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The Durban Chemicals Cluster has published the DCC 2012/2013 Annual Report for public review.
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Contents
Key Facts and Numbers 2008 - 2013 ......................................................................................... 2
Report Scope .............................................................................................................................. 3
Brief Background to Cluster ....................................................................................................... 3
Letter from Chairman ................................................................................................................ 4
Letter from the Chief Facilitator ................................................................................................ 6
Chief FacilitatorLetter from the Deputy Mayor ......................................................................... 6
Profile of the local chemicals industry ....................................................................................... 8
Cluster Conceptual Model ....................................................................................................... 15
Executive Function ................................................................................................................... 16
DCC Strategic Priorities ............................................................................................................ 19
DCC 2012/13 Programme Activities ........................................................................................ 21
Highlights for the year 2012/13 ............................................................................................... 30
Annual Financial Statements ................................................................................................... 33
Notes ........................................................................................................................................ 42
Contact Information ................................................................................................................. 43
Key Facts and Numbers 2008 - 20132008 - 2013
Established in late 2008 and 5 years in existence with a membership of 28 firms
Membership represents approximately 28% of the chemicals manufacturing activity in
KwaZulu-Natal
5 successive years of unqualified financial audits
R2.25m annual budget
Approximately 25% of funding has been leveraged from private sector and sources other
than the eThekwini Municipality
245 people participated in workshop related activities between 2012 and 2013
91% average positive assessment for workshop related activities
Provided assistance to member firms to access R30 million for capital upgrading from MCEP
incentive
Report Scope
The Durban Chemicals Cluster (DCC) is a not for profit private public partnership between the
eThekwini Municipality and the Chemicals Industry in KwaZulu-Natal. This annual report represents a
review of the financial and operational performance of the cluster for the period July 2012 to June
2013.
Brief Background to Cluster
The DCC was established in 2008 with the primary purpose of developing the competitiveness of the
local chemicals manufacturing industry. The development of the cluster followed the successful
completion of a pilot phase nine months earlier. The DCC received its first tranche of funding from
the eThekwini Municipality and its member firms in March 2009. Thereafter the DCC became fully
operational as an industry body.
The Durban Chemicals Cluster aims to achieve and promote the competitiveness and development
of chemicals manufacturing firms through establishing mutually competitive advantages and helping
the industry overcome generic challenges. The DCC is governed by an Executive Committee which
comprises senior executives from member firms, as well as government officials. Five strategic focus
areas have been identified as central to the growth of this sector in consultation with various
stakeholders. These focus areas are as follows:
Value Chain Competitiveness;
Compliance;
Skills Development;
Transformation; and
Investment and Growth
Each of these strategic thrusts formulates a programme of the DCC
and has a dedicated Technical Steering Committee comprising of
industry officials which directs the activities of the programme. In this
way, the activities of the cluster are continuously changing in line with
the needs of industry and are for industry by industry.
Letter from the Chairman
On behalf of the Executive Committee of the
Durban Chemicals Cluster I am pleased to
deliver the Cluster’s 2012/13 Annual Report.
The aim of this Public-Private Partnership (PPP)
between the eThekwini Municipality and the
chemicals industry in Durban and surrounding
areas is to support the competitiveness and
development of the local chemicals
manufacturing industry – and in this regard the
Cluster continues to make good progress.
Since the Cluster’s inception late in 2008 a range of initiatives have been successfully implemented
as per the 2008 to 2012 business plan, with these initiatives reflecting the essence of clustering and
indicating that the Cluster has established a solid foundation for itself.
In 2011 the Cluster recognised that there was opportunity for it to play an even greater role in the
development of the local chemicals manufacturing sector and for this reason the Cluster
commissioned a study of the major chemicals manufacturing value chains in the eThekwini
Municipality. The purpose of this study was to create an improved understanding of the local
industry’s development requirements to enhance the Cluster’s ability to provide more beneficial and
relevant interventions.
The outcomes of this study informed a decision to re-align the strategic focus areas and hence
activities of the Cluster. The strategic focus areas, and associated activities, of the Cluster moving
forwards will therefore be as follows:
Investment and Growth - directed at promoting innovation, increasing local producer share of
the domestic market and export promotion.
Value Chain Competitiveness - incorporating operational competitiveness, supply chain
management and risk management.
Compliance - encompassing both enhancing adherence to best practices and representation in
respect of select compliance and regulatory matters.
Skills Development – based on first determining skill requirements and then establishing and
operationalising targeted skills programmes.
Transformation – directed at both promoting B-BBEE best practices amongst established
enterprises and developing SMEs.
