The manufacturing sector in KwaZulu-Natal is robust and resilient, and is facing the global economic downturn head-on, confident of emerging from the crisis stronger.

This was the essence of a recent workshop, hosted by professional services firm Deloitte in Durban, at which some of the province's biggest manufacturing companies gathered to discuss their response to the economic meltdown.

Forty representatives from KZN's top manufacturers, including Toyota, Bell, UEC, GUD, Feltex and Grafton Everest, attended the workshop.

They were hosted by Deloitte's Andy Dillon, an analyst of lead technology innovation, and Paul Botha, the director of consulting.

The meeting took place after Stats SA announced that manufacturing output in South Africa had contracted by 20 percent in the last quarter.

In KZN, according to the provincial government, manufacturing was the biggest contributor to the province's gross geographic product (GGP). Manufacturing contributes 24 percent to GGP. The next biggest contributors are finance, real estate and business services.

 "Manufacturing in KZN is going through a tough time. There are rising input costs and markets are softening," said Dillon.

 Botha said manufacturing companies were well aware of the challenges. They knew that "now is the time for action" and this was not just a phase that would "go away".

 Botha and Dillon emphasised the value of leadership in the current climate.

Dillon said in these uncertain times, when people were worried about their futures, it was important for business leaders to remain calm and to display inspirational leadership.

 Botha said: "There are a slew of things that you can do. Our advice is to pick the right initiatives and stick with them.

 "Focus should be around cost saving and innovation. Cost-saving should not automatically be associated with lay-offs. Don't automatically think that you have to cut heads. Your people have bright ideas and, when things pick up, you don't want to be without them."

Botha said manufacturing firms had to be ruthless about dealing with waste, duplication and inefficiency.

 Streamlining

"Now is the time to cut fat and be lean. Look at the top three aspects of your business. Look at procurement. Streamline how you handle your materials. There are always ways to improve."

 Dillon said all manufacturing companies struggled to handle materials efficiently.

"Apart from the cost of material, there is how you receive and store materials, how you choose and deliver them to be manufactured, and how you get your product to market," he said. "The common thread is efficient logistics: conveying these goods to the right place at the right time."

 Botha said in many ways, KZN manufacturing firms were going back to basics.

"Sometimes it takes a crisis to improve co-ordination. Many of our clients haven't hit rock-bottom, but they are fully aware that harder times are on the way. Some have long-term contracts that will help them weather the crisis, but these contracts also have finite lifespans."

 Botha said manufacturers were keen to get their houses in order to improve productivity and position themselves for growth when the economy turned.

 He said there were minority views from manufacturers that the government should help more with import tariffs to protect local producers. Appeals for this were likely to come from the auto sector.

 Beyond that, Botha said, KZN manufacturers would benefit from more trade agreements that opened up developing markets like Brazil and India.

 "Local producers are looking to the government to increase bilateral trade agreements with developing countries," he said. "They are looking to get their products to new markets which can be volatile, but are potentially lucrative."

 Dillon said the province had serious, globally competitive manufacturers with original designs and great components.

"They have visionary leadership and they are prepared to transform to become more competitive," he said.

"They are looking to new products and new markets. Now is the perfect time to consider this."

Botha said although it was difficult not to be affected by general market confidence, most manufacturers in the province were "spirited and imaginative" and were prepared to ride out the storm.

 

April 01, 2009 Edition 1

Network Reporter

The Mercury