It is no secret that power outages as a result of mismanagement at Eskom have an effect on all our lives, both personally and in business.
The manufacturing sector tends to be particularly hard hit by this, since virtually every aspect of all operations requires electrical power.
This is certainly the case for the electronics industry, so we asked some of the local players how the week or so of load shedding in February this year (which reached Stage 4) affected them, as well as their forecasts for the future.
Dataweek: How much disruption did the latest week of load shedding cause to your operations?
Rob Steltman, owner of Barracuda Holdings: Even though we have generator backup for our factory units, load shedding is incredibly disruptive. Working 24/7 in some areas requires managers and maintenance to be on site outside of normal hours for a power changeover.
Also, there is downtime as the lines have to be stopped completely, turned off, changed over to generator power, then restarted again for every load shedding period. This causes a minimum of 30 to 40 minutes of downtime on the entire SMD plant, sometimes twice a day.
Schedules have not always been adhered to and when outages come as a surprise, the disruption is huge and products can be damaged together with equipment.
Hosia Matlou, director at Phahama Systems Development: At some point we knew that this snake was going to raise its ugly head again but we didn’t know exactly when. It presented a lot of challenges in terms of production, so we have been affected to an extent.
We found ourselves having to work extended hours to try and catch up with the lost time but that was never possible with the same staff complement. We do have generators but they can only power up so many machines, and in an environment where our business mostly requires three-phase power there was only so much we could do.
Load shedding just added to the misery that the industry and the economy at large is facing, making a bad situation even worse. We found ourselves having to deal with crisis after crisis and customers are not so forgiving. It happened at the wrong time when the industry was just coming out of the December holidays and we were trying to pick up the pieces of the past year which was very, very quiet. It killed the momentum and affected our cash flow badly – it made the working hours short but we still had to pay full salaries to our employees.
The load shedding really set us back almost a whole month and customer confidence came crumbling down. The China song started to reverberate even louder. It just stretched everything – the driver took longer than usual to collect and deliver because of the dead traffic lights; traffic affected production as well.
It was a bad, rolling wave that affected one thing after the other. Let’s hope Eskom fixes and manages the load shedding better.
Ushir Mehta, director at Production Logix: Fortunately, being situated in an industrial area, we were not affected too badly with the exception of the day we went to Stage 4 load shedding. Even with this, we have a generator that can run the entire plant so the impact is not too severe.
The major problem we have with load shedding and the power supply in general is the impact it has on our equipment. Quick dips and spikes take their toll on sensitive equipment which is costly to repair or replace. Where we can we have protected machinery with surge protection but this does not guarantee any safety from high-frequency spikes.
Daniel Dock, managing director of TraX Interconnect: How ironic that just as I started writing this we started with Stage 2 load shedding and I am writing this with the generator rumbling in the background.
The disruption is pretty bad for us, despite how well we have planned for it. Last year we installed a 120 kVA UPS (uninterrupted power supply) to keep the computer network and critical machines running. Almost every machine in our process is controlled by either a PLC or a computer.
One cannot, however, run inductive loads off a UPS, so all the automated cranes on our plating lines need to be placed on hold before load shedding is scheduled to start, and plating can only resume once our generator is safely up and running.
We have a large 500 kVA generator which is capable of running approximately half of our factory, so while we are load shedding we need to turn off lines selectively so as not to overload the generator; this is a manual process since the work can be in different places each time load shedding occurs.
We are also not able to risk having multilayer boards in our vacuum press when load shedding is looming, due to the risk of delamination if the power is cut during a critical part of the pressing cycle.
Dataweek: Are you worried about further power disruptions and how are you planning to deal with them?
Rob Steltman: This is of great concern to us. Due to our high power requirements, alternatives other than generators are not really an option for us. It is complex and costly enough investing in equipment to keep up with technology, without now having to consider basic services such as power and water as well.
As for water, since we are based in the Western Cape, we were forced to install an independent water supply to the factory from a borehole during the drought last year and the looming Day Zero.
Hosia Matlou: The prospect is there and it’s always at the back of every businessman’s mind. Honestly I don’t know how to deal with it – as I’m writing this comment now I’m without power. The fact that the power grid is so unreliable makes me wonder how serious the government is in dealing with this power crisis.
Tshwane has become one of the worst run municipalities and I don’t care what the stats are saying. Every municipality must look after its industrial hub. I have seen services in Tshwane declining every day but the costs of staying and running your small business diminishing daily.
What government preaches and what it does are two different matters. We are tired of hanging in there!
Ushir Mehta: Like most other businesses, this is always a worry. We fortunately have a generator that is more than capable of powering our site, however the cost impact of running this for a sustained period of time is prohibitive. We don’t currently have any need to deal with the disruptions as we are already prepared. We are considering modifications to the system to help us with a seamless transition from mains to generator supply.
Daniel Dock: We have already done what we can within our financial limitations – buying another 500 kVA generator is not feasible for us. As it is, we already plan our production shifts around the load shedding schedule. The problem is when, like today, it escalates from Stage 1 to Stage 2, your shifts are messed up.
For us the biggest worry is the impact load shedding has on our customers and business confidence in general. We are already under duress as far as our input costs are concerned, and one is not able to pass the cost of running diesel engines or paying your staff overtime to catch up on to your customers.
Dataweek: Are you confident about business conditions going forward?
Rob Steltman: We have concerns based on policy turning to reality. Our hope lies in the resilience of South African companies (our customers) having navigated very turbulent waters over the past decade and coming out on top.