I am also pleased to report that the cluster is in a healthy financial position. Income for 2013 totalled
R 2 252 695 while expenses totalled R 2 259 895. The cluster has a retained income of R 137 642.
The Section 21 Company remains compliant with all relevant legal and statutory requirements and
continues to receive unqualified, clean audits from PKF Auditors, the appointed auditing firm.
The Executive Committee firmly believes the new strategic direction of the Cluster positions it to
increase the value of activities to members while also supporting increased Cluster membership.
Accordingly, I think both industry and Government stakeholders can look forward to an exciting year
ahead.
Best Regards,
Robin Archer
Chairman
Letter from the Chief Facilitator
2012/13 proved to be a noteworthy year for the Durban
Chemicals Cluster for a number of reasons. In spite of being
challenged by moderate levels of funding uncertainty and new
compliance requirements, the Cluster managed to continue to
deliver effective support to member firms constantly challenged
by the effects of globalisation. I am therefore pleased to be able
to report that the Cluster has successfully overcome its funding
challenges and remains well positioned in respect of compliance
and governance requirements.
Importantly, the achievements of the Cluster would not have
been possible without the strategic direction and guidance of the
Executive Committee, which comprises member firm
representation. I would accordingly like to take this opportunity to thank the members of the
Executive Committee for their on-going commitment, support and leadership.
The Cluster’s funding of R2.25m for 2012/13 was employed as effectively as possible and, where
possible, used to leverage outcomes disproportional to the limited amount of funding available. In
this regard I am also pleased to report that collaborative partnerships continued to be expanded in
2012/13.
The Cluster took a significant step forward when it completed the value chain study of the local
chemicals manufacturing industry in 2012. This research identified the need for specific
interventions that would enhance industry growth prospects and the Cluster is consequently now
better positioned to support firms through its understanding of industry-wide issues, cluster-level
issues and value chain specific issues.
Lastly, I hope this report further affirms the fact that a solid foundation for the Cluster has been
successfully established and that the Cluster is well positioned to engage with its 2020 objective
through the implementation of its new business plan.
Kind Regards,
Douglas Comrie
Chief Facilitator
Letter from the Deputy Mayor
The Durban Chemicals Cluster is a Public-Private
Partnership (PPP) between the eThekwini
Municipality and the Durban-based chemicals
manufacturing sector. Since its inception in 2008,
the Cluster has achieved considerable success in
providing tangible interventions to facilitate the
economic development of the sector. The Cluster
has also facilitated the development of strategic
and international partnerships between
stakeholders and industry and has thereby been
able to leverage increased outputs for industry.
In 2012, the Cluster underwent a tender process for facilitation services. This process was deemed to
be transparent and fair and an exemplary example of good governance.
The Cluster has therefore created an effective platform for the delivery of industrial upgrading. The
eThekwini Municipality recognises the importance of supporting this sector and recognises its
significance as a key contributor to the local and national economy. Looking ahead, with the new
strategic direction of the Cluster, the Cluster has the ability to deepen its value addition to industry
even further. It is therefore crucial that the Cluster is provided with the necessary resources to
facilitate the delivery of these service offerings.
We, as eThekwini Municipality, view the partnership with industry through the Cluster as important
in providing for economic growth in this sector in the future.
Kind Regards,
Cllr Nomvuzo Shabalala
Deputy Mayor, eThekwini Municipality
Profile of the local chemicals industry
South African chemicals industry
The South African chemicals industry has achieved rapid sales growth in recent years, with a
compound annual growth rate (CAGR) of 8.2% between 2006 to 2010, and this is projected to rise to
9.4% over the 2010 to 2015 period (Datamonitor, 2011). Despite this, the chemicals manufacturing
value added has been sluggish over this period with a decline evident from 2007 to 2009, and a
slight recovery in 2010 (see Figure 1).
Figure 1: South African real value added (R million 2005 prices)
Source: Adapted from Quantec Database (2012)
Figure 2 below reflects the national export - output ratio for the period 2000 to 2010. The export -
output ratio indicates the proportion of output that is exported. Exports have been consistently
declining relative to output since the turn of the millennium, potentially indicating that domestic
manufacturers are either increasing their focus on capturing domestic market share or are
alternatively finding it increasingly difficult to compete successfully in export markets.
Figure 2: South African export - output ratio (at constant 2005 prices)
Source: Adapted from Quantec Database (2012)
The South African chemicals industry employs almost 150 000 people. Employment output has also
remained consistent in the face of a dramatic increase in salaries and wages (see figures 3 & 4). This
suggests that a trade-off has been made, with employment growth being sacrificed in order to
accommodate higher salaries and wages in an environment where there is limited growth in
production output.
