The sporadic collection of waste tyres, rising numbers of illegal tyres infiltrating the market, and the impact of Covid-19 on the South African tyre manufacturing sector. These are some of the critical issues raised during our exclusive interview with Nduduzo Chala, Managing Executive of the South African Manufacturers Conference (SATMC). Armed with a Masters’ in Business Administration (MBA) (GIBS), and a qualification in Finance coupled with eight years of working experience within the local tyre industry, Chala appears well placed to navigate some of these critical issues on behalf of the country’s four tyre makers. We catch up with him on where things currently stand.
Nduduzo, you took up your current position with the SATMC on November 1, 2020. What has been your major focus during the past twelve months? There are a number of critical areas of
concern affecting the local manufacture of tyres, especially since the onset of Covid-19. My role, representing the country’s four tyre producers, is to engage with government and the various industry associations, such as the National Association of Automotive Components and Manufacturers (NAACAM), the National Association of Automotive Manufacturers of SA) (Naamsa), to hopefully find solutions to some of the pressing issues they are facing. Finalising and implementing the Waste Tyre Management Plan rates high on the list of priorities alongside a defined regulatory standard for the sale o second-hand (part-worn) tyres.
Where do things currently stand with respect to the approval and implementation of an official Waste Tyre Management Plan? Have relevant proposals been submitted and bein considered?
Suffice to say, as an industry, we are frustrated by the slow pace being exhibited by government. We have been engaging with the department, for some time, to revive a new plan in line with ou industry and looking at benchmarks fro other countries and taking the entire value chain into account, following the failure of the existing waste management plan in 2016. Version 8 of the Draft (pertaining to Section 29) of the new plan, was expected to be released for public comment in June.
This did not take place which was when we decided to adopt a different approach with the Department of Forestry, Fisheries and the Environment (DFFE), that entailed becoming a lot more vocal about the important contribution the various component manufacturers make to the Automotive segment (tyres being one), with regard to employment, job creation and overall contribution to the economy. Bear in mind that prior to the pandemic, in terms of sales, the tyre industry contributed R12 million plus to the domestic market, (this has since reduced to R9 million), with the impact of Covid-19. Efforts in this regard have been ongoing since 2018.
So, how much longer is this process likely to take?
Once the new Draft is released, it usually takes between 30-60 days for public comment to be submitted, discussed and incorporated, after which the Plan will need to go out on tender to find a suitable plan implementer. This too will take time, so it could take between 18-24 months before a solid waste tyre management plan is implemented. In the meantime, we are pushing the element of instituting regulations around the sale of dangerously worn tyres.
We have been conducting surveys over the last few years in an effort to demonstrate the growing incidence and dangers of part worn/illegally regrooved tyres to the consumer. Last year, the
number of illegal tyres detected on our roads rose to an alarming 63%! Having submitted this data, we are now working with the SABS to formalise a voluntary standard for part-worn tyres. This was in effect some years ago, but fell away due to a lack of support from other government departments.
Now, however, we are approaching the issue as a united front, encompassing all the relevant players in the SA tyre sector who share a common interest in seeing the eradication of this dangerous practice. Coming together with a stronger voice appears to be working and we have been able to garner support. Having made certain recommendations to the Department of Transport concerning the National Traffic Road Act, (as to which sections no longer make sense due to production changes, or how safety regulations have changed globally), we have received approval and are a few months away from adoption and implementation.
That is encouraging but going forward, how does industry ensure the new regulations are being policed and enforced?
For this to happen, the various government departments are going to have to talk to each other. The new standards, once implemented, will have to be correctly enforced if we are to see an effective rollout.
This too is causing the industry a lot of frustration but we have to start somewhere. We have started training traffic officers to ensure better alignment between ourselves and the various enforcement authorities. It is hugely important for the policing officers to be aware of the proposed new changes before they can enforce them.
How much can the rise in the sale of partworn tyres be attributed to the lack of a formal waste tyre management plan?
