This report describes the current situation in the country, examines the increasingly competitive market and focuses on factors influencing the sector’s success. The report also profiles 47 industry players ranging from local manufacturer Powertech Transformers (Pty) Ltd which employs 1,026 people and is one of the market leaders in the transformer sub-sector, to small business, Transformer Manufacturers (Pty) Ltd based in Gauteng, which employs 25 people to service its mining, industrial and parastatal customers.
The South African Generator and Transformer Industry
This report focuses on the local generator and transformer industry which in the past decade has experienced strong growth as demand for power has outstripped supply, resulting in power supply shortages. This, combined with poorly maintained power infrastructure, unreliable power supply, rapid infrastructure growth, increasing population, the commoditisation of telecommunications devices, and access to data, have contributed to a significant increase in demand for generators and transformers.
Demand is expected to continue as a result of Eskom’s planned power expansion projects, capacity added by Independent Power Producers (IPPs) and the eventual implementation of Government’s Strategic Infrastructure Projects (SIPs). Currently South African transformer manufacturers have the capacity to deliver between 50% and 60% of market demand for medium and large power transformers. The balance, along with many other items, has to be imported. Stakeholders believe that cheaper imports, particularly from China and India represent a threat to local manufacturers. As well as receiving manufacturing and export incentives, these countries pay no import duty. In comparison, local manufacturers have to pay duties as high as 40% when exporting to certain countries.
High Quality Local Manufacture
Although there is a critical lack of cost-effective local manufacturing capacity to meet domestic demand, manufacturers emphasise the high quality of locally manufactured products. Local companies continue to innovate, spend on research and development, invest in state of the art manufacturing facilities, manufacture world class products and deliver complex managed integrated solutions. The African export market is becoming increasingly important and South Africa is already the major transformer supplier in Botswana, Mozambique, Namibia, Zambia and Zimbabwe.