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Crucial to Keep Power Pylons Local – Working Committee to be Formed
The Southern African Institute of Steel Construction (SAISC) is in the process of convening a working committee to discuss and implement strategies for keeping the manufacture of power pylons local after its successful application for import protection, which was gazetted earlier this year. “Protection is only the beginning of the story. We still have much to do to ensure that this important sector is kept local,” says SAISC industry development manager Kobus de Beer.
De Beer says the volume of steel required for power pylons in this decade is significant. “A total of some 420 000 tons of power pylon steelwork is required up to 2020, peaking at 80 000 tons in 2012 followed by 50 000 tons per annum in 2013 and 2014. A further peak of 85 000 tons is predicted for 2017,” he says.
He adds that it is crucial to ensure that both the steel and labour are locally sourced. “South African companies have been manufacturing these power pylons for at least eighty years. During the past few years, however, cheaper power pylons of acceptable quality have been imported from the Far East, which has damaged the local industry,” de Beer says.
The main reason for this is that the fabricated products produced in Asian countries are being subsidised thereby enabling them to offer highly competitive prices delivered in South Africa. The proof is that steel sections such as angles and channels cannot be imported from the same sources at better prices than locally produced steel in spite of the fact that South Africa, during the 1990’s, agreed that practically all basic steel products as well as raw steel could be imported free of duty into South Africa. In recent years some 30 000 tons of fabricated and galvanised steel components were imported for ESKOM’s and neighbouring countries’ pylon requirements. “This is enough steel to keep at least two medium sized companies - employing 500 people going for a year,” de Beer says.
In fact, what transpired was that Babcock Ntukutuku, a power pylon specialist for decades, was eventually forced to close its doors and retrench long-standing employees due to lack of work and several other companies had to reduce staff while others simply did not enter the market. “The real concern,” de Beer says, “is that this establishes a pattern which is difficult to escape.”
But the SAISC has been attempting to change the pattern for some time. “Initially we tried to play a role in influencing the buying of locally produced power pylons. But it soon became clear that ESKOM was under enormous pressure to produce and supply electricity in the most cost-effective manner and that no premium – in this case about 20% - would be paid for local pylons in spite of the advantages in terms of job maintenance and creation in the industry as envisaged by the DTI’s CSDP (Competitive Supplier Development Program),” de Beer says.
After consultation with the DTI, the SAISC decided to use the established formal mechanisms of ITAC (International Trade Agreements Council) to apply for import protection. “These applications demand extensive details of the industry and its participants, the cost-breakdowns of the products and participants as well as details of employment, historical information and the development of a business case for protection . “It required a comprehensive, time-consuming and expensive process, which took more than a year from initiation to the formal Gazetting on 11 March 2011. A 15% import duty is now applied to imported power pylons and latticed cellular telephone masts.
The way forward is now being mapped out. A working committee of all affected parties is being convened by the SAISC and information on annual requirements for new pylons supplemented by the extensive requirements for refurbishment and upgrading of existing lines is being compiled.
“South African cost structures must be challenged,” says de Beer. “We will analyse in detail steel prices, pricing of galvanizing and productivity issues in workshops and improvements will be implemented.
“The objective is to help develop the South African power pylon industry to its full international competitive potential starting with the building of all our own and then most of Africa’s power lines in the face of relentless pressure from foreign competitors,” de Beer concluded.
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