A new study by the Localisation Support Fund (LSF), Price Benchmarking Study on Steel Lattice Towers used for Power Transmission and Distribution, reveals that South Africa has the potential to compete in steel tower manufacturing if domestic demand is stable and strategic interventions are made. The study highlights key areas where South Africa can improve efficiency and cost-effectiveness, as well as the challenges the local industry faces when compared to international suppliers.
The study was applied for by the Power Line Association of South Africa (POLASA) through LSF in response to growing concerns about the competitiveness of South Africa’s steel tower manufacturing sector. It aimed to clarify how local production costs compare to those of countries like China, India, and Turkey, and to better understand the factors driving cost differences.
Key Findings of the Study
The study, conducted by Rhythm Power, a specialist in Transmission and Distribution consulting, examined key factors driving production costs, including raw material prices, design complexity, and global steel price fluctuations. A critical finding highlighted the need for a minimum production volume to offset high fixed costs and enable South African manufacturers to remain competitive. Additionally, fluctuations in the currency exchange rate—particularly the value of the South African Rand against the US Dollar—were identified as a significant influence on overall competitiveness.
Nick van der Mescht of Rhythm Power noted that low production volumes were a critical factor in the higher costs of local towers. “Countries like China can produce at much larger volumes, which significantly reduces their per-unit costs. South Africa, on the other hand, does not have the demand consistency to achieve similar economies of scale,” he said.
The study found that South Africa has been a reliable and capable producer of steel towers, having supplied high-quality products for over five decades. However, the local industry has declined due to inconsistent demand and increasing reliance on imported towers, which often come at a lower cost but carry risks related to supply chain disruptions and quality control.
Risks and Opportunities
The study highlights that continued reliance on imports poses significant risks for South Africa, particularly in terms of supply chain disruptions and the loss of domestic manufacturing capability. Importing towers may appear cost-effective in the short term, but it undermines the country’s ability to respond swiftly to emergencies and meet future demand locally.
Van der Mescht emphasized the importance of revitalizing local manufacturing capacity. “South Africa has the expertise and capability to meet its domestic demand, but we need clear and consistent demand signals to make local production viable,” he said.
The study also identified opportunities for South African manufacturers to expand into export markets, particularly in Africa, where there is growing demand for infrastructure. By scaling up production, local manufacturers could reduce their costs and compete more effectively on the global stage.
Recommendations for Strengthening Local Manufacturing
Based on the findings, the study makes several key recommendations:
Consistent Demand: Stable, long-term demand is critical to helping local manufacturers plan production cycles and reduce costs. The National Transmission Company of South Africa (NTCSA) should play a leading role in providing clear, long-term procurement plans.
Government Support: Strategic investments in the local sector are needed, particularly in sourcing raw materials and building manufacturing capacity.
Export Opportunities: Local manufacturers should explore aggressive expansion into export markets to boost production volumes.
Industry Collaboration: Strong partnerships between the private sector and government are essential to ensuring long-term stability and competitiveness in the industry.
Capacity Building: Investing in manufacturing capacity is vital to compete with international suppliers. Scaling up operations will enable South African manufacturers to achieve economies of scale and reduce production costs.
Looking Ahead
At a recent roundtable discussion on the report’s findings, Harald Harvey, Chairperson of the LSF, reiterated that while South Africa has the potential to be competitive in steel tower manufacturing, the key lies in stabilizing demand and building capacity. “The study gives us a clear picture of the cost structure and competitiveness of our local industry. Now, we need to ensure there is consistent demand to unlock the necessary investment in capacity building,” he said.
Harvey also stressed the role of government in facilitating the necessary engagements between stakeholders across the supply and demand value chain. “The opportunities are there, and South Africa can offer the quality and reliability needed to compete. The LSF remains committed to fostering structured conversations and interventions to enable the local industry to succeed.”
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