MANUFACTURING OCTOBER 2021
INSIDE
RENEWABLE ENERGY
Moving to a net-zero emissions economy
PHARMACEUTICALS
Does SA have vaccine manufacturing capacity?
SHEQ MANAGEMENT
AGRICULTURE
New workplace safety regulations
A boom in SA’s fertiliser production
MANAGING IMPACT How social unrest, climate change and regulations could change the future of the manufacturing sector
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F ROM T HE EDI T OR
Impact zone
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n the last issue of Manufacturing, we spoke of the impact of innovation and its potential to reinvigorate local industry. Six months later, we’re talking about impacts of a very different kind. Some might say nobody could have foreseen the rioting, looting and violence that swept across parts of KwaZulu-Natal and Gauteng. Some might argue that in a country beset by stagnant economic growth, rampant corruption, racial tensions being fanned by politicians and the world’s highest unemployment rate, it was inevitable. Whatever your position, the immediate impact was staggering: more than 340 lives were lost, over 150 000 jobs and 40 000 businesses were affected, and R2-billion in damage was done to infrastructure. The broader economic ramifications are expected to be around R50-billion, but only time will tell. Time will also tell whether businesses will start to disinvest in South Africa or in the areas worst affected, as we see on page 10. A huge range of industries were affected, including mining, which has been a stalwart of the economy of late, as the Minerals Council South Africa argues on page 13. Pharmaceutical companies weren’t spared either, with the unrest disrupting distribution of crucial medicines and COVID-19 vaccines, which are being made here, but to what degree? Find out on page 14. Agriculture suffered too, with thousands of hectares being burnt. They’ll need plenty of fertiliser to regrow these plantations; check out what’s happening in the local market on page 17. Textiles were hit too, but new legislation around marijuana and hemp offers a glimmer of hope, as we see on page 26. The riots added another item to the long list of concerns investors have about South Africa, among which unreliable electricity supply ranks highly. Coal is seemingly unable to meet our energy demands, so what’s being done to introduce renewable capacity along the grid? Our experts, on page 19, share why a net-zero emissions economy by 2050 is essential for the manufacturing sector. Anthony Sharpe Editor
Contents 9
TRENDS
Counting the cost – both immediate and long term – of the July riots for the manufacturing and agricultural sectors
13 MINING
The Minerals Council South Africa weighs in on what needs to be done to capitalise on opportunities within the sector
15 PHARMACEUTICALS
We’ve never talked about vaccines as much as we do now, but is South Africa actually producing them?
19 AGRICULTURE
Increasing prices and bumper maize production are driving a boom in the local fertiliser market, so why are we importing so much?
23 SAFETY
A safety, health, environment and quality policy is essential in ensuring workplace safety and adherence to standards
26 TEXTILES
Hemp grows prolifically in South Africa, but are government and industry ready to take advantage of the global boom?
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33 RENEWABLE ENERGY
South Africa is particularly vulnerable to climate change, making a transition to greener energy crucial
PUBLISHED BY
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THE FUTURE OF AFRICAN
MANUFACTURING:
MAKING THINGS IN A CHANGING WORLD As the world continues to shift, subsequently affecting all aspects of industry as we know it, Africa’s manufacturing sector has proven resilient
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he world is changing at an unprecedented rate, given the impact of COVID-19, innovative technologies, shifting customer expectations, increasing social awareness around gender equality and restoration of previously marginalised communities. These major shifts have a considerable impact on the future of Africa’s manufacturing sectors. If African manufacturers can effectively balance health risks, a combination of efficient economics of production and supply chains, strong and reputable products, loyal customers, an established logistics network, and reliable online business elements, they will be well positioned in the future industrial marketplace.
INDUSTRY 4.0 OFFERS MANY BENEFITS Technological advancements and the need to minimise health risks have given rise to the revolutionary Industry 4.0. This phenomenon represents the complete digitisation of factories and manufacturing facilities that will, ultimately, merge with the unique needs of individual customers, resulting in benefits such as customised product design and manufacturing processes as well as speed to market to maximise customer satisfaction
Panel discussion at the Manufacturing Indaba conference.
levels. Moreover, Industry 4.0 brings with it a host of additional benefits for manufacturers such as cost, productivity, managing workers’ health safety, profitability and operations that manufacturers are striving to control, streamline, optimise and enhance. Similarly, these opportunities extend to small and medium businesses, allowing them to establish new business models and integrate into global value chains. Despite concerns that the continent lacks the requirements of global advancements to capitalise on innovative technological initiatives, African countries are uninhibited by infrastructure legacy challenges, thereby providing a higher degree of flexibility than their developed counterparts. Accordingly, Industry 4.0 remains a considerable opportunity for African manufacturers, ultimately giving the continent a leading edge over the global economy.
THE FOURTH INDUSTRIAL REVOLUTION WILL PROVIDE IMPROVED LEVELS OF SAFETY TO MANUFACTURING FACILITIES. 6
Further to this, the fourth industrial revolution will provide improved levels of safety to manufacturing facilities. Human beings are restricted by the tasks they are able to carry out in hazardous environments and the degree of accuracy to which they can complete them, due to high-risk pandemic management. Machines, on the other hand, are far superior in terms of executing these tasks safely as well as having a high level of competency, essentially minimising workplace accidents along with Workman’s Compensation claims. By encouraging industrial safety, automated machinery enables producers to reduce the medical claims of workers and ensure they remain healthy in the face of COVID-19, reduce downtime, save on long-term capital expenses and improve overall productivity for African industrialists.
GREATER OPPORTUNITIES AND ECONOMIC GROWTH In the face of increasing digitalisation, barriers to entry into the manufacturing sector are dwindling, translating into a positive outlook for new African market entrants who are more flexible than their larger, more cumbersome counterparts, thereby providing products and
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Dube TradePort presenting to the Namibian Trade & Industry Minister.
