As an industry-based organisation, the Southern African Institute of Steel Construction (SAISC) and its members are widely respected for their professionalism, ethics and technology but, looking at the broad picture, they are currently under considerable pressure on several fronts including the current market trends, pricing, and design standards.
Dr Hennie de Clercq, the outgoing chief executive officer (CEO) of the SAISC, made some interesting comments recently on South Africa’s declining market share on the continent, outside our borders. In the past the rest of Africa was seen as a happy hunting ground for the local steelwork industry, but this is no longer the case, it seems.
De Clercq says the industry was on a high in the run-up to the 2010 FIFA Soccer World Cup held in this country, with new stadia and major renovations to existing arenas, meaning that the local industry was hard pressed to meet the huge demand, and thereby took their eyes off the ball as far as the rest of Africa was concerned.
“So while we were inwardly focused, companies from Europe, South America and Asia appeared on our doorstep and established themselves as suppliers to this market,” he says.
The market for the African continent is about two- to three-million tons of steel used for structural applications per year. Deducting the South African and Northern African parts would still leave at least a million tons per year – much more than what is currently consumed in South Africa.
“It is interesting to observe the trends that have been noted worldwide in the
consumption of steel. When a country is in an underdeveloped state, little steel is used, less than 100kg per person per year (the world average is about 200kg),” says De Clercq.
“During the development phase of a country the intensity of steel use increases rapidly, as one can see in China, where the consumption per person has shot up to about 400kg. As an economy matures, steel intensity decreases again, as exemplified by the USA (300kg) and the UK (170kg).
“Exceptions are countries like South Korea that have developed very steel-intensive industries like shipbuilding, and consume more than 1 100kg per person. South Africa lies at approximately 110kg per person per year, which is an indication of the fact that a large part of the population is not yet fully integrated into the economy.
“What is very disconcerting, is that the total consumption of steel in South Africa has been stuck in the four- to five-million tons per annum range for some 40 years, even as the population grew, so our consumption per person has actually diminished. Africa’s consumption of steel lies in the 10 to 20kg per person range. This implies that the continent still has a long way to go in terms of development.”
De Clercq sees these statistics as a huge scope for growth. As African economies develop with more people entering the middle-class and diversification of industries, more steel will be consumed and from such a low base the impact will be huge. Moreover, during earlier development phases structural steel tends to be quite prominent.
“It is quite clear that for South Africa the African steel construction industry is where our future lies. I also believe that we, as Africans, can bring something special along as we participate in the developing economy of Africa: We can create a partnership that will leave both us and the countries we deal with stronger and better equipped to handle our own development.”
Pricing: “Best country sourcing” hurts SA industry
The large quantities of fabricated structural steel coming into South Africa from China, Saudi Arabia, India, Turkey, Thailand and others continue to have a significant impact on the South African economy. This is the opinion of Kobus de Beer, the SAISC’s industry development director.
De Beer says many of the major South African client companies have introduced a policy known as “best country sourcing”, which means they buy from the cheapest international supplier which, in many cases, turns out to be China.
“These companies say they simply cannot be competitive with other global players if they do not continue with this practice. Many of them have gone to the extent of setting up purchasing offices in China and other countries, to take advantage of what they call a ‘massive’ price advantage,” he says.
But he says this is a misperception, because the right comparisons haven’t been made, nor the full hidden, associated costs of this practice. For example, China typically needs full and final drawings to proceed, they tend to not process variations very effectively and, even if the work is done well, the costs are high.
Also, many buyers overlook the 15% import duty payable on imports of fabricated structural steel on entry into South Africa, and a number of instances have been found where importers use fraudulent codes to try to avoid paying these duties.
De Beer says almost every major company buying from these foreign sources needs a full-time resident quality assurance (QA) team on the premises of their suppliers and often a second team to fix the poor quality of the work. Technical communications are also a very real problem, and major quality and scheduling issues are not uncommon.
He adds that while it is true that delivery times are generally quick from these Eastern countries, he is convinced that delivery from South African fabricators are just as quick, particularly when taking into account the six weeks shipping time needed to bring foreign supplies. Most buyers also fail to account for the time and effort needed to repair paint and other damage before steel structures can be erected.
“Our quality and speed of delivery is on par with anything in the world and, taking into account the extraneous costs when buying from the East, we are also much closer to being competitive from a price perspective. Also, the weakening rand has made South African prices even more competitive lately,” De Beer says.
“The fact that South Africans have managed to export 75 000 tons and more of structural steel per year for the past ten years does indicate a reasonable degree of competitiveness in spite of the many domestic constraints, such as relatively low volumes and the inability to specialise. To give a perspective on this number: It comprises about 15% of the total South African capacity. A medium-sized South African structural steel fabricator will employ some 210 people to produce 500 tons a month or 6 000 tons a year,” says De Beer.
He says it’s time the industry take a holistic view and understand that, given South Africa’s relative overall competitiveness, buying fabricated steel locally is not only beneficial to them in terms of the overall efficiency of trade, but it is also good for the country’s economy as a whole.
“A lot of government and private sector effort goes into creating new jobs and incentivising productivity improvements at South African companies. Against this background it is totally counter‐productive to allow existing decent jobs of well-trained people to be wiped out while big buyers pay lip service to social compacts and local industry developments, while continuing to import fabricated steel and other items.”
Eurocode for steel design: yea or nay?
Earlier this year the SAISC conducted a survey in an effort to decide whether the industry should go to the Eurocode for the design of structural steelwork, which resulted in 49% for and 47% against the decision.
Among those who voted for the Eurocode were 33% academics, 59% consultants and 38% EPCM people. A total of 59% of those who support the Eurocode had at least some familiarity with it, but 41% had none. Among those who still use pre-SANS 10162-1 codes, 55% were in favour of the Eurocode.
De Clercq is largely against changing, saying that the skills situation in the country is such that South Africa cannot afford to introduce a new, complex code. It will not be generally accepted and implemented before almost the entire corps of currently active engineers has been replaced – some 20 years.
“CEN will not allow us to do anything with the Eurocode other than to adopt it exactly as any member of the EU would do – adopt the whole code without any change, by means of the specified national annexes. The complete set of standards is hugely comprehensive, complex and very expensive, with a high degree of inter-reference. Some Eurocodes are unacceptable to us. EN 1993-1-3, dealing with cold-formed sections, is an example. We have recently adopted, as SANS 10162-2, the Australian standard AS/NZS 4600, which is based on the North American standard (and is thus in effect a sister code of SANS 10162-1), because our light steel framing industry has very close Australian ties. Moving to another code would be unconscionable. Furthermore, there seems to be no international trend towards the Eurocode outside Europe,” he says.
“Taking note of all of the above, I would like to recommend the following: Let us resolve to put the Eurocode firmly on the back burner, until it becomes clear that it (or another set of codes) is clearly the right thing for the country.”
“In the meantime, anybody is free to study the Eurocode and to use it for designing structures, even in South Africa if necessary. It is surely a good set of reference documents. But let us, until a groundswell for change develops, not live in an atmosphere where we act as though our code is on the way out and do such things as to base the education of students on the Eurocode,” De Clercq concludes.