Research has shown that consumers are not brand-loyal,
- Mark Preston-Whyte, process engineer, S A Oil MIlls
'It is no secret that the majority of South Africa's labour force is unproductive and functionally illiterate ...'
- Andy Procter, sales director, PG Autoglass
AN invader invariably seeks the Achilles' heel in his enemy's
defence system. And when he finds it, he concentrates the
main thrust of his attack on it.
In South Africa, many believe that product quality and
productivity - or the lack of them - are businesses' weakest
links; links that are likely to part under concerted
bombardment. And when they snap, they leave the way clear for
invaders to establish a bridgehead from which they can fan out
and consolidate their positions.
You can expect the quality of imported cars to be better
than those of similar models assembled locally. This
perception is popular among members of the motoring public.
Even some people employed in the motor industry ascribe to it.
In private, of course.
For public consumption, most local manufacturers either
ignore the contention or deny it. Some maintain there's no
difference between locally assembled and imported vehicles.
This is the way Samcor's Mike Ewing sees the quality
situation: 'Samcor does not design vehicles at Silverton.
Samcor assembles motor vehicles. For example, the [Ford]
Telstar in South Africa is the same as the Telstar in Japan
and Australia. The name may change and there may be some
adjustments to adapt the vehicles to local conditions ...
'The assembly plant in Silverton is very sophisticated and
follows the Japanese technology. It has Kawasaki robots, which
are identical to those found in Pacific Rim manufacturing
But the perception of poor quality sticks like glue to
cars that roll off local assembly lines.
More than a perception
For some in the motor industry poor local quality is more
than a perception. It's a fact. It's the only reason that
Jaguars are no longer assembled in this country.
Importing this prestige car in semi-knocked down form for
re-assembly in South Africa would reduce import duty from 115%
to between 35 and 40%.
As a result, the showroom price would
dip from about R400 000 to R300 000.
So why doesn't Lindsay Saker assemble the cars here?
Because Jaguar is wary of re-assembly quality control in
It's also more than a perception in the heavy vehicle
sector of the motor industry. David van Graan, of Mercedes
describes the quality of foreign technology as a sizeable
threat to manufacturers.
Advanced diesel engine technology in the United States,
Europe and Japan offers large savings in fuel consumption - a
major cost area in fleet operation. Fleet owners, who need to
trim running costs, find imported trucks fitted with more
efficient, imported engines attractive propositions.
South African heavy vehicle manufacturers, obliged to fit
less efficient, locally manufactured ADE engines in terms of
local content legislation, can do little to stop erosion of
Meanwhile, in publishing...
THE SKIN PICS ARE GREAT, BUT ...
The quality of homegrown 'girlie' mag Scope wasn't all it
should have been, admits Carole Brille, the Johannesburg-based
Because Scope enjoyed a near-monopoly in the market, it
became lax in maintaining production quality standards. But
the entry of three American show-it-all magazines, Playboy,
Hustler and Penthouse forced Scope publisher Republican Press
to really pull up its garters.
When the three American 'girlie' magazines entered the
market, Scope made strenuous efforts to upgrade the quality
creativity of the magazine by switching to modern desktop
And while women of ample proportions vie for centrefold dominance, many offshore corporations plan to enter South Africa with ...
GLOBALLY SUPERIOR PRODUCTS
Price will play second fiddle to quality when foreign
companies attack South African markets, contends Klaas
Jonkheid, marketing planning director at Lindsay Smithers FCB.
'My research indicates that companies most likely to enter
South Africa are those that have a globally superior product - a product recognised as superior by people throughout the
world. Such products will incorporate leading edge technology
and are commonly attractive even if priced at a slight
This doesn't faze members of the local 'rag trade' who
claim that the quality of South African fashion is of
For example, Mervyn Sacks, of Roz Designs, plans to
compete with imports on the basis of product quality, not
When foreign competition hots up, the company will target
its products at the upmarket segment of the local fashion
market and adjust its prices accordingly.
This move is specifically aimed to avoid direct
competition with low-priced imports from Pacific Rim
When American Skippy challenges South Africa's Black Cat...
QUALITY COULD BE THE CLINCHER
The manufacturer of Black Cat Peanut Butter fears it may
lose market share on the basis of product quality to Skippy,
manufactured and marketed by CPC International, of the United
CPC uses constant research and development as a marketing
tool to give it the marketing edge, says Mark Preston-Whyte,
of SA Oil Mills. And Skippy's consistently high quality could
hit Black Cat hard.