Finding niche markets and being prepared to do what others feel is not worth the effort, has allowed us to grow during this period. On a personal note, I feel relieved that there is better insight into the extent of the problems faced by the country and that there is now acknowledgement and a serious effort to rectify them. How long the process will take, and who will survive it, is anyone’s guess.
Hosia Matlou: I’m sorry to sound unpatriotic but I feel that there was nothing much in finance minister Tito Mboweni’s recent budget speech that gave me even a ray of hope.
Let’s look at the digital migration process: we were told last year by the previous minister of communications that they had decided to change the funding model. This after running in circles for over 12 years; after money was looted left, right and centre then you want to change the funding model… why? That was my silent question.
They are trying to change the picture frame but still holding on to the same image. I think even the minister of finance was never briefed about the problems in the rollout of the set-top boxes because Eskom and their other state-owned-enterprise cousins are high on the minister’s agenda.
There was hope to revive the industry with the local manufacturing of the boxes but now it looks like we will have to wait for Zimbabwe with all its financial problems to migrate first. It really amazes me that the same government doesn’t see the opportunities that are there if we just complete this programme. They are the ones killing the economy – the mobile operators are singing every day, “please free the spectrum”.
Lack of innovation is also playing a very critical role in getting our manufacturing sector back on its feet. I’m still wondering what exactly the role of the CSIR is. I need someone to spell in Setswana for me, maybe it’s the English that I don’t understand. Why should we suffer with development while the CSIR exists?
Ushir Mehta: Compared to previous years, I am definitely positive about the South African economy. I believe we still have a long way to go to get our economy to where it should be but I am excited for the prospects available to our industry.
There is a big focus on the skilled sector and in particular to BEE compliant companies, and we are starting to see larger corporates put more emphasis on wanting to find companies that are both capable and compliant. I don’t think we will see a major improvement in the economy in the short term, but possibly in the medium term as corruption is hopefully dealt with.
I am also confident that South Africa has the right skills with respect to engineering and manufacturing to make the electronics sector a success. The large sectors that we supply into have also been allocated good budgets for the new fiscal year, which will also have a positive impact on us.
Daniel Dock: No we are not too confident about business conditions for our line of business in the immediate future. Taking a long-term view, one hopes that president Ramaphosa is able to deliver on his promises to revive our economy and attract investment. Sorting out Eskom is going to be key to that.
We have also been very negatively affected by problems at the state-owned enterprises, in particular Denel which has not paid its account in over a year and has done a lot of harm to the entire electronics industry supply chain.
Dataweek: Have you done any expansions or added any new equipment/capabilities recently?
Rob Steltman: We are continuously adding capacity as well as new capabilities to our factory, in an effort to provide a comprehensive service to our customers. We have spent a great deal of effort to provide more than just PCB population.
Hosia Matlou: I think we all know that manufacturing is a multi-dynamic industry. We wait for engineers to start designing new products to feed into the manufacturing belt. Without new products there is nothing to invest in. IoT has been the biggest buzz word at the moment, but personally I think it came early in South Africa. It hasn’t shaken up the market, or the industry for that matter.
I really want to invest in new equipment but you must back it up with a solid business plan or venture. My 50-year-old pick-and-place machine still does the job without any sweat. It is a wait and see game at the moment but unfortunately it affects lots of companies in the value chain. That is the reality.
Ushir Mehta: We recently invested in a Koh Young 3D solder paste inspection machine, as well as a fully automatic cut/strip/crimp/twist machine to deal with our growing harnessing division. We are currently investigating adding a new SMT line as well as selective soldering and various other harnessing machinery to address the needs of the automotive industry.
Daniel Dock: Trax is always trying to add additional capability and we are looking at ways to produce boards for the export market, in particular Europe where our pricing is still attractive compared to other European manufacturers. Later this year we will be implementing resin filling of vias, which will allow us to do ‘via in pad’ which is becoming essential with the modern BGA components that have a very tight pitch between pads.
Dataweek: Are there any other headaches your operation is experiencing?
Rob Steltman: We have managed the component lead times well, in partnership with our clients and suppliers. We hope that we are through the worst of it now, although there are still some challenges when urgent projects arise with very short lead times.
Industry labour rates are high, and without productivity and efficiency we quickly become uncompetitive. Gearing up to use innovation and technology is the only way we see ourselves remaining competitive as time passes. I do not believe we are unique in this regard.
Hosia Matlou: Funding challenges and the old boys’ club mentality. I don’t see a way for new entrants into this market unless you design your own products. There are so many contract manufacturers fighting for the same clientele, we are all knocking at the same door using a different doorbell. I don’t know for how long, but it seems we are at the crossroads now.
I don’t want to talk about the funding challenges because whatever is happening in those institutions is very, very scary. For now I will stay in my little corner – maybe this is all just a bad dream. In Tswana they say “Modimo ke oo” (God bless).
Ushir Mehta: Our biggest headache by far is supplier delivery performance, as well as the component lead time situation. The long lead times on certain components make it particularly difficult to operate effectively in an environment where customers can source their products from anywhere in the world.
Quite disappointing also was the performance of major suppliers who don’t meet their own committed supply dates, which we calculated to be approximately 30% on time and in full for the previous year. This has a knock-on effect on our own production environment in terms of constantly needing to reschedule production orders. It makes for a very unstable operating environment.
Daniel Dock: Fortunately the water crisis in the Western Cape is no longer an issue, but our next big headache is going to be treatment of effluent water. All our water saving efforts now mean we have a more concentrated effluent stream which is going to require additional capital investment in the form of a wastewater treatment plant. This is another expense that is very difficult to absorb following on from the R2 million we spent last year on boreholes and borehole water treatment plants.
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