The predominant issue for local designers and manufacturers of electronic products is competing against the influx of low-cost products from the East. How do they make a living in South Africa and is there any chance of making their mark overseas? Dataweek spoke to three local companies who are thriving in spite of rumours to the contrary.
Omniflex
Ian Loudon is the international sales and marketing manager at Omniflex Automation Products (previously CONLOG Industrial Division). Omniflex is a South African designer, developer and manufacturer of industrial electronics for local and export markets.
“We focus on developing and supporting our products in three main areas: alarm annunciation and plant sequence of events recorders, signal conditioning and process automation controllers, remote monitoring, telemetry and data acquisition. Industries supported are petrochemical, mining, mineral beneficiation, nuclear, sugar refining, power generation and manufacturing,” said Loudon.
The company’s customers include British Nuclear Fuels, Sasol, DeBeers, Goldfields, Xstrata, Anglo American, Eskom, Illovo, Hulletts, BHP Billiton, Australian Navy, Hong Kong Harbour Authority, Ford Motor Company Taiwan and Impala Plats.
Mernok Elektronik
Schalk Janse van Rensburg is the founder and managing director and Robert Shaw is the project and operations director at Mernok Elektronik. This rapidly growing company specialises in the design and manufacture of power electronic and embedded control systems.
“We handle projects in the electronic engineering industry from concept through to production as well as product maintenance,” explains Shaw. “With vast experience in the mining and military industries, reliability and safety are at the core of all our products and services. The company was established in 2008 and has expanded rapidly.
“With an experienced design team and a dedicated production team we are now able to handle a wide variety of project types and sizes. We recently moved to larger premises to increase our product development and production capacity. We supply customers with innovative, proven power and control systems that currently operate in some of the harshest environments in the world. Some of our products are used by AngloGold Ashanti, Impala Platinum Holdings (Implats) and Lonmin Plc.”
Instrotech
Pieter Deysel is the technical director at Instrotech, a company involved in the design and manufacture of digital process control instrumentation and calibration equipment, as well as boiler tube leak detection. The company has been in business for 30 years and has sales offices in Johannesburg, Cape Town and Durban, as well as a manufacturing facility in Johannesburg.
Design factors
With regard to factors that affect industrial product design, like tolerance to vibration and high temperatures, what are designers expected to consider in the approach taken when designing and specifying components, as well as manufacturing these products?
According to Loudon, there are standards that must be adhered to and these are normally the IEC standards. “All products are designed to meet these requirements in order to meet minimum international standards,” he explains. “In industrial electronics, most of these standards are a prerequisite to trading a product on the market.
“Safety systems like IEC 61508 require certification through standards bodies as well. There are also self compliance standards like the CE mark, which uses IEC standards as the minimum for specific parameters,” he continued.
“If you export products, then these standards are a prerequisite. A reseller targeting the local market, or even a ‘grey’ importer, may fly under the radar for some aspects, as South African regulatory systems and certification bodies are not actively policing this. The standard may be in place but it is not being enforced due to, amongst other reasons, dire skills shortages,” added Loudon.
According to Janse van Rensburg, “The first thing one should have is a thorough understanding of is the working environment that the product is being designed for. In general, component selection should be based on the environment rather than the cost of the product.
“The industry is full of substandard products that do work but one needs to look at the overall picture to ascertain where the benefits lie. For instance, a cheaper product that uses sub-grade components will have a lower initial cost but if you consider the total cost of ownership you do end up paying more.
“In the mining industry we constantly battle vibration and humidity,” Janse van Rensburg continues. “One solution to this is a good and well thought out mechanical design. Other options include conformal coating and component bonding. Operating temperature can also be critical when designing a product. Although a component is selected with a certain de-rating in mind, one should always remember that the higher the de-rating the better, for instance a 105°C cap will inherently last longer than an 80°C one.”
Deysel posited that static and magnetic interference are some of the biggest aggravating factors when designing for success. “Prototyping will iron out these issues as it allows the designer to make hardware and software changes to counteract interference. Customisation is therefore a necessity, since no two prototypes will be identical in this regard.
“Essentially, bringing a product to market is a learning curve for the designers and engineers. By having a base of intellectual property and expertise, one is able to leverage past experiences and use these lessons to implement alterations prior to manufacturing. The critical thing to remember is that some problems are application specific,” he concludes.
Testing, testing, 1, 2, 3
Are local test labs generally equipped to perform the relevant tests or must products be sent overseas for certification?
“Some certification is conducted overseas in the market you wish to sell into,” says Loudon. “There are no reciprocal agreements in place with, for example, the SABS. However, there are some local test houses who test to international certification levels and fill the gap admirably. There are few facilities available for testing in South Africa, so some manufacturers make an investment in acquiring testing equipment but they often have to have the test ratified by overseas test houses.”