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AS THE BUYING POWER OF AFRICA’S MIDDLE CLASS CONTINUES TO RISE, DEMAND FOR PRODUCTS AND SERVICES ACROSS THE CONTINENT INCREASES, THEREBY ENABLING SUSTAINABLE ECONOMIC GROWTH AND MUCH-NEEDED INTEGRATION AMONG REGIONS. services that were once the exclusive domain of major incumbents. Further, digitalisation is set to empower the continent’s rural and small business owners, whereby advanced data analytics available to them on their smartphones can enhance partnerships among stakeholders and provide access to new markets, using the entire value chain. Such connectivity provides support for their daily operations through tasks such as acceptance of digital payments and gaining insight into their customers so that they can devise appropriate marketing strategies responsive to collected data. This, ultimately, places them on an equal footing with larger, more established businesses with the capital to access this data via expensive in-house software development. This access unlocks the opportunity for small business owners to apply for bank loans at long last, as they have incontestable evidence (data) supporting their revenue and cash flow projections. Experts purport that Africa conveys a positive economic growth trajectory, deeming it a feasible alternative to other markets. Africa is regarded as the world’s fastest-growing continental economy, and
its business-to-business (B2B) market is fundamental to this boom. B2B expenditure in the continent’s manufacturing is projected to reach $666.3-billion by 2030, $201.28-billion more than it did four years ago. As the buying power of Africa’s middle class continues to rise, demand for products and services across the continent increases, thereby enabling sustainable economic growth and much-needed integration among regions. Radical transformations within both a global and African manufacturing context will be integrated into the entire supply chain, thereby optimising operations and stimulating efficiency and innovation for years to come. By successfully assimilating advanced technologies into their systems, existing and prospective African industrialists can expect to realise even greater revenue and profits from their investment. As the world continues to shift, subsequently affecting all aspects of industry as we know it, Africa has proven steadfast: improved political stability, growing investment prospects, business-friendly trade agreements, Industry 4.0, enforcement of policies empowering black and female manufacturers in addition to
government funding solutions, to name a few, are pivotal factors demonstrating a positive and thriving manufacturing future for Africa. As the flagship symposium of the continent’s entire industrial sector, the upcoming Manufacturing Indaba taking place in November 2021 as a virtual conference and exhibition, is set to empower its manufacturers to rise on an international scale and realise their true potential at long last.
➔ Scan this QR code to go directly to the Manufacturing Indaba’s website.
For more information: info@manufacturingindaba.co.za www.manufacturingindaba.co.za
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Counting the cost With COVID-19 and the recent riots affecting industries across the board, we talk to the experts about the specific challenges to the long-term outlook for manufacturing. By ANTHONY SHARPE
The riots that plagued KwaZulu-Natal earlier this year almost collapsed the local economy in that province.
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he riots and looting that took place across KwaZulu-Natal and Gauteng in July this year laid bare the fragility of the social compact that governs South Africa. Nearly R2-billion damage was done to infrastructure in KwaZulu-Natal alone, and with the broader impact on the economy is estimated to be R50-billion – that’s 1.15 per cent of the country’s 2020 GDP. According to National Treasury, 14 500 jobs in Gauteng were affected, while in KwaZulu-Natal 150 000 jobs and 40 000 businesses were affected. “The impact from a pure production perspective is devastating, because even companies that weren’t directly affected closed,” says Lisette Ijssel de Schepper, senior economist at the Bureau for Economic Research, part of the Faculty of Economic and Management
Sciences at Stellenbosch University. “We know from the Absa Purchasing Managers’ Index (PMI) covering July that many companies lost half a month of production.” The Index also highlights that the output recovery in the manufacturing sector was set back notably at the start of the third quarter this year. From an elevated 57.4 in June, the headline PMI suffered a record single month decline of almost 14 points, dropping to 43.5 in July. This is well below the neutral 50 level. The magnitude of the monthly Lisette Ijssel decline, which dragged the de Schepper PMI down to the lowest level since May 2020, was worse than during the hard lockdown in April 2020. At that stage, the index notes, the SA manufacturing PMI and PMIs across the globe were (counterintuitively) propped up by a big increase in the supplier deliveries index.
“The implications of the riots for the agricultural sector extend not only to exports but also to numerous internal social issues, employment and food security.” – Sandy la Marque
The long-term impact Ijssel de Schepper says that while this production obviously can’t be regained, the stoppages were at least temporary. “July was very hard for manufacturers because we had a strict lockdown, the Transnet security breach that resulted in export delays, and then the riots.” What makes the situation worse, says Ijssel de Schepper, is that the manufacturing sector was slowly but surely starting to look better. Manufacturing confidence in the second quarter, before the third COVID-19 wave and concomitant restrictions arrived, was at 46 – its highest level since 2012. “There was broad-based economic recovery in the early months of the year, but also a sustained uptick in demand. That was a trigger for production to increase. The sector wasn’t doing well before the pandemic, so it was a recovery from a low base, but that sustained demand recovery – and the confidence that comes with it – is what’s needed to drive investment, capacity expansion and increased employment.” Given South Africa’s massive unemployment rate and simmering social discontent, Ijssel de Schepper says it’s not unreasonable to expect more such upheavals. “Will this result in companies fully disinvesting? It’s hard to say. It will certainly add to your costs: you’ll have to pay more for insurance and ramp up your security, for example. And the cost of doing business in South Africa is already pretty high. This will make it even harder to compete internationally.” ›
WHO GOT HIT? Business Leadership South Africa reported that 200 malls were attacked, 100 stores were burnt to ashes and 800 were looted. Pepkor reported 489 stores looted, Foschini 190, Spar 184, Shoprite 154, Pick n Pay 136 and Mr Price 109. Tiger Brands also halted bread distribution through KwaZulu-Natal. Forty trucks carrying half a billion rands’ worth of goods were burnt. The country’s largest refinery, Sapref, declared a force majeure and shut down for eight days. A factory producing antiretroviral drugs was looted and damaged, while the distribution of COVID-19 vaccines was derailed. Sappi reported R220-million in lost production.
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The impact the riots had on the manufacturing sector also heavily impacted interrelated agricultural processes.
THE FUTURE OUTLOOK The August edition of the Index conducted by the Bureau for Economic Research (BER), which measures economic activity, shares a better outlook for the manufacturing sector. It climbed to 57.9 points, after plummeting to 43.5 points in July. A move above 50 signals an improvement in activity, while a move below 50 indicates a deterioration.