Research in the peanut butter market shows that consumers
look for the perfect product, but at a good price.
While SA Oil Mills will be able to offer the consumer a
product priced below that offered by CPC, it won't be able to
defend its market share on quality.
'Although we have explored various techniques to improve
the quality of our product, we lack CPC's production skills,'
But on the pharmaceutical front ...
SOUTH AFRICAN QUALITY IS TOPS
The man who heads BE-TABS Pharmaceuticals, R A H Bhikha,
shrugs off suggestions that foreign invaders can beat his
company's products on the basis of quality.
The company allocates a large percentage of its budget to
ongoing research and development.
'As a local company,' Bhikha says, 'our research and
development department is better placed than multinationals to
assess local market needs and market niches - especially in a
Third World environment like South Africa.'
And in the engineering sector ...
LOCAL QUALITY RATES WELL
The quality of competitive imports poses no threat to Robor Industrial Holdings, which claims that the quality of
its tubular steel products is among the best in the world.
Robor, which has exported 40% of its capacity for the last
10 years, isn't intimidated by overseas boasts of advanced
technology and user-friendly operations.
Managing director Michael Coward alleges that imports
entering the country now don't measure up to South African
'They have been low-priced, but stockists have been stuck
with them because of their poor quality.'
W Riedel, managing director of La FORGE, also believes
foreign quality is overrated.
'Technologically advanced products are only as good as the
services that go with them.'
This doesn't mean that Riedel is satisfied with research
and development (R&D) at La FORGE, which produces high quality
forged and machine components in various alloys.
He attributes the low standard of local R&D to two
the impossibility of recovering costs in a small
a longer-than-average product life cycle in South
Riedel explains that the long product life cycle leads to
'jumps' in model ranges to retain economies of scale and
retards the process of 'innovation diffusion'.
The petro-chemical and paper industries should also jack up their ...
RESEARCH AND DEVELOPMENT
While South African petro-chemical technology is up to
First World standards, the quality of product research and
development leaves at lot to be desired, according to
Sentrachem financial director Norman Kennelly.
'Far too little time and money is spent on R&D. This
could place Sentrachem at a disadvantage. We appear to be
reactive, not proactive. Someone else seems to be re-
inventing the wheel, and we are simply buying it.'
Playing follow the leader isn't the sort of policy that
breeds product innovations, as SASOL 3 has discovered.
'Sasol's research and development programme needs to be
accelerated,' says J H Little, divisional inspection and
planning manager. 'If new products or new techniques are not
developed or adapted quickly enough, the competition will
eliminate Sasol from the industry.'
A major weakness
And how does Mondi fare in terms of product quality vis-a-
vis the invaders?
Not very well, according to Mike Stewart.
'Local manufacturers, including Mondi, tend to spend less
on the research and development of new products than their
This means that when a new competitor enters the market,
its product will be better and provide the customer with
'Mondi tends to be second-stream regarding technological
improvements in that most of our local technology is simply
imported from overseas subsidiaries.'
This leads to savings on R&D costs. But it also puts Mondi at a serious disadvantage in terms of comparative
Inefficiency crept in
Less than the best quality also spells problems for Sappi
Fine Papers, reports Wayne Scrooby.
Magno Print and Lumi Art, two German grades, and Comdat, a
French grade, first imported by paper merchants in the mid-
1980s, produced a better print result. They where whiter and
smoother in terms of surface characteristics.
The underlying problem: prior to the imports Sappi
monopolised the market.
'We were the only producer and supplier of coated grades,'
says Scrooby. 'As such, we were inefficient. With heavy
sanctions, we distanced ourselves from international markets
and could not learn from overseas.
'As inefficiency crept in, costs of production increased
and our prices increased, sometimes four to five times a
When imports began to pour in, Sappi found itself trailing
well behind in terms of technology, coating, formulation,
formation of products and aesthetics. As a result, the company
lost volume and saw the European invaders grab 30% of its
The 'Made in South Africa' label doesn't necessarily mean
poor quality. On the contrary, most products manufactured in
South Africa are of at least adequate quality. They do the
jobs they were designed to do.
But 'just doing the job' is no longer good enough.
So, if you want to compete with the invaders ...
THINK FURTHER THAN PRODUCT QUALITY
If local products have a failing, it's because they're 'me
too'. They look and perform the same as every similar
So make them different.
You don't have to reinvent the wheel. Take what you've
got and add value through research and development.