The two issues go hand-in-hand. As I’m sure you know, the Waste Bureau is unable to cope with the effective removal and disposal of scrap tyres from manufacturing plants and retail sites.
Our four manufacturers are currently sitting with stockpiles outside their plants which is raising health and safety issues from authorities.
And in the retail space, (most retailers lease their properties), landlords are receiving letters of warning from authorities about the growing mound of scrap tyres on their properties. In response, the landlords are coming down heavily on the retailers. The repercussions of this are grave, for both manufacturers and retailers. The manufacturers are now looking to reduce
their production volumes – with massive implications to costs, quality standards and labour – while some retail stores have been forced to close in compliance with health and safety notices.
Worse still, as an industry – and the manufacturers in particular – we are paying a R2.30/kg environmental levy to Treasury on a monthly basis towards providing the service of collecting and disposing of waste tyres towards funding waste tyre collections and other logistical issues. Our new goal would be to focus on ensuring proper governance materialises and that industry is given oversight over the entire process in order to make the necessary changes in line with our operational levels. We are pleading with the Department to hear our pleas, in order to hopefully improve the current service levels.
Some are suggesting the manufacturers should cease paying the environmental levy until their concerns are heard.
I lead a group of companies that is very environmentally responsible. The tyre producers realise that their product can land up as an environmental hazard and are determined to think of the good of the planet and future generations despite the absence of an immediate waste tyre management plan. The notion of not paying the levy is not feasible. They will continue to abide by the law in hopes that a long-term solution is not that far off.
So, in reality, when do you expect the Draft to be released?
As we are coming up to the holiday season, we are hoping for January 2022. However, for industry the sooner the better!
How has Covid-19 impacted the manufacturers?
The impact on them has been vast. Bear in mind, that sizeable plant investments were made by our local producers some years. ago, with new capacities being installed. Last year, they were sitting at below 60% utilisation of these new facilities from a production point of view, due to the hard lockdown and the months that ensued that saw consumer confidence dwindling.
As it is, tyre production is a challenging space, and once production stability is compromised, it is hard to recover as stopping/ starting production impacts their perations and their bottom line.
We are predicting that preCovid-19 production levels will likely not recover before 2023/24. This year, after regrouping and addressing priorities, things are starting to stabilise, but it would be
fair to say disruption of the global supply chain has impacted every aspect of the business, from exports, to freight and logistical costs, (both of which have spiralled). And lest we forget, the protests and riots that occurred in July, which heavily affected product availability, shed market share further, with figures for the last quarter of 2021 dropping to below 50%, something we have not seen in years.
What measures are being adopted to combat this?
The local four are using every resource available to them to stabilise their respective facilities, output and labour issues. They are also driving to get closer to their customers in an effort to secure shelf space, remain closer than ever to their OEM customers and above all, push local product. From a sales standpoint, they need to regroup and change some of the dynamics of how they go about selling their product, whilst also lobbying with government to align with the local producers in promoting proudly South African
That way, whatever is locally produced will be utilised, thereby protecting the industry at large. From a cost saving perspective, and given the large contributions being made toward the environmental levy and carbon tax, they are also implementing a variety of cost saving measures to provide them with the necessary edge to compete in the market.
Of course, government needs to provide the right economic and. trading environment for businesses. This is critically important in the face of rising unemployment figures, dwindling consumer confidence and shrinking disposal income. These are testing times for our local producers but they are resilient and determined to rise above all the challenges they encounter. Buying Proudly South African will be the driving force, if they are to remain competitive in the market.
Nduduzo Chala is no stranger to the South African tyre business. He first joined Sumitomo Rubber SA in 2014 as an internal auditor, before being appointed to head up Strategic Planning for the company in 2016. In November 2017, he was promoted to General Manager of Strategy, a position which spearheaded his involvement with government. In 2019, he was appointed to SRSAs Ladysmith plant as Divisional Head Corporate Services, overseeing finance, procurement, HR and security