The real loser Economist and Wits University senior lecturer Lumkile Mondi believes that industrial activity within KwaZulu-Natal will experience long-lasting challenges due to the July riots. “The riots have demonstrated to many industrialists the reality that it will be volatile for a long time,” says Mondi. Moving forward, Mondi believes there will be a lack of investor confidence in KwaZuluNatal, and companies will feel they’re better off in Gauteng or the Western Cape. Another consequence of the uprisings, he shares, may be the concentration of industries in certain protected areas.
THE IMPACT ON AGRICUTURE
Production linkages arising from the interdependence between agriculture and manufacturing through the use of productive inputs such as chemical fertilisers, pesticides, electric power, agricultural machinery and implements, etc mean that the impact the riots had on the manufacturing sector also heavily impacted interrelated agricultural processes. Sandy la Marque, CEO of the KwaZulu-Natal Agricultural Union. (Kwanalu), adds that “the implications of the riots for the agricultural sector extend not only to exports but also to numerous internal social issues, employment and food security”. Agri SA executive director Christo van der Rheede adds: “Supply chain disruptions such as those experienced during and after the riots could impact South Africa’s agricultural reputation. Government Sandy la has a massive responsibility to ensure that our Marque harbours, roads, rail and so forth function optimally and that disruptions to the supply chain are dealt with efficiently. Any future disruptions that delay exports will have a serious and disastrous impact on agricultural exports.” The PMI Index shares these sentiments with the findings that the riots disrupted supply chains, industrial output and the demand for manufactured goods. In addition, the Index reports, the manufacturing sector may also have been negatively impacted by the recent cyber-attack on Transnet, which saw operations at SA’s major ports temporarily grind to a halt. The July PMI reading suggests that these factors vastly outweighed the positive spillovers to parts of the manufacturing sector from robust SA mining sector activity amid elevated commodity prices.
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Digging deep Minerals Council South Africa CEO ROGER BAXTER weighs in on the opportunities and challenges facing the mining industry
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he South African economy has suffered a number of recent setbacks, most notably the economic disruption caused by the COVID-19 pandemic in the first quarter of 2020, and the violence, looting and arson across Gauteng and KwaZulu-Natal in July this year that disrupted exports and rattled investor confidence. The mining industry has performed well despite these disruptions. In August, SARS reported that the country’s trade surplus – a measure of the balance of trade where exports outweigh imports – had grown to a record R57.7-billion in June. Exports, driven mainly by commodities, expanded by nearly 44 per cent to R166.5-billion compared to the same period a year earlier. Preliminary indications from SARS are that it gathered R138-billion more in tax revenue for the 2021 financial year to endMarch than it had budgeted for, largely because of mining and financial services being stronger than expected. The mining sector employed nearly 5 000 people more in the first quarter of 2021 compared to the same period in pre-COVID 2019, reaching 459 407 jobs in the industry. The mining industry is also a leader in private-sector efforts to combat the COVID-19 pandemic, opening on-mine health facilities to vaccinate not only its employees but also their dependants and community members.
Beneath the surface However, beneath the rosy glow of fi nancial performance buoyed by high global prices for South Africa’s minerals, there are deep concerns around the slow pace of institutional and infrastructure reforms as well as regulatory uncertainty. Without these reforms there is little hope of addressing the unemployment crisis unfolding in South Africa, with more than 12 million people out of work. This translates to a record 44.4 per cent when the expanded definition of unemployment is used. Essentially, large numbers of school leavers are unlikely to
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find a job. The government needs to adopt a pro-growth and pro-investment strategy to address the burgeoning unemployment and social crises. The Minerals Council South Africa (MCSA) has, along with its partners in Business for South Africa, identified several of the most important structural and institutional reforms needed to revitalise investment, job creation and inclusive growth. The government needs to stabilise the fiscus. Government debt has mushroomed from 24 per cent of GDP in 2008 to 89 per cent in 2021. Key to this strategy would be no longer pouring billions of rands into state-owned enterprises. The state must show intent in cracking down on corruption and wasteful expenditure. The government must halve crime levels in three years, with an overhaul of the police, justice and security departments, and underlying structures. The government must expedite the entrance of the private sector through investment and competition into the provision of services in electricity, rail and ports. The government’s opening of 100MW of embedded power generation without a licence is a vital first step in this direction, while talk of opening terminal operations to private partners is another.
Moving commodities The MCSA and Transnet held a full-day workshop in August to discuss the difficulties the state-owned rail and port company was experiencing in moving bulk commodities like coal, chrome, iron ore and manganese to ports to take advantage of high commodity prices. The MCSA estimates that so far this year, coal exports are 20 per cent down, translating to a R10-billion loss, while iron ore exports are 7 billion tonnes below target, equating to a loss of R15-billion in the year to date. One of the
“The government needs to adopt a pro-growth and pro-investment strategy to address the burgeoning unemployment and social crises.” – Roger Baxter
FAST FACT ALL THAT GLITTERS IS NOT GOLD
Although South Africa was once the world’s largest gold producer, today it is platinum that dominates the sector – perhaps unsurprisingly, as 95 per cent of the world’s platinum (around 63 000 tonnes) is found here. Among the mineral commodities, platinum occupies 45 per cent of market capitalisation share, followed by gold at 35 per cent, iron ore at 12 per cent, diversified metals at 7 per cent. and other comprising 1 per cent. Source: Statista
biggest factors hampering exports is theft and vandalism of Transnet rail infrastructure. Transnet and the MCSA are exploring areas of cooperation to boost productivity on the export channels and address theft. The national, provincial and municipal tiers of government, along with a large and expensive civil servant base, need to be addressed and red tape reduced. Finally, the government must provide regulatory certainty, urgently resolving the question around land expropriation, which is a major deterrent for investors.
