An overview > Chairman’s report

Chairman’s report

Mafika Edmund Mkwanazi
Mafika Edmund Mkwanazi

High-tech industries such as aluminium provide a cradle for the birth of a skilled workforce and encourage investment in modern manufacturing equipment.

It is important to stimulate South Africa’s manufacturing sector, both by levelling the playing fields with appropriate import tariffs and by pursuing economic policies that favour local beneficiation over the export of raw materials.

The environment in which we operate

The headwinds that have buffeted South Africa’s manufacturing sector continued in 2014. Demand for South African made goods was impacted by both domestic issues and global factors. These included increased competition from imports, weak mining and construction activity, a decline in the demand for capital equipment, energy supply challenges and labour-related productivity stoppages impacting the effectiveness of supply chains. Hulamin has not been immune to these challenges and I applaud management for continually finding ways to mitigate their impact on the business.

It is important to stimulate South Africa’s manufacturing sector, both by levelling the playing fields with appropriate import tariffs and by pursuing economic policies that favour local beneficiation over the export of raw materials. In particular, it is imperative that when we face periods of severe limitations of key resources such as electricity, we ensure that priority is given to locally beneficiated products and job creation.

High-tech industries such as aluminium provide a cradle for the birth of a skilled work force and encourage investment in modern manufacturing equipment. If we do not stem the decline of key industrial capacity we will lose these skills forever and the resultant capacity to compete as a nation.

It is worth noting that after rebasing its economy in early 2014, Nigeria has overtaken South Africa as the largest economy in Africa. However, both South Africa and Nigeria face stiff challenges in providing jobs for their burgeoning populations. This requires strong partnerships between industry and government and we applaud government for the actions it has taken and in particular:

  • Introducing legislation aimed at curbing exports of ferrous and non-ferrous scrap which are a key input for some sectors of our industry.
  • Having introduced the Manufacturing Competitiveness Enhancement Programme which is an incentive programme aimed at supporting enterprises with competitiveness improvement interventions.
  • Continued roll-out of the Customs Modernisation Programme which is under the guidance of SARs’ Customs and Excise unit. This programme is aimed at among others strengthening capacity at ports of entry and reducing turnaround times of imported goods.
  • Continued efforts to secure favourable access to the USA market for South African made goods through AGOA.

Sustainability and Stakeholder Engagement

2015 marks a milestone for Hulamin as we will be celebrating 75 years of contributing to community development and South Africa’s industrial development and capacity.

Hulamin remains committed to sustainable growth and prosperity recognising the interconnectedness of both. Therefore, maintaining and strengthening good relations with all stakeholders, who include government, the communities we operate in, capital providers and employees remain top priorities. We continue to make good progress in improving our carbon foot print monitoring, recording and reporting among a range of other sustainable improvements. Sustainability is covered extensively in the sections below:

Social relationship and intellectual capital
Financial capital
Manufactured capital
Human capital
Natural capital

Availability of rolling slab and extrusion billet

Long-term security of local supply of both rolling slab and extrusion billet had been a concern for many years. It was, therefore, pleasing when BHP Billiton announced on 24 November 2014 that Isizinda Aluminium, a consortium comprising Hulamin and Bingelela Capital, had been chosen as the successful bidders for the Bayside Casthouse. We hope that this will be the catalyst for the development of an aluminium hub in the Richards Bay IDZ that will allow local industry to benefit from the Hillside smelter. The details of this transaction are covered in more detail later in the report.

Business performance

I am glad to report a good set of results for 2014. I am also encouraged by management’s efforts and focus on our core competencies and key product streams that are paying off in the form of increased profitability. While the weak Rand has assisted by bringing our cost base more in line with that of our international competitors, producing technically demanding products to global quality standards is something we are very proud of. I would also like to acknowledge the leadership our CFO David Austin who ably steered the business in the absence of CEO Richard Jacob who was on extended sick leave.

Conclusion

Hulamin’s financial performance improved during 2014 but it is clear that conditions will remain challenging in the future. Nonetheless, the board and I are confident in the strategic direction of the business and look forward to an improved manufacturing performance and resulting benefits for all stakeholders. I would like to thank the board, the executive and employees for their commitment and hard work during the year.


Mafika E Mkwanazi
Chairman

19 February 2015