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South African Steel Fabrication Industry bleeds as Major Clients procure abroad

The large quantities of fabricated structural steel coming into South Africa from China, Saudi Arabia, India, Turkey, Thailand and others continue to have a significant impact on the South African economy. This is the opinion of Kobus de Beer the Southern African Institute of Steel Construction (SAISC) industry development director.

De Beer says that many of the major South African client companies have introduced a policy known as ‘best country sourcing’ which means they buy from the cheapest international supplier which, in many cases, turns out to be China.

“These companies say that they simply cannot be competitive with other global players if they do not continue with this practice. Many of them have gone to the extent of setting up purchasing offices in China, and other countries, to take advantage of what they call a ‘massive’ price advantage.

“But this, in my opinion, is a misperception,” says de Beer. “They haven’t made the right comparisons and they certainly haven’t taken into account the full hidden, associated costs of the practice.  For example, China typically needs full and final drawings to proceed and they tend to not process variations very effectively and, even if the work is done well, the costs end up high.  Many buyers also “forget” the 15% import duty payable on imports of fabricated structural steel on entry into South Africa.  A number of instances have been found where importers use fraudulent codes to try to avoid paying these duties.

“Also, almost every major company buying from these foreign sources  needs a full time resident quality assurance (QA) team on the premises of their  suppliers and, often, a second team to fix the poor quality of the work. As technical communications are also a very real problem, major quality and scheduling issues are not uncommon. These issues have made countries like Australia move away from China as a cheap source of supply,” says de Beer

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