Seeking certainty We are working closely with the Department of Mineral Resources and Energy to bring certainty to the exploration and junior sector of the industry by collaborating on a plan to kick start the search for and development of mineral deposits. The MCSA is pushing hard for a new online mineral rights management system called a cadastral system, and will continue working closely with the department to replace the dysfunctional Samrad system that has proved a bottleneck in the administration of mining and prospecting rights. The MCSA will build on the high levels of collaboration and cooperation established with the department during the onset of COVID-19 in 2020, which allowed a safe and orderly return to work for the mining industry ahead of many other industries. Roger Baxter
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Protecting Africa from disease, today and tomorrow South African groups are establishing a vaccine technology transfer hub, writes JAMES FRANCIS, a step that will help Africa take charge of vaccine supplies during current and future epidemics
WHAT IS AN mRNA VACCINE? Despite what internet pundits claim, the mRNA vaccine doesn’t change DNA. It instead does what a virus would. When a virus infects your body, it uses your cells as factories to create more of its own. mRNA technology exploits this. Many other vaccines will have a piece of the actual virus, which the immune system uses to spot the invading virus (call it a medical “wanted” poster). In contrast, an mRNA vaccine uses our cells to create a harmless piece of a virus that the immune system can use for identification. It’s an incredibly advanced and powerful way to combat diseases. But it doesn’t alter your DNA. Source: Harvard University Afrigen’s facilities will host the vaccine technology transfer hub.
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frica has grappled with its share of diseases over the centuries, and continues to do so today, with tuberculosis, malaria, HIV/AIDS and diarrhoeal diseases among the leading causes of death on the continent (according to Statista). COVID-19 has nevertheless presented an unprecedented public-health crisis, exacerbated by the fact that Africa doesn’t produce enough vaccines. But yet again, Africa and the world is in the grip of a pandemic. COVID-19 is not as lethal as smallpox, but it has nonetheless
revealed our weaknesses around disease prevention. Notably, Africa doesn’t produce enough vaccines. “The rest of the world was getting vaccinated, but Africa just had no vaccines,” says Prof Petro Terblanche, MD of biotech firm Afrigen. “What happened over the last 18 months again re-emphasises the importance of having local capability for vaccines and health security on the continent.” At the rate that new diseases appear to surface, scientists such as Terblanche agree that more outbreaks like COVID-19 are likely.
“Countries inside and even outside of Africa can come to learn how to set up the vaccine production process and then to transfer the technologies to their own countries.” – Dr Michelle Mulder
Additionally, Africa has so-called forgotten diseases – malaria and TB, (delete and AIDS) for example – that could be repelled if we had a greater capacity to develop and manufacture vaccines locally.
Building a vaccine pipeline Using the pandemic as an opportunity, the World Health Organization (WHO) put out a call earlier this year for collaboration on the subject. The result is a conglomerate formed by local companies Afrigen and Biovac along with the South African Medical Research Council (SAMRC), the African Union via the Africa Centre for Disease Control and Prevention (CDC), the UN’s Medicines Patent Pool, and the WHO itself (including its COVAX initiative). The parties signed a letter of intent to establish a vaccine technology transfer hub based in Cape Town to serve the continent. ›
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Home-grown responses to diseases “The purpose of the hub is to establish a full manufacturing cycle from start to finish, so we are no longer reliant on any part of the manufacturing process from outside the
DID YOU KNOW?
The vaccine technology transfer hub will aim to create complete vaccine development and manufacturing pipelines across Africa.
THE COST OF A VACCINE Vaccine development and production are spread across several stages. The conceptualisation, development and testing are primarily in the preclinical and phase 2 stages. Then follows phase 3, to test effectiveness, after which the vaccine is submitted for regulatory approval. Due to this multistage journey, it can be tricky to calculate the ultimate cost of a vaccine. According to a 2018 paper published in medical journal The Lancet, developing a vaccine up to phase 2a can cost R114.5-million to R5-billion. The costs vary depending on the vaccine and failure rate, though indirect costs such as past licensing have a significant impact. Yet, in a push to develop a COVID-19 vaccine faster, spending was a lot higher. Oxfam estimates that $118-billion in public funding was spent to develop the Pfizer/BioNTech and Moderna vaccines. Groups such as The People’s Vaccine Alliance claim that some vaccine companies are profiteering from vaccine sales, charging as much as 24 times the production price. For example, the Alliance reports that Colombia overpaid by R5.4-billion for its shipments of the Modern and Pfizer/BioNTech vaccines.
country,” says Terblanche. She adds, however, that this is a complicated process involving at least three timelines. Foremost is trying to secure closer partnerships with established vaccine providers to fast track local manufacturing and delivery of COVID-19 vaccines. The second timeline involves partnerships with COVID-19 vaccines still in development. The third is to build an entirely indigenous development and manufacturing pipeline, which is crucial to combat any current and future diseases other than COVID-19. Even though the hub focuses on mRNA vaccines, it will hopefully encourage the
The vaccine mechanism was discovered in the 1700s when doctors noted milkmaids who had contracted cowpox didn’t suffer as much when they caught smallpox. But inoculation was already practised by the Chinese as early as 1 000CE and may go as far back as 200BCE. Source: historyofvaccines.org
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“South Africa should be proud that it has vaccine capabilities.” – Dr Morena Makhoana
establishment of pipelines for other types of vaccines. All the interviewees stress that vaccine technologies are very different, and the hub isn’t aimed at other types. But it can nonetheless catalyse ways to include them, while widening the opportunities to harness mRNA technology against other diseases. “We already have the capability in South Africa to develop vaccine candidates based on other platforms,” says Mulder, “so it will certainly not be restricted to COVID. It’s the focus for now, but the intention is to use that capacity for other diseases.” Makhoana reflects similar sentiments: “Biovac is the first African company to be involved in mRNA manufacture on the continent. This can only bode well where this technology platform is concerned.”
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“The hub is a central point through which a number of different organisations and countries can build their vaccine capacity,” explains Dr Michelle Mulder, the SAMRC’s executive director of the Grants, Innovation and Product Development Unit. “Countries inside and even outside of Africa can come to learn how to set up the vaccine production process and then to transfer the technologies to their own countries. It’s more of a training hub.” The hub operates around several Dr Michelle Mulder objectives, but its overarching goals are to provide access to vaccine development and production expertise to different countries, and to connect the dots of a disparate value chain. South Africa is a leader in vaccine research and it has manufacturing capacity, but vaccines are very complex and need a unified approach. Currently, vaccine production in Africa is mostly “fill finish”, meaning the production cycle is completed here, but the development happens elsewhere. “South Africa should be proud that it has vaccine capabilities,” says Dr Morena Makhoana, CEO of Biovac, which locally manufactures Pfizer’s COVID-19 vaccine. “Many Dr Morena Makhoana middle-income countries do not have the capability that we have. What we will endeavour to do is ensure that at some point in the next 5-10 years that we have drug substance manufacture of ‘raw material’. This requires continued support in local R&D efforts.”