According to Shaw, “In the mining industry and specifically gold and platinum, we would look firstly at what the legal requirements are in terms of the SANS1809 specification. Next, we would analyse the COP or code of practice that the mine uses. Lastly, we look at what we would like and how we can give our product competitive advantage. In terms of testing, we would typically be interested in environmental tests such as vibration, temperature and humidity. Local test labs are generally equipped to perform most tests that we require.”
Deysel adds that ISO is one of the systems that governs the processes for manufacturing. “The CE international certification mark is one of the prerequisites for the export of goods from South Africa. They determine not only the criteria that need to be met in the laboratory, but are also application- and industry-specific. For conformance tests, we send our products to agencies such as the SABS. We believe that the local quality control is adequate for now.”
In-house or outsourced
Are companies doing all their manufacturing in-house or is outsourcing dominating? Does this extend to offshore manufacturing?
Loudon says that Omniflex does all its design work in-house. “However, PCB manufacturing is outsourced to overseas companies who can provide us with better quality, pricing and delivery. All components are imported and kitted for local assemblers using SMT machines.
“We do utilise in-house facilities for some of the large components like transformers and we do all our own testing and certification to guarantee quality standards. There is a rapidly increasing reason for South Africa to protect its local design and development companies because outsourcing erodes South Africa’s ability to develop an industry.”
As for Mernok, Janse van Rensburg says “Mernok manufactures in-house, with some outsourcing of certain components. We like to do the final assembly to ensure that our products meet the quality standards expected by our customers. We do occasionally use offshore manufacturing facilities, especially for higher volume production runs. While it is nice to have control of manufacture, the trade-off is having to deal with labour-related issues.”
“Instrotech outsources a portion of its SMT assembly to local companies,” says Deysel. “If you factor in the time, people required and the cost of manufacturing equipment, it often makes sense to outsource the bulk of this element. The volumes we produce do not justify sending the manufacture offshore. However, if the demand increased for our products, we would definitely consider this.”
Export opportunities
Loudon says that Omniflex’ turnover comprises 50% export and 50% local sales: “Local protection is non-existent and there is no real local incentive for the use of local products, so we are forced to actively pursue the export market to generate turnover.”
“In general, South Africa has huge potential in the manufacturing of industrial electronics as well as the potential to compete with the international market,” according to Shaw. “As smaller players, we are also able to offer installation services to overseas and local clients that many of the larger companies might not consider. We have smart engineers with innovative ideas that can be used to harness and develop our name in the international market.”
Deysel asserts that one needs to consider the fact that South African manufacturers are competing with international companies who thrive on high volume production. “However, we have ascertained that specialised and niche products are the drivers for success on an international platform,” he says. “All our exports are niche products and they have been eagerly received in Europe and the US.”
Is local lekker?
When competing with imported big-name products, do locally manufactured products really stand a chance? Is it a case of David versus Goliath?
“This can be true and competing against a high-volume manufacturer can be futile,” says Loudon. “However, most South African manufacturers fill niche markets which do not always attract the big players. Omniflex often has complementary product that we can leverage against the other large manufacturers.
“A popular misconception in South Africa is that if it’s imported, it must be better. Evidence against this is that Omniflex has preferred supplier status in the UK with British Nuclear Fuels, which adopts extremely strict standards and quality policies far in excess of anything South African industry demands.
“Omniflex often has more credibility overseas than at home,” Loudon continues. “Imported products are often not as well supported by importers when compared to the service supplied by local manufacturers. When you can talk to the guy who designed the product, your implementation issues are quickly dealt with. We also thrive on the feedback which goes directly into R&D.”
Deysel firmly believes that local manufacturers, in general, have a good reputation: “Because local manufacturers are right on the doorstep, they are able to quickly and efficiently swap out components. This builds customer confidence since it saves them both time and money,” he says.
“I believe that we have a distinct advantage over international producers mainly because we have experience within the industry,” says Shaw. “Many of our products are designed to serve a specific purpose and we are able to customise for distinct situations.
“I do not think pricing on locally made products can be compared, as most imports are mass produced for a larger international market and they make use of quantity to reduce unit price. I do not think customers have any reservations in terms of the quality of locally manufactured products not matching that of big-name products,” he asserts.
Government incentives
Loudon believes that government is not doing enough to spur local manufacture of industrial electronics via, for example, tariffs on specific imported products and funding assistance for locally made products. “In the same way that BBBEE is promoted, government should offer incentive points for companies who make use of locally manufactured equipment.
“The DTI does provide funding for development and tariff protection is mostly outdated,” he continues. “One major problem is the small percentage of the pie that we compete for as local manufacturers. When a new power station is built, the instrumentation electronics portion is usually in the region of 1 or 2%. This falls through the cracks in local procurement quotas as, for example, the project may be 80% civil and mechanical and local procurement quotas are satisfied from that,” Loudon concludes.
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