Figure 3: South African gross salaries and wages (actual) by sub-sector
Source: Adapted from SARS (2010).
Figure 4: South African employment output ratio (including informal sector)
Source: Adapted from Quantec Database (2012)
The employment profile of the industry is increasingly orientated towards skilled and highly skilled
employment. Recent South African industrial policy has been increasingly aligned with harnessing
state procurement and incentivising capital investment and competitiveness upgrading. This
presents potential growth and competitiveness upgrading opportunities for existing enterprises as
well as opportunities for attracting green field investment. In particular, the IPAP2 and IPAP3 KAPs
present additional growth, investment and innovation related opportunities.
KwaZulu-Natal chemicals industry
Figure 5 presents the chemicals sector outputs for KwaZulu-Natal and eThekwini. Both the
associated contribution of eThekwini to the national sector’s output and the year on year growth of
the eThekwini sector are also represented. Between 2000 and 2010, KwaZulu-Natal’s output
increased by 39.4%, from R 42.0 billion to R 58.5 billion representing a CAGR of 3.4%. While by far
the majority of output from KwaZulu-Natal was produced within the eThekwini Municipality, output
from the eThekwini Municipality grew by 26.4% to R 37.0 billion over the corresponding period,
representing a CAGR of just 2.4%.
Figure 5: KwaZulu-Natal and eThekwini chemical output at basic prices (constant 2005 prices)
Source: Adapted from Quantec Database (2012)
The eThekwini chemicals manufacturing sector has been experiencing slower growth than that of
the sector at a provincial and national level. eThekwini therefore seems particularly weakly
positioned in relation to harnessing the opportunities associated with growth in domestic sales. This
should be raised as a concern given its ability to undermine employment creation prospects in an
increasingly globalised and competitive operating environment.
The eThekwini sector employed a total of 18 314 people in 2010, with a strong orientation towards
skilled and highly skilled employment. Pre-2009 employment levels have been comparatively
consistent, although there is a long term trend characterised by stable levels of skills and highly
skilled employment and reducing levels of semi-skilled and unskilled employment. Critically, then, it
is evident that the absence of output growth has reduced scope for employment growth and in
response to competitiveness pressures the sector seems to have reduced lower skilled employment
and increased its reliance on more skilled employment.
Profile of prominent value chains in eThekwini
The chemical sector largely comprises producer-driven value chains, based on high levels of
industrial capital investment. Firms that compete in producer driven chains develop core
competencies that lie in research and development as well as production capabilities. There are five
major value chains in eThekwini:
1. Coatings, inks, adhesives and dyes;
2. Resins and polymers;
3. Pulp and paper;
4. Water treatment; and
5. Petroleum and gas
The major demand side and supply side issues impacting on development of these five value chains
are summarised below. These findings emanate from the DCC Chemicals Value Chain Study (2012).
Table 1: Major coatings, inks, adhesives and dyes value chain development considerations
Demand side considerations Supply side considerations
Domestic demand likely to exceed GDP
growth due to historical trend as well as
interplay of industrial policy, social policy,
and Government expenditure.
Positive demand outlook in domestic
mining, food, petrochemicals and
automotive sectors.
Exports to other African economies present
opportunity for growth.
Reduced levels of protection and
differential operational compliance
requirements placed on local versus foreign
manufactures will diminish manufacturing
growth prospects.
Above inflation factor costs will inhibit
competitiveness challenges and adversely
affect employment growth.
Employment likely to be created in highly
skilled and skilled categories.
Investment in new capital equipment would
enhance competitiveness and support
improved economies of scale.
Investment in product and process
innovation would support improved
competitiveness.
Table 2: Major resin and polymer value chain development considerations
Demand side considerations Supply side considerations
Domestic consumer demand unlikely to
yield growth prospects above GDP growth
levels.
Positive demand outlook for sectors closely
aligned with Government expenditure.
Positive demand outlook for domestic
mining and automotive sectors.
Reduced tariff protection and differential
Investment in innovation would support
improved competitiveness, as well as
potentially new market opportunities
(particularly in green technologies).
Investment in new capital equipment would
enhance competitiveness and support
improved economies of scale.
Access to skilled and highly skilled persons
operational compliance requirements
placed on local versus foreign manufactures
will diminish manufacturing growth
prospects.
Exports to other African economies present
opportunity for growth.
required to support growth and innovation.
Table 3: Major pulp and paper value chain development considerations
Demand side considerations Supply side considerations
Uncertain if growth will exceed GDP
growth.