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SUPPLY CHAIN SUPPORT FOR SMALL BUSINESSES SAPICS has reinforced its commitment to the development of small, medium and micro enterprises with a training and support programme geared towards building these businesses’ skills in supply chain management management best practices,” says Chanti Wilson, SAPICS director and chairperson of the SAPICS SMME task group. “Small businesses have so many responsibilities and things to consider that the critical supply chain function is often overlooked. But it can make or break the business. Supply chain management is increasingly important in today’s complex and volatile business environment,” she explains. Chanti Wilson
In addition to contributing to the growth, success and sustainability of small businesses through the provision of education and training, SAPICS aims to be the conduit for big corporates to support SMMEs and participate in the development of their suppliers. SAPICS’s SMME Programme includes accredited training for entrepreneurs covering all aspects of business management with a strong focus on operations management. Among the certifications offered are: • warehouse control • inventory replenishment principles • operational planning and scheduling • lean manufacturing principles • supply chain and materials management. The programme also includes webinars covering supply chain management, demand planning and sales and operations planning. Case studies and success stories are shared, and the programme offers insights from business leaders and supply chain experts. A SAPICS SMME Support Line enables small business owners to get advice and assistance.
EDUCATION AND SUPPORT
SAPICS has a dedicated team and a network of authorised education providers that work with SMMEs and the large corporates, which the SMMEs supply, to offer accredited skills development opportunities that will deliver mutual benefits and enable job creation. ➔ Scan this QR code to go directly to the SAPICS website.
“A major contributor to the growth and development of SMMEs is an understanding of operations and supply chain management best practices.” –Chanti Wilson 18
For more information: www.sapics.org
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hen it comes to reaping the benefits of supply chain optimisation – including efficiency enhancements and cost savings – small, medium and micro enterprises (SMMEs) are being left behind because they lack the necessary skills and resources, states SAPICS, The Professional Body for Supply Chain Management. “SMMEs have a crucial role to play in the national economy as major sources of employment and drivers of inclusive economic growth. However, they are not adequately supported and their growth is hampered by a lack of capital and limited access to skills development. A major contributor to the growth and development of SMMEs is an understanding of operations and supply chain
The SAPICS community offers an abundance of networking opportunities.
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AGRICULT URE
To feed the future we need to work on self-sufficiency and resilience – Nambu local team working through its black fly larvae process
A fertile market South Africa consumes just one per cent of the world’s fertiliser but demand is growing, writes LISA WITEPSKI
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round the world demand for fertiliser is on the rise. This is driven not just by population growth but also changes in diet: more consumption of meat requires more feed, which in turn requires more fertiliser. While South Africa broadly follows this trend, the country also handles a large portion of the burgeoning amount of fertiliser needed by the SADC region. At the same time, says Lowell Scarr, owner and managing director of organic fertiliser company Nambu, the country is seeing increased planting of crops like cotton and soya in areas where production had previously ceased due to unfavourable production and market conditions. “Additional fertilisers are being purchased to supply this need,” he explains. This is taking place at a time when fertiliser stocks the world over have been compromised by shutdowns and logistics challenges flowing from the COVID-19 pandemic, pushing prices upward. Moreover, some ingredient-producing countries such as Iran and Belarus have had sanctions placed against them, further reducing supply.
IMAGES: SUPPLIED
FAST FACT
South African fertiliser consumption in 2018 (latest data) was 72.8kg per hectare. Source: Knoema
South Africa’s supply What does this mean for South Africa? At present, production is centred around Gauteng, eThekwini and the Cape Metro, with Kynoch, Omnia, Haifa, Yara and Foskor dominating the sector. However, the majority of South Africa’s fertiliser needs are addressed through imports. This is because although the country is able to produce some of the required ingredients, the vast majority – including urea, potassium and phosphate – need to be accessed abroad. Because of this, we’re forced to Lowell buy at higher prices and sell on, Scarr using the higher import costs as a base. This means that higher prices are passed on to farmers. “The relatively small size of South Africa’s agricultural sector means that we’ve had little fertiliser production infrastructure in place, while the high cost of developing new production plants serves to discourage local investment,” adds Scarr. Other factors, such as political instability and the availability of raw materials, have also played a role, with the result that South Africa typically imports fertilisers, “resulting in a high share of logistics costs as part of the overall retail price”.
“The high cost of developing new production plants serves to discourage local investment.” – Lowell Scarr
Fly larvae in a Nambu pupation cage
BSF fertiliser/soil amendment
At present this situation seems unlikely to change, says Scarr, as production plants are expensive to build and take several years to commission.
The what and the how Fertiliser is typically classified as either inorganic or organic. Inorganic fertilisers are synthetically produced, and tend to be more rapid acting. Organic fertilisers are fertilisers found in a natural state, such as manure. Although more slow acting, Scarr says that with long-term use they contribute to sound soil biology and resilience. So which should farmers choose? Both have advantages and disadvantages. Although the use of inorganic fertilisers has been contested, recent research published in Sage Journals overturned the notion that these are an inferior, imbalanced source of nutrients, indicating that advanced formulations mean inorganic fertilisers can be adjusted to suit all plant needs. That’s as organic fertilisers have been shown to make a significant contribution to soil health. According to Scarr, South Africa is largely dependent on rapid-acting inorganic fertiliser. Although he argues that green ammonia – which releases less carbon dioxide during the production process – would improve sustainability, other industry players maintain that green ammonia is not able to meet current market needs, and is therefore not a viable option. Fertiliser also has a key role to play in sustainability: applying the right amount of fertiliser in the right place at the right time and in the right form not only improves yield, but can also reduce input costs and limit the negative effects of over-applying. The key lies in obtaining sound agronomic advice, which may also reveal whether a nitrogen, phosphorus or potassium fertiliser is best suited to the farmer’s needs.