Starting now, research and develop your product to make
Do what ever you must to differentiate it from the
imports. And make sure that your customers are aware of the
Although, in most cases, the quality of 'made in South Africa' goods may be up to par ...
PRODUCTIVITY IS ABYSMAL
No matter how good the quality of your product is, it's
not going to do you or your customers much good unless you
actually produce it:
at the right price.
In South Africa, all but a few high-tech companies use
labour-intensive rather than capital-intensive production
methods. This provides jobs. But, unfortunately, most
members of the workforce are either semi-skilled or unskilled.
This means inefficient production. While the per hour rate
for labour may be low, the rate per unit produced is unduly
EXECUTIVE THOUGHTS ON PRODUCTIVITY
Here's a snap roundup of what a few executives in various
sectors of commerce and industry had to say about the quality
of labour and levels of productivity in South Africa.
The country's 'notoriously unproductive' workforce can
impair the quality of customer service and damage
- M Sydney, First National Bank.
Productivity in South Africa is a glaring weakness
that will be exploited by foreign competitors.
- Klaas Jonkheid, Lindsay Smithers FCB.
Frequent strikes and labour disruptions lead to a drop
in production, which has a detrimental impact on
- R A H Bhikha, BE-TABS Pharmaceuticals.
In terms of technology, South Africa is definitely a
First World country. But in terms of labour
legislation and general labour attitudes, we could be
considered Third World. Within this context, overseas
companies hoping to set up plants here will face the
same problems as we do.
- Norman Kennelly, Sentrachem.
Low levels of productivity are ...
A TWO-EDGED SWORD
While Samcor's Mike Ewing staunchly defends the quality of locally assembled
cars vis-á-vis the quality of those
assembled overseas, he's a lot less bullish about
'South African industries are unproductive. And
productivity levels are unlikely to increase.'
But he adds: 'It will be impossible for foreign
competitors to increase productivity, and foreign competitors
will have to Africanise their operations.'
Unless, of course, they assemble their cars overseas and
bring them into South Africa as fully built units.
Reinforcing the merits of this option, Ewing points out
that it takes at least 16 - man hours to build a VW Citi Golf
and 29 - man hours to build a Ford Telstar in South Africa.
These lead times are significantly shorter in the United
States and Korea.
John Jessup, of Nissan, doesn't agree.
'Despite what many people say, South African labour in the
motor industry is not unproductive. It is unfair to compare
South Africa to a country such as Japan, which is far more
'By its nature, capital-intensive industry is more
productive and, therefore, justifies a higher investment in
plant and machinery.'
In the service industry, unproductive employees ...
When it comes to service businesses, like banks, says FNB's M Sydney, unproductive workers raise costs, paving an
entrance into the market for cost-efficient foreign
competitors who employ highly qualified and motivated people.
Steve Greiff, Standard Bank's strategic products and
pricing manager, echoes Sydney's views.
'The local workforce is functionally illiterate and notoriously
unproductive. But fortunately for Standard Bank, the labour problems
inherent in the South African economy are not really applicable to the
highly sophisticated banking industry in which we operate.'
Nedbank crosses swords
Nedbank's Jack de Blanche crosses swords with his
colleagues at FNB and Standard on the question of labour
literacy and productivity.
'South African labour in the banking world is not
illiterate. It is productive.'
But he maintains that there's a shortage of educated
people, especially black managers, which leads to a great deal
of job- hopping.
'In the short term, this is a problem - one which Nedbank
does not know how to solve.'
And the long-term solution?
The continuing education of black people.
But De Blanche reckons that the pace of economic growth
may exacerbate the problem.
'If the economy grows at a reasonable pace, there will be
enough educated people to meet the demand. But if the economy
grows too fast, the country is going to suffer great
He also raises the sensitive issue of affirmative action,
which in his opinion 'has not worked anywhere in the world'.
De Blanche worries about but draws solace from the fact that
foreign competitors, even with their more advanced technology,
will also have to live with it.
Automation makes soft drink production ...
Because producing soft drinks is more capital than labour-
intensive, Retail Brands InterAfrica isn't too concerned about
The company owns most of the machinery in a small plant. A
resident manufacturer provides the labour force and some of
the machinery required to fulfil clients' orders.
Retail Brands, therefore, has only a capital interest in
the factory, which helps eliminate labour problems.
For example, if a contractor's labour force is
strikebound, the company is free to approach another producer
to fulfil the order to protect production from disturbances.