Positive demand outlook for sectors closely
aligned with Government expenditure.
Exports to other African economies present
opportunity for growth.
Chemical cellulose production presents
opportunities for growing exports and
establishing aligned downstream value
added manufacturing.
Duty circumvention and differential
operational compliance requirements
placed on local versus foreign manufactures
will diminish manufacturing growth
prospects.
Investment in new capital equipment would
enhance competitiveness and support
improved economies of scale.
Investment in innovation would support
improved competitiveness, as well as
potentially new market opportunities
(particularly in green technologies).
Access to skilled and highly persons required
to support growth and innovation.
Table 4: Major water treatment value chain development considerations
Demand side considerations Supply side considerations
Future growth likely to exceed GDP growth
due to interplay of social, environmental
and industrial policies.
Strong demand outlook in primary market
due to Government social expenditure &
local procurement
Water scarcity will intensify government
focus on treatment of waste water,
necessitating increased focus on process
innovation.
Investment in new capital equipment would
enhance competitiveness
A secondary, largely industrial, market to be
stimulated by water scarcity and related
Government environmental policies.
African economies present growth
opportunity.
Access to skilled and highly skilled persons
required to support growth and innovation.
Table 5: Major petroleum and gas value chain development considerations
Demand side considerations Supply side considerations
Primary long term consideration of
refineries will continue be demand for fuel
and legislative changes, not demand for by-
products.
Positive by-product demand outlook in
domestic mining, agriculture, food,
petrochemicals and automotive sectors.
By-product demand to be further bolstered
by competitiveness support, Government
local procurement, and efforts to bolster
industrial growth.
Export potential for HS 27, with specific
focus on Sub-Saharan African.
Installation of new, competing refining
capacity will reduce attractiveness of
refinery investment / upgrading and
introduce additional demand for scarce
skills.
Production of sulphur and benzene to
increase, introducing potential to affect
price and create new downstream
opportunities. Upgrade of all refineries
nationally will introduce additional
(temporary) demand for scarce skills.
Investment in new capital equipment would
enhance competitiveness
Biofuel technology will introduce new
sources of by-products.
Cluster Conceptual Model
The principle of clustering is in essence one of enhancing
the competitiveness of a regional industry through
collective interventions, which are more likely to be
successful than isolated efforts. Clustering efforts are
therefore based on undertaking rigorous research to
identify the major industrial challenges followed by the
facilitation of joint activities or interventions through
securing firm-level input into the specific opportunities
identified.
A successful and sustainable clustering model is dependent on a range of key principals, the most
fundamental of which are:
1. Partnership
A balance between private sector and public sector objectives and interests needs to be maintained,
with this principle applicable to goals, commitment, time, and funding.
2. Industry leadership and ownership
Industry leadership and ownership enables higher levels of commitment from industry and ensures
validity of cluster initiatives.
3. Trust relations
Clustering represents a partnership between the public and private sector that is enabled by cluster
facilitators. Transparency, reliability and accountability are important in the relationships that exist
between the various parties.
4. Reliability and consistency
A cluster’s credibility is enabled through reliable and consistent delivery, with this taking place within a
framework of defined objectives, transparent leadership and strong trust relations.
5. Flexibility
The ability to adapt to changing external factors is important and as such a cluster should be able to
adapt to emerging industry threats and opportunities while keeping within a framework that maintains
credibility and accountability.
Executive Function
Executive Committee
The DCC is an industry driven initiative and is overseen by an Executive Committee. The Executive
Committee is comprised of senior executives from members firms and government officials.
The Executive Committee’s responsibilities are primarily twofold:
1. Strategic direction and oversight of programme implementation
2. Corporate governance and compliance
The members of the Executive Committee for the year ending 30 June 2013 are listed below.
Name Position & Firm Role in Executive Committee
Robin Archer Purchasing and Materials Manager
Huntsman Tioxide
Chairperson & Transformation TSC Chair
Jay Udith Director
Sancryl Chemicals
Deputy Chairperson
Ravesha Govender HSE and Planning Manager
NCS Resins
Value Chain Competitiveness and
Compliance TSC Chair
Oswald Maluleka Operations Manager
Gold Reef Speciality Chemicals
Investment and Growth TSC Chair
Daniel Souchon Managing Director
Arkema
Nominated Industry Representative
Junai Maharaj Managing Director
Buckman Laboratories
Nominated Industry Representative
Mukesh Akoobhai Operations Manager
Hosaf
Nominated Industry Representative
Shunnon Tulsiram Head Economic Development
Department of Economic Development
eThekwini Municipality Representative
Douglas Comrie Managing Director
B&M Analysts
Non-Voting Chief Facilitator
Michele Arde Executive
B&M Analysts
Non-Voting Facilitator
Constitution
The activities of the DCC are governed by its Constitution. Within the constitution, rules and
regulations governing the DCC objectives, membership requirements, decision making processes and
the facilitation service providers are listed.