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SAFETY
NEW REGULATIONS AND STANDARDS The principle of SHEQ management is an old one, but new standards and the onset of digitalisation are shaking things up, writes RODNEY WEIDEMANN
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ince the vast majority of accidents in the workplace are caused by unsafe acts by employees, health and safety regulations are vital for any company. Your employees’ health and safety should always be at the forefront of your decisionmaking, and ensuring compliance with safety, health, environment and quality (SHEQ) rules is thus crucial. According to Joep Joubert, group manager of BBF SHEQ Services, SHEQ policy is indeed the guiding document in the organisation to direct the efforts in this regard. “All policies, if they are to meet the requirements of the ISO Management Systems Standards, must address the provision for a safe and healthy work environment, protection against environmental impact and a commitment to quality. A SHEQ policy should establish a framework to ensure legal compliance and within which objectives are formulated.” Joubert says the policy should also indicate a commitment to eliminating risks, addressing environmental aspects and not compromising on quality. “Furthermore, the policy should commit the organisation to continual improvement, consultation and communication.” Ingrid Osborne, co-founder and CEO of Saryx Engineering Group, explains that with old, paper-based SHEQ files, complete compliance has always been extremely difficult. Ingrid Osborne It was for this reason that her company developed its own online health, safety, environment and compliance tool to ensure better compliance. “Having an online tool makes the auditing process much simpler, which is vital, since auditing is critical to ensure effective SHEQ. Auditors help companies to identify where they are non-compliant, allowing them to close these gaps. Such a tool also enables you to measure your progress around what corrective measures are put in place. ›
DID YOU KNOW?
SHEQ, which is the acronym for Safety, Health, Environment and Quality, simply refers to the integration of the 3 basic management systems – ISO 14001, OHSAS 18001 (now ISO 45001) and ISO 9001. Source: wwise.co.za
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SAFETY
“There is no question in my mind that if you want a truly successful SHEQ solution, it must be a digital one.” – Ingrid Osborne “By utilising technology to your advantage, you can also significantly simplify the auditing process. An online tool makes updates, changes and audits much easier to undertake.”
SHEQ training Proper SHEQ training is a must, says Osborne, pointing out that by going digital, companies can make it easier for employees to access training when it suits them best. Online training can be scheduled by the employee when they have spare time, and now, thanks to remote work, they can even choose to do it outside of office hours. Joubert agrees that training is one of the critical elements of any management plan to establish a safe, healthy, environmentally sound and quality-orientated workplace. “Firstly, you cannot expect anyone to do the job correctly if they haven’t been properly trained to do it. Secondly, employees need to be trained in the hazards and risks in their environment and, should an incident take place, be in a position to deal with the situation. Thirdly, training is often a legal requirement, such as hazardous chemical agent training or ergonomics training. It is also a strong requirement for ISO system certification. “The final desired outcome should be that the training and post-training supervision actually lead to changes in behaviours and a safer, healthier, more environmentally friendly workplace, which ultimately produces better quality products,” adds Joubert. Osborne reiterates that, as we’re living through the Fourth Industrial Revolution, digital is the future. “There is no question in my mind that if you want a truly successful SHEQ solution, it simply must be a digital one – if only because, operationally, it makes you much more efficient, which in turn guarantees better compliance.” As for Joubert, he says that the focus of SHEQ management is driven by compliance, mostly due to the legislative requirements that must be met. “However, I believe that in order to truly establish a strong SHEQ culture, the focus should be moved away from compliance and compulsion. Instead, the focus should be on care and instilling the desire to work safely for the right reasons. This entails not only a change in behaviour, but also a change in attitude,” he concludes.
• ISO 9000 Family – Quality Management. The ISO 9000 family is the world’s best-known quality management standard for companies and organisations of any size. • ISO 45000 Family – Occupational Health and Safety. Reduce workplace risks and make sure that everyone gets home safely with ISO 45001. • ISO 31000 – Risk Management. Manage the risks that could jeopardise your company’s performance with this ISO standard. Source: https://www.iso.org/popular-standards.html
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IMAGES: ISTOCKPHOTO.COM, SUPPLIED
IMPORTANT ISO STANDARDS
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T E X T IL ES
Banking on hemp F
ollowing the Constitutional Court’s landmark 2018 ruling decriminalising private cannabis use, the Cannabis for Private Purposes Bill was tabled in parliament last year, while the Department of Agriculture, Land Reform and Rural Development this year released its draft cannabis master plan. While much of the focus may seem to be on personal use of cannabis for psychoactive purposes, the plants have a host of other industrial and manufacturing uses. According to agricultural law experts Cliffe Dekker Hofmeyr (CDH), government is clearly eager to kick-start economic growth in South Africa, and is taking a pragmatic approach in order to achieve this. “Department of Trade, Industry and Competition estimates that the domestic cannabis economy could be worth around R28-billion by 2024. However, to get there, more legislative changes are needed to facilitate the commercialisation of cannabis across the board.” CDH explains that government’s master plan makes it clear that a new policy and legislative framework for commercialisation of cannabis is vital. After all, the biggest challenge is that there is no law that allows for it. “Government needs to maintain the delicate balance between the need to protect its citizenry against potentially harmful substances, and the need to promote legitimate economic activity.” Hemp – a cannabis cultivar low in delta-9-tetrahydrocannabinol (the main psychoactive ingredient in marijuana, commonly known as THC) – has 2 500 possible applications and counting. For hemp entrepreneurs, this and the changing legislation is welcomed news. Following the ground-breaking Constitutional Court ruling in 2018 legalising the private growing and use of cannabis, there is new legislation set to come into effect in October 2021. This will allow the commercial growing of a variety of hemp that is low in THC. Those with growing permits, such as local community-owned company Siyabambisana,
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are the symbols of a new era for the industry. In partnership with the Eastern Cape Rural Development Agency, Siyabambisana will begin planting 1 000 hectares of industrial cannabis/hemp in the Eastern Cape. Furthermore, Siyabambisana will be working with local communities to assess the fibre and biomass qualities of traditional landrace varieties to add value to the other crops growing in the area. There is also a proposal for special dispensation from the Eastern Cape government to view this as a pilot project, should legislation not take effect soon.
