Modern Quarrying October-November 2016

AROUND THE INDUSTRY EDITOR’S COMMENT

Pious attention to BEE is not helping job creation

A company I have respected throughout my career as a mining journalist is Bell Equipment which, with a history span- ning six decades, has made continuous progress through its mechanical and technological innova- tion, it’s quality and highly-efficient manufacturing, a diverse product range and the expansion of the group’s geographical footprint. I met the founder of this remarkable company, the late Irvine Bell many, many years ago, when he took me on a personal tour of the manufacturing facility. A gracious and modest man; so incred- ibly smart; and I recall his immense pride as we walked through the facility. In 1984, I was present in Richards Bay for the launch of the company’s first articulated truck, and again in 2001 for the exciting launch of the D-series ADT. The company employs 2 200 people around the country with 900 abroad, and sources compo- nents and services from almost 1 000 companies in SA, 250 of which are in Richards Bay. However, when it made a bid to supply Richards Bay munic- ipality with its world-class product, it lost out to a company importing ready-made machines from Hungary, with no value add, local content or jobs. According to CEO Gary Bell, this was supposedly in the name of BEE. Bell Equipment is SA’s only major manufacturer and distributor of heavy equipment and over the past five years, has pumped around R800-million into the upgrade and expansion of its product range. However, a major challenge facing this local company is the cost of doing business in this coun- try; an ever-increasing cost which includes import duties, regulatory controls and the costs of BEE. Sadly, every time the municipality imports fin- ished equipment, those supplier employees move another step closer to losing their jobs. In the Business Times a week back, Gary Bell spoke to Chris Barron, and reiterated the fact that 250 companies in the town rely on the company. “Local people paying taxes and shopping here would benefit if our local municipality bought a machine from us instead of buying imports. “But in spite of SA’s high unemployment rate, regular assurances by President Jacob Zuma that creating jobs is his priority, and commitments to the ratings agencies that the government will prioritise job creation – having the right number

of points of the BEE scorecard trumps jobs every time.” He points out that less than 3,0% of the com- pany’s business done in SA comes from the pub- lic sector. “We don’t get any preference at all from local municipalities. The way that these tenders are adjudicated has very little to do with local produc- tion or local jobs.” The Bell Equipment division comprising 22 sales outlets across the country is BEE compliant. Bell’s BEE partner exited last year, and the company is about to confirm a new deal. However, the bulk of its product comes from small and medium-sized entities that are not compliant to the same extent. Bell believes this is a legacy of the past.“There’s a huge shortage of engineering skills, which starts at school level where maths is a problem. It will be 20 years before we get the right number and quality of engineering people coming through our colleges and universities.” Most of the product produced at its Richards Bay plant is for markets in Germany, the US, UK and Russia where BEE compliance is not an issue. The irony is that Bell Equipment would be more compli- ant if it shipped products from its German factory to its South African company.“Because the product would then be imported and not made here, we’d get a higher BEE rating,” Bell says. “Any of our com- petitors who bring a product from overseas get a better BEE rating because they import. “If you procure from a local entity that does not have the highest BEE rating, you’re disadvantaged.” He would like to see BEE scorecards giving more preference to local products and local jobs. “A lot of people don’t understand what our value add is in this country. We have a huge multiplier effect. Every time we sell a piece of machinery in this country, there are 980 companies deriving some benefit. However, at a local government level there’s not a very good understanding of the mul- tiplier effect.” Doing business only with companies that score the highest business points is not helping job cre- ation, and this challenge affects most local busi- nesses in South Africa.

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MODERN QUARRYING

October - November 2016