Compliance and Transformation
The Executive Committee pro-actively identifies and puts in place mechanisms to ensure that the
Cluster is compliant with relevant legislation.
Cluster Scorecard
The DCC is fully compliant with the following legislation:
Municipal Finance Management Act (MFMA)
Tax Administration Bill (TAB)
International Financial Reporting Standards (IFRS)
New Companies Act
Consumer Protection Act (CPA)
Competition Act
DCC is a Level 4 contributor.to the Broad-Based Black Economic Empowerment Act (B-BBEE)
Preferential Procurement Policy Framework Act (PPPFA)
Public Finance Management Act (PFMA)
Facilitation
Cluster facilitation services are provided by an independent team from Benchmarking &
Manufacturing Analysts SA (Pty) Ltd (B&M Analysts) appointed by the Executive Committee.
Founded in 1997, B&M Analysts provides high value specialised support services to drive sustainable
industrial development. Its primary areas of expertise and service provision include cluster
facilitation, competitiveness benchmarking, policy and strategy research, and training. These
services are provided to government, non-government organisations (NGOs), clusters, industry
associations and manufacturing companies. B&M Analysts is a verified ‘Level 2 contributor’, or what
the Codes define as being 125% B-BBEE compliant. For more information on B&M Analysts please
visit www.bmanalysts.com.
DCC Strategic Priorities
Based on the current positioning of the local chemicals sector, the DCC has developed the following
strategic priorities:
Compliance
Investment Attraction and Growth
Export Growth
Innovation
Value Chain Competitiveness
B-BBEE Transformation
Skills Development
The overall objective is that the development of the sector in these key priorities will enable the
chemicals sector in KZN to enhance its competitiveness and thereby grow its manufacturing value
added (see figure 6 below):
Figure 6: DCC Strategic Priorities
Each of these strategic priorities has dedicated programmes with activities designed to achieve the
programmes’ objectives. The programmes of the DCC are therefore as follows:
1. Compliance
2. Investment and Growth
3. Value Chain Competitiveness
4. B-BBEE Transformation
5. Skills Development
Each of these programmes is governed by a Technical Steering Committee (TSC) comprising industry
officials. The TSCs direct the activities of the programmes in line with industry’s needs. Each of these
programmes and their activities for 2012 are dealt with on the subsequent pages.
Figure 7: DCC Programme Organogram
DCC 2012/13 Programme Activities
Investment and Growth Programme
The chemical sector in South Africa is largely characterised by producer-
driven value chains, which are highly capital intensive in nature.
Unfortunately, this is also a sector in which there is a high level of machinery
which is outdated, and therefore firms are unable to take advantage of
economies of scale and the machines require high levels of maintenance. Therefore the aim of the
investment and growth programme is to facilitate investments in both capital equipment and
innovation to enhance the competitiveness of the firms and facilitate growth. During 2012, this
programme facilitated the following activities:
Investment Intervention Area
The Manufacturing Competitiveness
Enhancement Programme (MCEP) is a
Department of Trade and Industry (dti)
incentive programme of which the objective
is to promote enterprise competitiveness
and job retention within the manufacturing
industry. This incentive programme
comprises a number of components
including: Capital Investment; Green Technology and Resource Efficiency Improvement; Enterprise-
Level Competitiveness Improvement; Feasibility Studies; Cluster Competitiveness Improvement and
Industrial Financing Loan Facilities. The DCC has focussed on providing member firms with 1)
Detailed information on this programme and 2) With providing firm-level application assistance on
this programme. In August 2012, the Deputy Product Director for the MCEP programme from the dti
provided an information session for members on the MCEP programme. In 2012/13 the DCC
provided five member firms with assistance in submitting their MCEP applications.
The cluster is also staying abreast of the major government investment projects and conducting
information sharing sessions with member firms. This is important as it provides information on
projects which have important ramifications for our members. On 24 June, 2013, Transnet provided
information to cluster members on their national road and rail plans.
Business Retention and Expansion Support Desk
The Business Retention & Expansion (BRE) Cluster Support Desk initiative, started in 2011, is aimed
at assisting member firms with technical related problems that they are experiencing. During 2012,
the desk assisted member firms with issues related to EIA compliance, air quality monitoring,
environmental waste tyre management, storm water monitoring and air emission licensing. The DCC
in turn liaised with the relevant departments within the eThekwini municipality to assist cluster
members with their queries.