Getting on the train Another initiative is Quattro-Canna’s acquisition of an exclusive licence to manufacture and distribute the Canadian-made HempTrain decorticator plant in South Africa, which could be a game-changer for the local industry. The multimillion-rand machine processes hemp bales into bast fibre, hurd and green microfibre. QuattroCanna CEO Sizwe Nkukwana is excited to be part of creating Sizwe what he calls the hemp Nkukwana industry ecosystem. Raised in Butterworth, Nkukwana envisions the area where he grew up as becoming Africa’s “hemp hub”, much like Singapore is a key trading and innovation hub. “The processing of hemp through the HempTrain takes it up a notch, in that we’re no longer simple growers, but beneficiators. Moreover, we can promote local economic growth and job creation because we no longer have to import expensive hemp from Europe, or compete with China. The trick now is getting local manufacturers and industrialists on board.” The company has also signed a memorandum of understanding with the Walter Sisulu University of Technology in Mthatha to foster research and innovation in the hemp manufacturing field.
FAST FACT
The global industrial hemp market is expected to grow to R223-billion by 2028, driven by demand from the cosmetics, animal feed, automotive, textiles, construction, and food and beverage industries. Source: Reports and Data
Nkukwana notes that superior-quality hemp fibre, processed specifically by the HempTrain, can be used as a construction material instead of concrete reinforcement. It may also be used for heat and sound insulation. Hurd is used as potting mix, to make paper and as a hydroponic retention aid. Green microfibre is used in skincare products, pet food supplementation and to repair damaged soil.
A companion plant Tony Budden, Executive Director of Hemporium, says that cannabis has been a companion plant for humans for at least 10 000 years. “Its uses are innumerable, but the industry has been sidelined due to outdated and ill-informed legislation.” Now with the opportunity to beneficiate hemp, Budden explains that supplying the processed material to the local market is imperative. “Ignoring the local market to provide for an export base will be a wasted opportunity. Overseas hemp processors, such as those based in Eastern Europe and China, have established operations and are firmly in the export market. We need to think differently here.” In the meantime, Quattro-Canna is partnering with Pondoland chiefs to cultivate 3 000 hectares of land over the next five years, processing more than 16 000 tonnes of biomass. The micro-farmers will be supplying the raw material for processing, and will own a portion of the cooperative set up for the operation. “Hemp farming has the possibility to change the Eastern Cape,” says Nkukwana.
“The trick now is getting local manufacturers and industrialists on board.” – Sizwe Nkukwana
Tony Budden
IMAGES: ISTOCKPHOTO.COM, SUPPLIED
Used for a whole range of applications, hemp grows easily in South African soil, giving us a key opportunity to cash in on a growing market, writes BETH AMATO
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A DV ER T ORI A L S A PIC S
SUPPLY CHAIN MANAGEMENT IS CRITICAL AMID MOUNTING CHALLENGES Supply chain disruptions are widely regarded as one of the biggest risks facing manufacturers. This calls for robust risk management and detailed planning
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anufacturers encounter disruptions almost daily in a testing business environment that is more complex, volatile and customer-focused than ever before. Amid the mounting challenges, an agile supply chain is critical, claims, SAPICS (The Professional Body for Supply Chain Management). In a recent Gartner survey, 76 per cent of supply chain executives indicated that today, compared to three years ago, their company is facing more frequent disruptions in their supply chain.
THE CHALLENGES Products are varied and their production more complicated, and manufacturers have to manage numerous suppliers contributing to the development, production and distribution of products. Consumers’ outlook and behaviour has changed, demanding fast, flexible order fulfilment, anytime, anywhere. “This can make or break a manufacturing business,” says SAPICS president MJ Schoemaker. “In addition, the COVID-19 crisis has brought unprecedented supply chain disruptions, exposing the vulnerabilities in many organisations’ manufacturing, production strategies and their supply chains. Among others, the pandemic resulted in shortages of computer chips, protective masks for healthcare workers and critical pharmaceutical materials
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for active ingredients in medicines. Certain pharmaceutical packaging such as tubes and ampoules were also in short supply. “The pandemic has highlighted the importance of supply chain risk management planning. New challenges are emerging almost daily, like the COVID-induced global supply chain crisis for container shipping, and now, the power crisis across Asia and Europe, which is expected to result in supply shortages ranging from textiles and electronics to machine parts. While supply chain risk control has been spoken about for some time, and MJ Schoemaker SAPICS has provided numerous learning opportunities for supply chain professionals, until the pandemic, only a handful of industries really embraced supply chain risk management. That is changing.”
THE SOLUTIONS “There is a growing recognition of the need for all businesses to build robust monitoring systems to evaluate and assess all types of risk,” Schoemaker says. “These assessments must include the detailed mapping of supply chains and suppliers. It is now clear to many organisations that they cannot rely on tier one suppliers to control and manage their risk and ensure stability from tier two, three and four suppliers. To mitigate the risk of supply chain disruptions, businesses’ strategies must include an alternative supplier network and flexible batch
sizes. Cost can no longer be the overriding factor in setting up supply chains, and geographical risk must also be taken into account. “More organisations understand the importance of supply chain visibility and exception management in their end-to-end supply chain; insight that they can trust. There is greater emphasis on identifying the right partners; building win-win relationships with all suppliers; and on collaborative planning and execution with supply chain partners and service providers. This is how organisations will mitigate their risks and weather any future chaotic supply chain disruptions.”
SUPPORT FOR MANUFACTURERS Schoemaker says that the growing number of manufacturers that are members of SAPICS is a testament to the burgeoning recognition of the vital role that supply chain management plays in the manufacturing industry. “Since its foundation in 1966, SAPICS has become the leading provider of knowledge in supply chain management, production and operations in Southern Africa. The training and education provided by SAPICS is geared towards addressing the specific needs of members and advancing the profession,” she explains. The annual SAPICS Conference, established 43 years ago, is the leading education, knowledge-sharing and networking event in Africa for supply chain professionals. The 2022 SAPICS Conference is planned for 12–15 June 2022, at Century City, Cape Town.
Scan this QR code to go directly to the SAPICS website.