Like Retail Brands, major competitor ABI, which uses Coke
to spearhead its range of carbonated soft drinks, doesn't see
productivity as a major problem.
Although statistics point to rising salaries without
concomitant increases in productivity, Coca-Cola has few
labour problems on the production floor.
'Mixing the ingredients and bottling are almost fully
automated,' Sharon Miller says.
And in the pizza industry ...
AN ANTI-PRODUCTIVITY RUN-AROUND
Pizza Hut recently decided to improve productivity by
cutting staff complements.
Spokesperson Grant Wilson explains the company's vicious
anti-productivity circle conundrum.
Because workers were often illiterate, they didn't always
understand what they were supposed to do. Outlets consequently
ended up with more staff than they really needed.
'The crux of the problem was that the more staff we
employed, the less productive each worker became. So we
employed more workers to increase productivity, which only led
an even greater fall in per worker productivity.'
Even if productivity levels are good ...
TAKE THE AUTOMATED ROUTE
Neither Willards nor Simba, South Africa's leading
manufacturers of snacks, are perturbed about losing ground to
offshore invaders on the basis of product quality.
And productivity doesn't appear to present a problem
They claim that most of the processes are automated and
describe the industry as capital rather than labour-intensive.
In fact, Simba is seriously considering further streamlining
its operation by becoming more capital intensive.
Says Johan de Jager, the company's marketing director:
'This move will reduce costs and increase productivity as the
equipment and machinery can run for 24 hours a day.'
The role of productivity at ...
Although most retail chains and stores claim that they
stock the best merchandise relative to price, they admit - not
always openly - that they have productivity problems.
For example, Pick 'n Pay acknowledges that the current
over-staffing level runs at 3 000 people. According to
marketing and advertising director Martin Rosen, this costs
the company R18-million a year. In effect, the retail chain
provides 'almost sheltered employment' to keep labour
Pick 'n Pay could pass on this R18-million to customers by
immediately retrenching the 3 000 redundant staff members but
management believes this would be socially irresponsible 'as
these 3 000 people may be responsible for feeding 3 000 other
Rosen acknowledges that many of the chain's staff are
'purposely unpleasant to customers'. He attributes this
attitude to South Africa's socio-political and economic
heritage. But he points out that new arrivals on the local
retail scene will have to employ local labour of the same
A barrier to entry
Sandy Barnes, marketing director at Jet, a member of the Edgars Group, sees South African labour's low levels of
productivity as a barrier to entry.
The cost of labour in this country is amongst the highest
in the world.
'We're looking at $4 per hour in South Africa against $1,5
in Mexico. And making South Africa even less attractive is the
low literacy rate of our population.'
Barnes agrees with Pick 'n Pay's Rosen that foreign
competitors entering the South African market would face
exactly the same labour productivity problems as established
'They may bring in three or four senior people from
overseas, but they certainly cannot bring over their whole
For the fashion industry ...
A MOST FRUSTRATING PROBLEM
Labour poses the most frustrating problem for local
clothing manufacturers, according to Roger Cartwright of SA
Clothing Industries and Durban Clothing Manufacturers.
Heavy labour unionisation has led to wages spiralling out
of all proportion to labour productivity. This lack of
'competitive productivity' stems from a period of flux within
South African labour market.
'Unions could be said to be flexing their muscles, so
causing widespread strikes, boycotts and go-slows.'
He cites as an example a wildcat strike by cutting room
workers at the Durban Clothing Manufacturers' factory in 1994.
The build-up of large amounts of unmanufactured cloth followed
when management axed workers who illegally downed tools
contrary to the provisions of a court order.
'It will be difficult to pick up slack time,' says
Cartwright, 'because we may need to train new employees or
negotiate new contractual arrangements with old employees.'
Ben Cartoon, managing director of Paris Belts, is
confident that his company's 'best quality at the best prices'
products can hold foreign competitors at bay. However, like
Cartwright, he sees South Africa's unproductive labour force
as a major stumbling block to progress.
'Fire the lot'
His first reaction: 'Fire the lot and buy a few more
But then the realist takes over.
Cartoon predicts that South African clothing manufacturers
will turn increasingly to advanced technology, 'unfortunately
to the detriment of employment opportunities'.
Paris Belts, he claims, has the most technically
sophisticated plant of its kind in the country. So why
doesn't Cartoon overcome his labour problems by introducing
full automation immediately?
