortunately following a presentation to the IIG (and other stakeholders) it has not come to fruition which is sad since even something a trivial as potatoes has an “association” to further it’s “cause”: http://www.potatoes.co.za/

One may however argue that there are associations which further C&I however these are associated to regulatory bodies and not trade as is my perspective. This does not make them less valuable but even more so as they form part of bodies to grow profession to build capacity to support trade bodies.

Given that so many different bodies exist (and all have different fee structures and objectives) it makes sense to review some of them at high level / conception-ally. The cover image developed is enclosed below for easy referral. Demand (or pull) focused bodies vs. supply (or push) focused bodies are depicted below. Differentiation is also made between local or export focused bodies / initiatives. While the use of push / pull terminology may not be 100% aligned with the more traditional understanding of those types of strategies (see: https://en.wikipedia.org/wiki/Push%E2%80%93pull_strategy/) in this case “pull” means to create capacity in order to be able to service demand while push means to create awareness of capacity mainly.

Regulatory bodies

As discussed above these are bodies established officially and may have sub bodies associated to them. An example could be Engineering Council of South Africa (ECSA). While companies may not have to register with them direct their employees are expected to depending on services they provide. Intention here is not to go into this topic into too much detail. It is anticipated other examples may also exist. The bottom line are that these relate to (legal) compliance.

Industry specific bodies

Original Equipment Manufacturer’s (OEMs) are deemed to associate themselves with industry specific bodies. A good example may be: http://www.plasticsinfo.co.za/ who for instance represents all plastics sectors… It is not likely that C&I entities will be able or make sense of joining these industry specific bodies direct given different scope.

Local & Push focused bodies

Numerous examples of these are found and it is common for their main cause to be to act as “lobby groups” for business i.e. to be the voice of business. It is also common for respective bodies to be associated to national bodies… Some might even relate to special interest groups also. I have been a non executive director at one of Pretoria’s most dynamic and fastest growing business chambers for a few years now and we continue to look for opportunities mainly for end clients to allow them to “grow”. This is not related to C&I however.

Export focused bodies

While one may argue about push vs. pull dimension there are a few bodies which focus on promoting export(s) along with some programs funded / supported by the Department of Trade and Industry (DTI). The two (2) main bodies in SA that are relevant to C&I are South African Electrotechnical Export Council (SAEEC) and Built Environment Professions Export Council (BEPEC) both supported by DTI. SAEEC focus more on promotion of exporting product while BEPEC exports services. Complications come in when a supplier offers both however but this is not deemed to be to big a challenge as the two (2) bodies have similar objectives. Incidentally many companies who are “patrons” of SAIMC (who I assume most people should know well) are also members of not only the IIG but also SAEEC…

Clusters / Cooperatives

Initially before wanting to start a trade association for C&I to address different needs deemed to exist, I looked at forming a cooperative also interestingly which was also not well received by some as latter was the case for the trade association. It along with “clusters” form part of DTI programmes however… See: https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=66&subthemeid=

This article does not focus too much on what is a cluster, see: https://www.slideshare.net/yashpal01/supply-chain-management-1316026 or http://slideplayer.com/slide/8858042/ but rather aims to elaborate on why this is best structure to align C&I supply chain and to build capacity to be able for government to take us more serious… The idea is to grow respective lower tiered companies to higher tiered (at times with the help of supplier development programs from OEMs or other larger Tier 1/2 companies…)

Benefits of cluster program

As per https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=66&subthemeid=  the program provides for cost sharing grant up to 80% (max R5/10M) for: shared infrastructure / Business development services and Management organization funding… This however means that members have to commit some funding to obtain grant(s) from DTI… The funds hence may be applied to grow an entity which translate to grow capacity to being able to service broader market (and even export)

Eligibility of cluster

DTI requires 1. five (5) or more members who are registered tax paying entities or non-profit organisations, 2. 20% of the membership of the cluster should be made up of 51% black owned entities in the first year…

Why this cluster program?

1st off I am not aware of any others and should there be one already established I would like to know more so we may look at feasibility of joining it, etc. Why I however think this program can work is no 1: it is driven professionally by a.) a company (https://www.rsaclusters.co.za/) and b.) committee complete with some competent people who have built big companies before and no 2. we already have four (4) of five (5) founding members on board.

Ai2SA as Founding member

As per below our company is one of the four companies presently forming part of clusters and 5th one has indicated they will join in next few weeks were after we will start process of registering EEE-M&S Cluster as an NPO officially along with all actions associated to starting a new company. Following this we will apply for 1st round of grant funding from DTI while progressively building the cluster and member base…

Member fees & application process

All of the above bodies have membership fees associated and a cluster is no different. At present we have revised model to ask R4,5K for entities below R5M turn over and R20K for entities with a turn over of up to R250M. We have a fair amount of levels in between and will be firming up model and adding correspondence re it in due course.

To join requires filling in application, signing code of ethics and constitution along with making deposit / subsequent member fee payments. We are looking at how to lower fees also to remove barriers to entry.

Opportunity cost

Form our perspective we may by forming part of this body have to sacrifice on other good opportunities as we have to invest our time and funds into this one which is deemed to be for a good cause to push localization, etc. and it is hoped we may be asked to head up some of the projects which may flow from either intra trade between members and more specifically projects as per EPC and / or EPC-M model(s). It is not deemed feasible at this stage for us to expect a referral fee for having members join.

Ideal EEE-M&S member(s)

The cluster is ideally aimed at Electrical, Control & Instrumentation (including Software ) companies within SADC who hopes to provide services to either state and / or private / public entities and who may hope to grow and even export some of their products.

Note above does not exclude international OEMs who may have licensing agreements in place however we are hoping to target local companies who also provide services, etc.

Hopefully this will give ECI critical mass to speak as one voice with government and to be able to build capacity. It should also be a great platform for emerging BEE companies to leverage off in order to grow.

Conclusion

While this is 1st unofficial correspondence re our plans it is hoped reader will appreciate our efforts i.t.o. investment in order to grow local economy and ECI specifically (including new technologies such as Internet of Things, etc.)

It is further hoped we may attract more prospective members to cluster so that we may increase capital application i.t.o. grant funding and more specifically so we may build an organization with capacity to create opportunities for it’s member base.

This is not envisaged to be a short term / once off activity and more will be corresponded about it in due course.

I really feel having done a vast amount of research that this is at present only and best platform to support if we are serious to (re)establish our industry internationally.

Please may you consider joining should you qualify (feel free to clarify). PS if you wish to export you should also consider joining one of the export entities. Note there are also other clusters and via this program we have access to associated ones also…

Feel free to comment and thank you for reading. 3rd party references included in links.

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