For more information: www.sapics.org
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RENE WA BL E ENERGY
Can South Africa reach its
green power goals? South Africa needs to transition to a net-zero emissions economy by 2050 to limit the damage of climate and ensure a sustainable manufacturing sector. By DELIA DU TOIT
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s one of the countries at greatest physical risk from climate change, South Africa needs to transition to a net-zero emissions economy by 2050. That’s according to Decarbonising South Africa’s Power System, a report by National Business Initiative (NBI), Business Unity South Africa and Boston Consulting Group, published in August this year. “South Africa is already a semi-arid country and a global average temperature increase of 1.5°C – the limit at which temperature increase needs to be stabilised, according to the Intergovernmental Panel on Climate Change – translates to an average 3°C increase for southern Africa,” says the report. And yet, South Africa ranks in the top 20 most carbon-intensive global economies on an emissions per gross domestic product (GDP) basis, and in the top five among countries with GDP in excess of $100-billion per annum, according to the report. If the country doesn’t reach the net-zero goal by 2050, the report elaborates, the country
could face severe challenges in irrigating and growing crops, keeping cattle healthy, and preserving its rich biodiversity – not to mention mounting trade pressure as trading partners implement their low-carbon commitments. But given the current state of the country’s grid and the slow transition to renewable energy to date, is this goal feasible, or are we heading for disaster?
Stop-start Soon after it began in 2011, South Africa’s renewable power programme became the fastest-growing on the continent, according to a report by ratings agency Moody’s. That was until Eskom stopped signing new contracts in 2015, saying that the country’s grid didn’t need additional capacity. Financing for renewables slowed to a trickle. The Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), developed to encourage private investment to help further the renewable energy sector in South Africa, only came back on track in 2019.
“You can build as much as you want, but if you can’t put it into the already-congested grid, it defeats the purpose.” – Nelisiwe Magubane
Nelisiwe Magubane
However, the REIPPPP isn’t being utilised to its full potential, despite South Africa’s wind and solar resources being among the best in the world, says Nelisiwe Magubane, chairperson at Matleng Energy Solutions. “When the REIPPP restarted, most developments preferred to go to areas where they could take advantage of such resources on vast amounts of open land, such as the Northern Cape and Western Cape. But the big challenge, especially in these outlying areas, is getting onto the transmission network. ›
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RENE WA BL E ENERGY
COUNTING THE COST OF POWER GENERATION The levelised cost of energy is used to calculate the cost of a generating plant over its lifetime, whether nuclear, coal, wind or solar, says Heino van Jaarsveldt of Kwantu Professional Services. “It takes into account factors such as the total cost of a plant, the capital required to build it, its running costs, and how much energy it produces (or will produce), giving you a cent per kilowatt-hour figure. Other factors such as the environmental impact and emissions penalties should also be considered.” According to the National Business Initiative report Decarbonising South Africa’s Power System, a wind- and solar-dominant energy system will be the least expensive at 100c/kWh, while a coal and CCUS (carbon capture, utilisation and storage, an emissions reduction technology) system clocks in at 129c/kWh and a nuclear-dominant system at 116c/kWh.
“The broad policies and goals are great, but there are other policies obstructing their implementation at the lower levels. The vision is there, but the road hasn’t yet been cleared to achieve it.” – Petrus Kheswa “You can build as much as you want, but if you can’t put it into the already-congested grid, it defeats the purpose. So, until the development of the transmission grid is accelerated, we’ll see slow renewable energy development in the country.” Petrus Kheswa, chief executive officer of Pendo Energy Solutions, says that although the country has some of the best national renewable energy policies around, they’re not being leveraged. “The broad policies and goals are great, but there are other policies obstructing their implementation at the lower levels. The vision is there, but the road hasn’t yet been cleared to achieve it.” Heino van Jaarsveldt, managing director at Kwantu Professional Services, agrees. “Though there are more policy changes needed, we are now finally seeing it happening. The recent policy change increasing embedded generation from 10MW to 100MW means a significant shift towards power generation from the private sector. Policy is certainly more positive than negative at the moment.”
Practicalities and power The NBI report says that a renewables-dominated power system is the most cost-competitive system for South Africa – once it’s up and running. “Transitioning South Africa’s power system to net-zero would require
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and plant will depend on several factors such as its location, availability of resources, generation capacity and more. The work needs to start to know what needs to happen next, and whether we can reach the 2050 goal.”
Blame game Magubane is hopeful for the future of renewables in South Africa. “When I listen to the new Eskom CE, I’m heartened that the focus is finally in the right places. Despite load shedding, I don’t think the average person has an appreciation of how badly the current energy fleet is performing – and I don’t see it improving. Even though a lot of money will have to be expended in the transition to renewables, it really is the only answer. We can’t keep spending money on our current broken jalopy; it’s time to trade it in for a new model.” Van Jaarsveldt agrees. “I do believe the 2050 target is possible, but possible and easy are not the same thing. This won’t just come down to the power system; it will require a holistic approach where the commercial sector becomes much more energy efficient and other markets, such as electric vehicles, increase. Public-private partnerships will be key.” The boxing match over the country’s energy woes needs to stop, says Magubane. “Everyone, whether government or Eskom, commercial or private, is currently boxing and then going back to their respective corners. It can’t go on. We are at a point where we need to stop the blame game and work together to solve the energy problems in this country.”
FAST FACT
South Africa’s world-class renewable energy resources should allow a highly competitive production cost by 2030, with the potential to become one of the largest global exporters of green hydrogen and green fuels. Source: Decarbonising South Africa’s Power System, National Business Initiative
IMAGES: ISTOCKPHOTO.COM, SUPPLIED
Petrus Kheswa
the deployment of 150GW wind and solar capacity by 2050 – almost four times the total capacity of its coal power plants today – and an investment of R3-trillion within the next 30 years to expand and upgrade the transmission and distribution infrastructure. It would also need to speed up deployment of renewable energy capacity to roughly 10 times the current pace of new-build.” This investment, believes Magubane, is the biggest challenge the country will face in its transition to a renewable power system. “Given the country’s economic struggles, there are unfortunately many other challenges, with poverty at the top of the list, that trump climate change – at least for now. The United Nations Climate Change Conference (to be held end October) will be crucial for us to attract much-needed foreign investment for our renewables goals.” This investment will largely have to go towards upgrading distribution and transmission networks, adds Kheswa, creating storage capacity, and upgrading systems at a municipal level. From a technical standpoint at least, things look good, says van Jaarsveldt. “We certainly have the necessary experts to make it work. We also already have decent natural gas infrastructure, which will form part of the basket of new tech required to reach the 2050 goal and will be key in managing seasonal variability of other natural resources such as solar power. But again, policy hampers the process. “Because renewable energy is such a specialised system, there is no one-size-fits-all solution. The requirements for each project
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