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Does electronic manufacturing need its own forum? No: AREI chairman
7 March 2016
EE Publishers

An article in EngineerIT of July 2015 highlighted that South Africa has a well-established electronics product development, manufacturing solutions and related services sector. The sector however is largely unrecognised and unsupported, apart from selected end products that have been identified by government such as set top boxes and electricity meters. It is fragmented and lacks both a common voice and coordinated interaction with government.

Over the years there have been several attempts to have the electronic contract manufacturing (ECM) industry represented by an organisation to look after its interests only. The closest the industry has come to be represented by one specialised body was when ADEC was transformed into the Association of Representatives for the Electronics Industry (AREI). Chairman of Arei, Arnold Perumal said that the association’s prime objective is to contribute to the creation of an environment which encourages dynamic growth of the electronics manufacturing industry at both the component and systems level. Tshepo Motsoane of the Electrotechnical Unit at the Department of Trade and Industry (DTI) said at the time that it was not enough but that it was a good start, saying that South Africa needed an ECM industry forum and that such a forum would facilitate constant engagement between the sector and government.

Perumal disagrees. He said that AREI has come a long way and has signed up some prominent players in the electronics contract manufacturing industry as members. He said that Motsoane joined the AREI committee to be a direct link with the DTI but that for the past six months the DTI has not been represented. He said that it had been learned from other sources that Motsoane was seriously injured in an accident, and he was wished well; but that the DTI had failed to communicate with Arei to appoint an interim representative. All AREI’s requests have remained unanswered, according to Perumal.

There are a number of factors inhibiting the industry. Electronic components are not manufactrured in South Africa, but are imported by a number of component suppliers. In most cases import duty is charged which make no sense and inhibits the development of the ECM industry. Many products which are manufactured overseas and imported as complete products do not attract import duty and compete unfairly with locally manufactured products for which import duty is charged on the components to produce the products. As we do not manufacture electronic components in this country, why charge import duty? The process should be reversed, imported components should be tax-free, and completed products which compete in the market with South African manufactured products should carry import duty to protect the local market.

In last year’s interview with EngineerIT, Motsoane said that the DTI is aware of these problems and is working on solutions to overcome the barriers – but it is not that simple. Before a tariff review, a proper assessment must be conducted to determine the impact of such a move. He added that there also needs to be consideration given to South Africa’s World Trade Organisation obligations regarding tariffs.

So where are we now? Motsoane appears to have been a lone voice as since his accident and long absence from DTI no one there has stepped in and followed up on his initiatives or communicated with AREI. However Perumal said that this had not stopped AREI from exploring other opportunities.

AREI has cemented its relationship with Trade & Investment KwaZulu-Natal, a provincial trade and investment promotion agency developed to promote the province as an investment destination and to promote trade by assisting KZN-based companies to identify markets and export their products. Together with this agency Arei presented the second National Electronics-AREI Regional Expo in May 2015 at Durban’s Moses Mabhida stadium. This year, on 22 and 23 June, the AREI Electronics show is being held at Kyalami, aimed at showcasing the electronics industry from components to manufacturing to the end user. Trade and Investment KZN will be one of AREI’s partners.

On another front, Duncan Pollock, business development manager of Grand Tellumat Manufacturing – a joint venture between the empowerment group Grand Parade Investments (GPI) and electronics contract manufacturer Tellumat – believes that the low exchange rate should help electronic manufacturing companies secure international contracts. He said that companies should now make use of the opportunity to promote themselves overseas, and that he believed we are seeing growth in the industry. He added thatt while the market had placed all hopes on the digital migration project, all was not lost – the importation of set top boxes as knock-down kits still creates work opportunities in the industry, and PC boards still have to be assembled, encased and packaged locally. He said that South African electronics manufacturers are well known for the expertise and the quality of products they turn out, but that they need to do more to promote themselves. He mentioned the huge potential in the motor industry which year on year introduces more electronics into vehicles.

Pollock mentioned that the company is involved in the manufacturing of slot machines – a growing market with export opportunities. Slot machines have to be regularly replaced with newer updated models, thereby creating work in other industries as the company outsources the metal work and other components to local businesses.

Clearly the industry requires more support from the DTI and more visibility in government, but the industry members should also be proactive, for instance by participating in the South African Electronics Industry Exhibiton 2016 (22 to 23 June, Kyalami, Gauteng) to show what they are capable of and that they are open for business.

For more information contact Duncan Pollock, Grand Tellumat Manufacturing, +27 (0)21 710 2911, dpollock@grandtellumat.com

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