In conversation with Michael Goodyer, CEO Microtronix: Local content set to grow the electronic manufacturing industry

September 1st, 2016, Published in Articles: EE Publishers, Articles: EngineerIT

 

Michael Goodyer, CEO Microtronix

Michael Goodyer, CEO Microtronix

Industry growth in order to create jobs is being used in many political campaigns but are South Africans really walking the talk and doing something positive that will show results? The electronics manufacturing industry – also referred to as the electronic contract manufacturing industry – is one of the sectors that could be leading job creation.  This month my conversation took me to one of the largest electronic manufacturers, Gauteng-based Microtronix, an employer of over 400 people, and soon to be opening a new state of the art 10 000 m2 manufacturing facility. CEO, Michael Goodyer and I spent some time talking about the industry and what it would need to take it on a growth path.

DTI and government policies are going in the correct direction but poor execution is blamed for the stagnation of the industry. “There are two sides to this”, says Goodyer. “Government policy has been good in that there is a huge emphasis on local manufacture, however the Universal Service and Access Agency of South Africa (USAASA) has not performed very well when it comes to the awarding of contracts for the local manufacture of set top boxes. The arguments about encryption or open access have not helped and has resulted in prolonged litigation, which after several years has still not been resolved. Related to the set top box issue is the way tenders have been awarded by USAASA. Tenders were rewarded when the rand/dollar exchange rate was around the R10 = $1. No company can survive when the exchange rate jumps overnight to over R15 = $1, even at the current rate – around R14,00 – no manufacturer can build set top boxes unless USAASA compensates for the exchange rate. In this whole process South Africa lost a massive opportunity to grow the electronics manufacturing industry.”

Had the delays not have happened and had USAASA not been plagued by accusations of irregularities resulting in expensive audits and other corrective action, the set top box industry would have looked very different. ”I believe that we would have seen large job creation instead of job losses.

“The other side of the story is about the emphasis on local content vs. black economic empowerment. I believe that there is nothing wrong with the current government policy aimed at growing the electronics manufacturing industry; they are correct but the execution is zero and that is the problem.

“A recent tender for solar power units stated that preference will be given to experience, local manufacture and local content. However when it was executed it was given to people with zero experience who are importing the device from China. This seems to happen all too frequently despite DTI policy that government must procure products with local content.”

Goodyer believes that there is too much emphasis on BEE and too little on local content and the employment of local people “In some instances this has led to preference being given to a company with a larger BEE component but with no experience and local manufacturers supplying imported products at the expense of creating local job opportunities and enriching individuals.”

The electronic manufacturing falls under the  Metal and Engineering Industries Bargaining Council (MEIBC),  a statutory body created under the Labour Relations Act (LRA) to provide for the co-regulation of stable and productive employment relations in the metal and engineering industries. “Our main problem with the MEIBC is that it does not meet the requirements of the electronics manufacturing industry. Our industry is a far cry from when the job classifications were created 30 years ago. There are still jobs listed for processes that have long been discontinued, for example lapping of crystals. We need an association of electronic manufacturers to meet in the bargaining council and set up job classifications that meet the needs of 2016.”

Talking about future growth of the electronic manufacturing industry, Goodyer said there a number of new companies entering the industry. “Companies like ourselves are constantly being undercut by small operators opening up. These small operators do not have to comply with the things we have to as a large organisation. They don’t have the same overheads like to having to qualify for ISO9000 certification, or to comply with the MEIBC, providing pension fund and training. These start-up companies employ five or ten persons on a take it or leave it bases. This has resulted in price undercutting. Expenses are increasing out of proportion. The MEIBC rates are completely unrealistic compared with other industries.

“If you are going to operate a professional business and are complying with the rules of the country it is hard compete on price with the smaller start-ups. While these start-ups are small and only employing a handful of people they are under the radar, but once they grow to say medium size their staff will force them to comply and they now in the same trouble as the larger companies. Some customer in the electronics industry are fickle, they will shop around for the lowest price. This may well be in their short term interest but in the process having a negative impact on the large established companies to which they ultimately return. I believe that competition is good, but in an even playing field.”

Microtronix has an extensive training policy in which 20 to 30 unskilled people are employed and trained. A percentage of now trained persons are offered permanent positions in the company while those not successful will enter the labour market. “Maybe we are our own worst enemy by training people for others to employ, but then it is for the ultimate good for the country. I really get irritated when people approach our staff as opposed to doing some training themselves.”

Will the industry grow? Yes, says Goodyer. However government must deliver on its policy of local content procurement by ensuring that all government sectors, national, provincial and local comply. “I believe the policy is sound, now execution of the policy of local content procurement must be escalated.”

 

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