'Because,' he explains, 'it's far cheaper to use local
labour resources while they're still a viable option.'
In the hotel industry ...
PRODUCTIVITY NOT UP TO INTERNATIONAL STANDARDS
The quality of the product a hotel offers its guests in any
given grade depends on the level of service the guests
receive. And this depends on the quality of 'the hired help'.
Which in South Africa is nothing to write home about.
Les Smith, group commercial director at Southern Sun,
admits that the group's labour force is 'very unproductive'.
'South Africa has marketed itself as a First World country
in many regards and, unfortunately, many visitors might expect
a level of service on a par with international standards.
However, Southern Sun's hotels are sadly behind American and
Pacific Rim hotel service levels.'
But foreign chains that set up in this country will also
have to use South African labour.
'Travellers will have to accept that service levels will
be slack in all hotels in South Africa in the short to medium-
An in the mechanical engineering sector ...
THINGS ARE JUST AS BAD
Hausler Scientific Instruments is also concerned about
The company employs 150 workers, most of them directly
involved in the manufacturing process, where the rate of
production and the capacity at which the factory operates is
directly dependent on the productivity of the labour force.
Local companies will, therefore, not be able to compete
effectively against foreign companies which enter the South
African market with skilled, productive technicians to operate
K H Feddes, of Hausler, also points out that mechanical
engineering companies, particularly in Europe, deploy
employees' skills across the entire production process. In
South Africa, in contrast, skills are employed only in
selected areas ... almost in self-contained pockets.
'Many mechanical engineers in South Africa explains are
great at designing the perfect product made from the ideal
type of metal. But when it comes to fabricating the product,
they find their designs are not conducive to the actual
The pharmaceutical industry ...
DOES IT HAVE THE ANSWER?
The response from Ian Strachan, chief executive at Adcock
Ingram Critical Care, is terse: 'Technical parity between
Adcock Ingram and any foreign competition exists at present.
However, local production is relatively labour-intensive and
moves towards increased mechanisation are occurring.
'Natural attrition will not be supplemented by new employees, thus the
workforce will be reduced.'
When it comes to making paper products ...
PRODUCTIVITY IS DISMAL
Carlton Paper can draw on the vast technological expertise
of Kimberly Clark in the United States to ensure that its
products meet the highest international quality standards.
But labour productivity is a horse of a different name.
As Geoff Gibson, director of the Personal Care Division,
puts it: 'Workers in South Africa are highly paid relative to
what they deliver. Productivity is dismal and South African
companies must increase their productivity by getting more out
of existing resources.'
What do you expect from what trade unions describe as a
grossly underpaid labour force?
'The truth of the matter,' asserts Mike Stewart, of Mondi
Paper, 'is that by world standards local labour is actually
not cheap. Measures of worker productivity, based on output
per unit input indicate that levels of productivity in South
Africa lag behind those of many other developing countries in
most sectors and way behind those of the world's developed
nations in all sectors.'
And from the manufacturing sector ...
A PHILOSOPHICAL ATTITUDE
On the question of productivity, Selwyn Leas, of African
Hoe, believes improvements will only come with socio-economic
and political stability.
'Until then, one has to accept that problems with
productivity will occur and deal with them as they occur.'
Identifying China and Thailand as posing the major
offshore threat to his market, he says that the manufacturers
in these countries enjoy the benefits of low labour costs
coupled to high levels of productivity.
'A worker who receives R1 200 a month in South Africa
would be paid about R60 a month in China and still be expected
to produce more.'
Marco de Nobrega, sales and marketing director at
Tiger Wheels Manufacturing, says South African industrialists
suffer from a strategic disadvantage - when it comes to
He attributes low productivity yields to:
the unionisation of labour which forced basic hourly rates of pay to soar
from R2,50 to R5,20;
the lack of a work ethic, and
low basic worker education and skill levels.
WHAT CAN YOU DO ABOUT IT?
Industrial relations experts say you can take multi-
faceted action to enhance levels of workforce productivity.
launch basic education campaigns to overcome
implement on-the-job skills acquisition programmes;
encourage enrolment in selected adult education
offer incentives that encourage achievement of pre-determined productivity goals.
PRODUCT QUALITY ISN'T ENOUGH
According to popular marketing wisdom, a lot of customers
don't find price - within limits, of course - a turn-off. And
they believe that, within a given category, a product is a
product is a product. Almost everything you buy does the job
it was designed to do. What makes the difference is service.
Before. During. And after.