Trade Statistics
Trade statistics play a vital part in monitoring, analysis and projections of macroeconomic
developments. In order to enable DCC firms to stay abreast of these development trends the DCC
collects the latest import and export statistics for the five major value chains in the chemicals sector
and this data is shared with member firms in the bi-monthly DCC newsletter.
Duty Circumvention
One of the challenges in the chemicals sector is duty circumvention and differential operational
compliance requirements which are placed on local versus foreign manufactures. This diminishes the
local manufacturers’ competitiveness. In support to this, Santia Customs Consulting undertook a
customs presentation in June 2013. The presentation covered customs issues, including the global
trading environment, customer valuations and duties, the evasion of customs duties, customs duty
avoidance, tariff investigations, rebates as well as licensing and security issues.
Export Markets
Africa has become a major export market opportunity for domestic chemicals manufacturers.
Unilever export manager, Nhlanhla Mdlawuzo, presented on his experience with exporting into
Africa at a DCC workshop in August 2012. He gave an insightful presentation on possible models
which firms can use to engage in exporting. The DCC is now in the process of compiling an African
export market study. The objective of the study is to identify prioritised African export markets with
an overall aim of growing exports to select African markets. Further to this, the study endeavours to
identify key non-tariff and logistical barriers to African export markets.
Fast Track Investment Initiative
The KZN chemicals sector achieved sluggish growth in recent years. While the reasons for the poor
growth performance are varied, investors (and potential investors) commonly cite extreme
frustrations with the complexity and timelines associated with navigating and securing ‘regulatory’
approval. This in turn either defers or deters much needed investment associated with employment
growth. For this reason the DCC has developed a schedule of all the major investments which are
planned and being implemented by member firms. Going forward, the DCC will create a fast track
investment working group comprising various industry stakeholders to ensure that any blockages
and red tape for these investments are easily overcome. This will facilitate investment in the local
chemicals sector.
Compliance Programme
Safety, Health and Environment have all been identified as areas where firms
need to be able to comply with an increasingly complex set of requirements
in a cost effective manner. The objective of the compliance programme is to
support member firms with compliance to safety, health and environmental
requirements. Support is provided through the research and promotion of dialogue between
members and stakeholders on regulatory requirements for industry as well as the facilitation of
sessions to assist members with adherence to best practice. During 2012, this programme facilitated
the following activities:
Compliance Developments and Best Practice
The DCC hosted workshops which updated member firms with the latest developments in
compliance issues and best practices in safety, health and environment operations. The workshops
covered topics such as 1) The Air Quality Act and the application for Air Emission Licenses 2) Incident
reporting and inspection from Province in the
chemicals sector 3) Introduction to Globally
Harmonised Systems for the Classification and
Labelling of Chemicals (GHS). The cluster is staying
abreast of developments and best practice in
compliance and knowledge is shared with members,
as changes in legislation and compliance has a
significant impact on chemical firms.
.
Environmental Legal Register
The generic national environmental legal register is prepared annually for member firms and
highlights the environmental legislation that chemical firms are required to comply with. The register
provides member firms with a compilation of environmental legislation that relates to the chemical
industry, and includes the specific legal requirement for each firm. The firms are provided with the
implementation documents that are required for each legal requirement listed. Members are also
provided with a by-laws register that is specifically aimed at firms in the eThekwini region. The DCC
provides members with a hard copy of the register and an annual workshop to discuss updates of
the register.
Safety, Health and Environment Best Practice Tours
The cluster scheduled best practice tours for member
firms to identify best practices in safety, health and
environment as many firms are challenged with
continuous complex requirements. Member firms
were exposed to best practices within the food and
beverage industry, as many of these best practices can
be adopted within chemicals industries.
Best practice tours in 2012 included South African
Breweries (SAB) and Unilever both of which have world class systems in place. Member firms had
the opportunity to identify additional best practice procedures that are implemented by the firms
visited such as continuous improvement, 5S, visual management and ‘green’ initiatives.
Value Chain Competitiveness Programme
Understanding of the chemicals value chain linkages and challenges in the
chemicals industry, allows the DCC to identify interventions that aim to
enhance the competitiveness of member firms within their specific value
chain. Focus areas of the DCC’s Value Chain Competitiveness Programme
include local value chain linkages and associated opportunities as well as
infrastructure and logistics. The DCC supports firms with the understanding of value chains through
benchmarking and best practice tours. Member firms also participated in cleaner production
initiatives to enhance competitiveness in ever increasing environmental and legal restrictions.
