The Department of Trade and Industry (the dti) has for a number of years had an interest in the electronics and ICT sectors of the local industry, together referred to as the ICTE sector.
While a study on the electronics industry was commissioned in 1996 this was broad-brush and did not get into detail in regard to strengths and opportunities in particular. An Electrotechnical business unit at Trade and Investment South Africa (TISA) was established by the dti in August last year and it identified as a first priority the need for an in-depth study of the industry, the identification of its strengths and weaknesses, opportunities and threats and a formal marketing and awareness strategy.
The Electrotechnical unit forms part of Trade and Investment South Africa (TISA), a division of the dti. An important initiative of this unit is the SAVANT marketing and awareness project (www.savant.co.za) which is a Public Private Partnership between government and industry. SAVANT is the official marketing and awareness programme for the ICTE industry. Note that the Electrotechnical industry is concerned with the practical application of electricity in all its forms, including those in the field of electronics.
Earlier this year, MBV Consulting Group under Renier Balt (ex director of the CSIR's Satellite Application Centre) was appointed to assist with the development of a marketing and awareness programme for the industry. MBV commissioned established experts in the field to assist with the study. These experts included Dr Hannes Steyn (Telkom, Armscor, retired), Major General Julius Kriel (SANDF retired), Johan Visagie (MBV Consulting) and Geoffery Daniell (Geoff Daniell Communications) and myself Dr McDowell (consultant, MD of MIT and Mashihe Dynamics), my main responsibility being to compile a report on as wide a sector of the industry as possible within the limited time deadlines associated with the contract. This report was based on direct visits to certain companies, information available from their websites and press releases and other information available in the public domain. Companies covered in the study ranged from micro enterprises with potential, through the medium sized company, to the large conglomerates and their individual constituent businesses. The task in total was complex as of course the structure of every country's electronics industry is different.
The term electrotechnical was used as this encompasses the true electronics industry as well as covering power generation systems, domestic appliances etc. In the Report submitted to the dti more than 110 companies were covered in detail, the sections including the following:
* Infrastructure, components, PCB and contract manufacturing.
* Defence electronics.
* Electrical power and power electronics.
* Commercial, consumer and industrial products.
* Telecommunications.
* Automotive electronics.
* Security electronics.
The IT sector was specifically excluded as other studies pertaining to this major field are ongoing. Where IT was specifically industrial-related (eg, SCADA systems, telemetry etc,) these companies were included in the study. This was based on a value matrix provided by SAVANT that started with component manufacture and availability and extended through PCB manufacture and contract manufacturing right through to final systems and integration.
Many success stories (based on a number of criteria including such things as impact [African or global], world-class, technological pioneering, comparative advantage and turnover, including Forex generated) were identified. These were in turn classified into three groups referred to as 'Main Street' (strong integration), 'Bowling Alley' (niche and entrepreneurial businesses) and 'Tornado' (Fairy tale stories). As examples, ATE, UEC, Sunspace and Avitronics fell into the Main Street category while Shuttleworth and Vodacom and MTN fell into the Tornado category, the last two obviously for the great success of their cellphone roll-out. In the Bowling Alley category we find companies such as Spescom Datafusion, Shurlok, CBI, AMS, Lodox, SACO Systems, Spescom and Conlog (these last two both for electrical metering systems) etc. Note that the models used for the industry description, broad marketing strategy development and the development of the marketing message were based on the work of Michael E Porter, Dr Geoffrey Moore and Fombrun and Van Riel (details of the specific publications can be found at the SAVANT website). Note that the identification of 'success stories' was not a trivial task and involved a large number of factors. Although carried out as a group initiative, I personally believe that many other local companies (in addition to those covered in the brochure) fall into this category.
The study found that South Africa has an electrotechnical industry that is superior in terms of size, level of advantage, and technological depth, to that of a typical nation of a similar stage of development, and is stronger than the GDP would suggest. This advantage is based on heritage factors including the developments in the mining industry, the massive state programmes in terms of telecommunications, electrical power generation, transportation and water provision. In addition to this, there were a number of major programmes and industrial developments such as Iscor, Sasol, Alusaf, Mossgas and the nuclear energy activities at Pelindaba. Last, but not least, was the massive investment in the creation and development of a world-class armaments industry as well as investment in space programmes. The industry in South Africa is a one-stop solution for any overseas company as the structure includes the total value chain including local certification to ISO9001:2000 and traceability in terms of calibration and test laboratories. These government, or IDC sponsored high-tech ventures resulted in a much higher investment in R&D than companies would have made using their own funds.
