Mechanical Technology

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Mechanical Technology — October 2015 1
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Adapting to changed economic times
According to an article called ‘Crash course: the origins of the financial
crisis’, published by The Economist, the 2008 collapse of Lehman Broth-
ers in the US triggered a global ‘credit crunch’ that transformed a ‘nasty
downturn’ of a year earlier into the ‘worst recession in 80 years’. Commenta-
tors were soon highlighting the long-term nature of any return to ‘normality’.
The article points out that ongoing massive monetary and fiscal stimulus
has resulted in a feeble recovery, but global GDP is still way below its pre-crisis
peak in rich Western countries – and seven years later, every time the US Federal Reserve attempts
to ‘scale back efforts to pep up growth, witness the wobbles in financial markets’.
In South Africa, from a real GDP growth of 5.5% in 2007, we dropped to a not catastrophic
3.6% in 2008, followed by a -1.5% recession, which only hit in 2009. We bounced back to 2.8%
in 2010 and achieved 3.2% in 2011, which was attributed to the FIFA World Cup of 2010 and its
associated infrastructure investment programme, along with the industrial activity generated by the
Medupi and Kusile Power station projects.
Ever since, however, growth has been hovering below and around 2.0%, with no obvious signs of
‘bouncing’ – and the World Bank forecasts that growth in South Africa will only rise to 2.4% by 2017.
In 2015, on top of the power crisis that came to a head earlier in the year, we have experienced
commodity price collapses that have hit our primary steel and ferroalloy producers very hard. Also,
the Rand has hit record lows against the US$, the Euro and the Pound. Towards the end of August,
with some 19 000 more mining jobs reported to be at risk, the mining industry, unions and the
government signed a broad plan to ‘stem a wave of job losses’.
Is this a new normal? SEW-Eurodrive’s Raymond Obermeyer believes so, suggesting that we are
now living in different economic times, even to those of the 2007 to 2014 period. He describes several
initiatives he believes will contribute to the company’s sustainability in this leaner economic reality.
First among these is service. “Since industrial clients are not investing in new machines, they have
to extend the life of existing assets, and this is keeping our service department very busy,” Obermeyer
says. At SEW-Eurodrive more service staff are being taken on and trained and all local branches are
being equipped to better service their local industries. “To enable smarter working practices, staff
training is key…. Ultimately, it is the hard work and smarter capabilities of our staff that will enable
SEW to better meet and understand the needs of customers,” Obermeyer says.
Service excellence has always been a differentiator for industrial customers but, when margins
are tight and productivity can make or break a company, the benchmark is inevitably higher. Says
Obermeyer: “All deliveries are urgent in today’s market, so it seems senseless to differentiate between
them.”
Localisation is another key survival strategy. SEW-Eurodrive has an established assembly facility
in Nelspruit for its large IG range of gearboxes, which supports many local supply industries in the
area and ensures that these heavy gearboxes can be supplied to local customers at lower prices
than imported equivalents.
In addition, the company is regionalising its localisation drive by equipping all its regional branches
with final drive assembly capabilities. In this way, local branches can be of service to local plants
from ordering through to commissioning. Final assembly and acceptance testing can then take place
at local level, reducing delivery times and travelling costs.
“We are striving to make it easier for staff to win business and for our customers to take up
business opportunities with us,” notes Obermeyer, “by working harder and finding smarter ways of
meeting industry’s needs.”
In this issue, we feature several other stories about successful companies that clearly follow ‘work
harder and smarter’ principles, local successes such as Highveld Vacuum, working out of a farm in
Wonderfontein near Sasolburg, and Unique Hydra, an OEM for hyperbaric diving support vessels in
Cape Town. Such businesses are generating their own local IP, employing local people in their regions
and fostering local support industries.
As a nation, shouldn’t we all – government, industry, citizens and labour unions – be single-
mindedly focused on “making it easier for staff to win business” and for “customers to take up
business opportunities”?
It is far from obvious that growth rates of 5.0% are likely to return, yet we continue to helplessly
depend on high growth rates to reduce unemployment and its inevitable consequence, poverty. We
have to find ways to adapt to the leaner times, ways that, as Obermeyer points out, will involve us
all working harder and smarter.
Peter Middleton