Challenges Facing Ssouth African Panel Manufacturers

Challenges facing South African Panel Manufacturers – Part 1: Internal Challenges

Our Managing Director, Johan Basson, wrote a piece for SDC-IBA 2019 looking at some of the challenges that face the electrical panel building industry in South Africa. We’re taking his thoughts and breaking it down into a three-part blog series detailing the internal challenges, external challenges and solutions that Johan put forward in his presentation.

What are panel builders and manufacturers?

The focus of Johan’s summation and this blog was on panel builders and manufacturers who serve the industrial sector which include MMM, water, petrochemical, paper and pulp, cement, material handling, automotive, food and allied, and energy. “When we use the term panel builders, we are referring to manufacturers of low voltage switchgear and control gear assemblies as defined in the IEC 60439, 61439 and SANS 1973 series of standards” said Johan.

Three categories of panel builders in SA

There are three categories of panel builders, namely:

  • International OEMs who have invested in the establishment of manufacturing facilities here in South Africa. In most instances, core parts are supplied from the OEMs main plants overseas, whilst the manufacturing of selected parts are done here before the panels are assembled and populated. In these cases, the designs are mainly developed and tested overseas.
  • OEM partner manufacturers who manufacture and/or assemble OEM designs in South Africa under license, or other special agreement. They will usually have been trained and provided with the required engineering software and special tools. In addition, the OEM will provide a formalized EDS Manual to ensure compliance and consistency. The panels are populated by the partner company in South Africa. The designs and type testing in these cases are also done overseas.
  • South African Manufacturers who manufacture designs which were locally developed, and type tested at laboratories in South Africa and/or abroad. Locally designed and developed panels are type tested to the same IEC standards as the international OEM designs.

What are the internal challenges facing these manufacturers in SA today?

In Johan’s opinion there are two major challenges at present, namely:

Type testing issues at the SABS

Type testing is essentially a range of safety and performance tests to confirm the assembly’s design and build integrity against the manufacturer’s ratings for the product. Perceptions arose that the SABS laboratories cannot perform the full suite of tests required in IEC 61439-1 and 2. Whilst not every test could be performed at NETFA, their Groenkloof laboratory and Gerotek could provide the services to fulfil the requirement. The SABS did indicate at various stages that some of the test facilities needed to be overhauled or upgraded, and so a new status report on the laboratories is now overdue.

Damaging rumours were also spread that the quality of testing performed by the SABS laboratories was inferior. This caused some customers to insist on panels which were type-tested overseas. It was generally felt that these rumours were mischievous, and with ulterior motives.

Major challenges included:

  • Cost of type testing is very expensive for smaller, South African manufacturers. Some local panel manufacturers who performed their IEC 61439-1 and 2 type testing with independent test laboratories in Europe, claim that their total testing costs inclusive of shipping, flights and accommodation was around 30% cheaper than they were quoted by the SABS in 2018.
  • Given the low manufacturing volumes here, it is virtually impossible to recover the cost of testing within reasonable period of time.
  • The waiting period for a testing slot at independent labs in Europe was around two months, vs. the nine months offered by SABS-NETFA.
  • SABS laboratories would not perform ‘special testing’ or ‘development testing’ against selected clauses of the IEC 60439/61439 standards. This caused major challenges for manufacturers who wanted to develop their products.

OEMs who manufacture

Independent local manufacturers often have to compete with OEM manufacturers, using that OEMs switchgear components inside their assemblies. This often puts the local manufacturer at a disadvantage, since his nett purchase cost for the components is much higher than that of the OEMs internal manufacturing division, who enjoys favourable internal transfer costs for the components.

Switchgear components typically represent 45-55% of the total value of the assembly and so it follows that the local manufacturer will suffer a rather substantial disadvantage on pricing. For this reason, mark-ups are usually substantially lower than that of the OEMs in order to be competitive.

OEMs often pass special project discounts to selected project houses, consultants or integrators equal to or better than the panel builders, who then free issue the switchgear components to the local manufacturers for incorporation into the assemblies.

Sheetmetal, copper and labour alone does not provide sufficient income for the local manufacturer to remain viable under such circumstances, and it is felt that as re-sellers for the OEMs equipment, discounts should be so structured to allow the local manufacturers to add a fair mark-up, but still be competitive.

Next month, we look at Johan’s take on the external challenges facing the industry.

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