These programmes fortuitously resulted in disproportionate investment in the training of engineers and technicians who were required to undertake limited-funded high-risk programmes that required extensive levels of innovation and project management. We also saw the safety requirements of deep level mining leading to a disciplined approach to design and implementation and in all of these industries oversight or failure of engineers could lead to loss of life and/or disaster.
These engineers are today's lifeblood for the electrotechnical industry and many have turned into entrepreneurs and created their own successful industries (Examples include Spero, Datafusion and Kreon to name but a few). Overall, the electrotechnical industry in South Africa provides innovative, cost-effective and price-competitive offerings at world standard levels and these skills are still considerably undersold.
The outcome of the study as indicated showed that the local industry is very much undersold and as a result of its diversity there will be a need for three marketing messages. These would be addressed respectively at the developing world, countries at a similar stage of development (where IP could be an issue), and the developed world. For the developing world our capability in integrated solutions is appropriate (eg, the airport radar system installed in Malaysia or the total upgrades to the Soviet Hind helicopter offered by ATE) while for countries with similar state of development security solutions may be appropriate (eg, Netstar, PIDS, Dortech etc). For the developed world there are many opportunities for niche products of world class standard and examples include Shurlok's automotive electronics, UEC's decoders and the Health and Usage Monitoring System (HUMS) from AMS.
The full report can be found at the SAVANT website, www.savant.co.za. The full study is summarised in a substantial brochure being prepared by the Electrotechnical group and which will be published shortly. The brochure consists of an executive summary, addresses competitive advantages and the size of the industry. Success stories are highlighted and then a brief summary of each of the companies covered in the study is provided together with website addresses.
All of the information that arose as a result of this study, together with copies of the brochure will be forwarded to some 50 overseas economic representatives to provide them with a complete profile of the industry. If they have enquiries they will be in a position to either directly refer the customer/investor with specific details about a single company or a sector. They will obviously also ensure that everyone who enquires about the local industry will receive a copy of the brochure.
A major advantage for the local industry as a result of this study is that they will be able to convey the depth of the industry and once again stress its 'one-stop-shop' nature. The various trade representatives will also be able to convey the right marketing message to the region they serve, or it could be a combination of these messages as their local capability could vary according to the market sector. The first objective will be to create awareness of the local industry and then to target the specific audiences with influence, such as companies, trade organisations, educational establishments and so forth. The overseas representatives will then be expected to provide feedback on the appropriate organisations to target, and this will be on an ongoing basis. Other events such as Trade Fairs may be identified and we could see a dti-sponsored SA electrotechnical pavilion at a future event.
As for the local electronics industry, do not expect another Motor Industry Development Plan (MIDP) which has been so successful in increasing exports in the automotive industry (although electronic companies such as Shurlok already benefit from this programme). The MIDP was relatively easy to implement because key decisions in this industry are made globally by a handful of major international companies. The same is not true for the electronics industry except in the area of defence electronics where the substitute (for the MIDP) in the form of the arms deal offsets are already showing positive results. While we have as a country got away with the MIDP, it is questionable whether it is in line with WTO expectations and the programme is currently being challenged by another country. While major opportunities exist for export of technology and products into the rest of Africa, note should also be taken of the potential economic tie up between South Africa, Brazil and India. Brazil has confounded the world with its world beating aircraft industry in the form of Embraer which is rapidly overtaking competitor Bombardier of Canada in terms of passenger aircraft in the 100 seat range (and is soon going to be competing with Airbus and Boeing in the 150 passenger class aircraft), but it lacks capabilities in other areas where South Africa is highly competitive such as missile technology. Certainly watch this space for more liaison between the three countries in the defence, aerospace and avionics industries.
Companies interested in further developments in respect to the Electrotechnical industry are invited to contact the dti group at [email protected]. They will be placed on an electronic mailing list and will be invited to provide feedback and suggestions. As no doubt the brochure itself will be regularly updated this is also your chance to convey to the group why your company is a true success story but has not be identified as such in the first round of evaluation.
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