During 2012, this programme facilitated the following activities:
Firm-Level Benchmarking
The DCC utilises benchmarking to outline the competitiveness of member firms and indicate the
strategic and operational priority competitiveness issues of firms. This in turn forms the basis for
consulting/coaching support that is provided to the firm by the DCC to enable it to make
improvements. During 2012, the DCC provided member firms with firm-level benchmarks as well as
customer benchmarks.
Supply Chain Management
Logistics costs contribute significantly to the overall cost of products supplied by local
manufacturers. Key port, rail and road infrastructure and services have consequently been identified
as priority areas. The cluster continuously stays abreast of key infrastructure projects and logistics
developments and conducts information sharing sessions with member firms. Updates have been
presented to the cluster on the Durban South Port and the Plan for the Intermodal Logistics Hub at
Cato Ridge.
In June 2013, the DCC hosted the launch of the 9th State of Logistics Survey which is an annual,
independent study presenting recommendations on South Africa’s logistics sector.
Carbon Footprint Assessments
In 2012, the South African Treasury released a proposed carbon tax policy paper. This tax is likely to
be implemented as soon as 2015, and firms will be taxed on their
greenhouse gas emissions. The cluster recognises that it is important for
firms to be aware of their current carbon emissions so that they are
equipped for the carbon tax. The DCC provided firms with carbon
footprint assessments, calculating greenhouse gas emissions and
supplying a report to each firm to indicate emissions and the possible
tax the firm will have to comply to. The cluster also provided an
information sharing session on carbon footprinting with an expert in the field. This expert, Mr Kevin
James from Global Carbon Exchange provided firms with an understanding of the carbon tax and the
effect this will have on the chemicals sector.
World Class Manufacturing: Best Practice Tours
The DCC initiated a World Class Manufacturing (WCM) study programme in 2012. The study
programme consisted of tours focused on lean methodologies such as 5S, continuous improvement
and visual management. Member firms visited various firms from different sectors, including food &
beverages, clothing & textiles and automotive.
Skills Development Programme
The chemicals industry requires access to a suitable quality and quantity of
skills that are central to enabling chemicals sector growth. The objective of
the skills development programme is to focus on attracting, developing and
retaining scarce skills in particular. During 2012, this programme facilitated
the following activities:
Skills Development
The DCC arranged student tours to member firms in 2012, exposing students to the chemicals
manufacturing environment. The cluster represented its member firms at career days at various
tertiary institutions where students were given an opportunity to gain additional knowledge on the
chemicals industry in KwaZulu-Natal and the opportunities that lie within them.
Wellness Programme
While many cluster members coordinate HIV/AIDS and Wellness initiatives of their own, the cluster
provides an opportunity to supplement these with additional interventions so as to enable each
participating company the opportunity to establish a more comprehensive HIV/AIDS and Wellness
programme at minimal cost. The programme currently comprises but is not limited to champion
training, peer educator training, condom distribution, awareness campaigns and HIV Counselling and
Testing (HCT). A highly successful Peer Educator training session was run for member firms in 2013
which resulted in firms gaining additional knowledge on employee wellness and managing their
peers in the workplace.
Transformation Programme
Empowerment and transformation is a challenge that affects all industries in
South Africa. It is vital that companies perform strongly in this area, as
Broad-Based Black Economic Empowerment (B-BBEE) has an impact in
decision making and strategies in the chemicals industry. Innovation and the
incubation of new enterprises present itself as an opportunity, as they provide the chemicals sector
with a growth opportunity. These opportunities may be aligned with a move into higher value
adding market segments and emerging industry trends such as green technology. During 2012, this
programme facilitated the following activities:
B-BBEE Best Practice Support
South African industries are required to be accredited B-BBEE firms. B-BBEE is a priority for member
firms as it impacts on their business strategy. The B-BBEE Act introduces the B-BBEE Balanced
Scorecard that sets indicators for measuring B-BBEE. Indicators are weighted to reflect relevant
importance placed on each component. The DCC hosts information sessions which consists of an
expert exploring B-BBEE components and assists firms with calculating and understanding the
scorecard. The B-BBEE Codes of good practice were amended, and released for public comment
towards the latter part of 2012. These amended codes will impact firms significantly as elements on
the scorecards are altered.
Small Medium Enterprise (SME) Development
Chemical SMEs in South Africa face a number of challenges, including high costs of capital, a difficult
regulatory environment, shortage of skills, difficult access to markets, an inflexible labour market
and increasing competition. All the above factors make it difficult for SMEs to be competitive and
hence grow in the chemical market in South Africa. There is an opportunity for chemical SMEs to be
the main driving force behind the growth of the industry, as seen in Europe. SMEs in South Africa
however face many difficulties in this industry. The DCC recognised this challenge within the
chemicals industry and embarked on a second SME Chemicals Manufacturer project in 2012 with the
Chemicals Industries Education and Training Authority (CHIETA). The aim of the project is to support
the competitiveness of struggling manufacturing SMEs so that they become sustainable
manufacturers in the long term. The sustainable development of SMEs will broaden the supply pool
of the existing chemicals sector and provide the sector with enhanced supply chain competitiveness
and value chain flexibility.
The SMEs all undergo a preliminary business viability study which outlines the competitiveness
position of each SME and thereby identifying critical focus areas to ensure sustainability of the
business, as well as to identify areas that need to be focused on in order to secure world class
manufacturing standards into the future. Each SME receives coaching support based on the
recommendations from the business viability study. The interventions include the revision of
business plans, production flow, 5S, financial management and various lean philosophies.
008 – June 2012
Highlights for the year 2012/13
Carbon Footprint Assessments
The SA Carbon Tax has been proposed to be implemented in January 2015 where industry will need
to embark on carbon reporting in order to identify their exposure to this tax. Carbon footprint
assessments will provide firms with this reporting and encourage firms to reduce their carbon
footprint and ultimately carbon tax. The DCC have been mandated by the Value Chain
Competitiveness and Compliance Technical Steering Committee to provide Carbon Footprint
Assessments to member firms. A total of eleven firms are participating in the Carbon Footprint
Assessments that are being conducted.
World Class Manufacturing Tours
The Cluster initiated a World Class Manufacturing (WCM) study programme in 2013. The study
programme hosted a tour on 5-S, which is a key pillar of WCM. 5-S is a workplace organisation,
continuous improvement system for efficiency and effectiveness by identifying and storing items
used, maintaining the area and items, and sustaining the order. The 5-S process involves sorting,
straightening, shining, standardising and sustaining items in a workplace area.
The DCC visited Dyefin Textiles as a best practice example of 5-S. The tour commenced with a
presentation which identified aspects of 5-S that the attendees could recognise in the plant. Twelve
representatives from the DCC attended the tour and learnt valuable lessons from visiting Dyefin
Textiles which they could take back to their individual companies.
9th State of Logistics Launch
The State of Logistics™ survey is an annual, independent study presenting directed research and
recommendations on South Africa’s logistics sector. It delivers a message of action and notes which
indicates that South Africa must make great strides in addressing critical issues relating to the road
freight sector, shifting freight from road to rail, addressing rampant skills shortages and
misalignment in the logistics sector. The State of Logistics™ survey was launched in KZN on 20 June
2013 at Makaranga Garden Lodge in Kloof. Nadia Viljoen (Scientific Editor: CSIR), and Prof. Jan
Havenga (Professor: University of Stellenbosch) introduced the survey to attendees and provided an
overview of the important findings that resulted from the survey.
This year’s edition relates to:
The cost of logistics in South Africa
Modal trends for inland freight flow
Regional connectivity in SADC
The impact of deteriorating road conditions on logistics costs
The state of transport infrastructure planning in South Africa
Critical skills shortages in the logistics and supply chain industry
SME Incubation Programme
The Durban Chemicals Cluster (DCC) recognised the challenges within the chemicals industry for
small firms and embarked on SME Chemicals Manufacturer projects with the Chemicals Industries
Education and Training Authority (CHIETA) and Engen Petroleum. The aim of the projects are to
support the development of new SMEs in the chemicals manufacturing sector and support the
competitiveness of struggling manufacturing SMEs so that they become sustainable manufacturers
in the long term. The sustainable development of SMEs will broaden the supply pool of the existing
chemicals sector and provide the sector with enhanced supply chain competitiveness and value
chain flexibility. Each project had the purpose of developing a group of black owned SMEs situated
in Durban and surrounding areas. The DCC achieved this by implementing a multi-phase programme
that commenced with a business viability study to identify the gaps and interventions that are
required. The SMEs received business plan training, which was required according to the
recommendations from the business viability assessments. The SMEs also received training on
business management and 5S. The DCC, with the support of CHIETA, have embarked on a second
SME Incubation programme which will be identifying an additional ten SMEs and provide support to
the SMEs with the ultimate aim to support their development within the chemicals manufacturing
sector and support the competitiveness of struggling chemicals manufacturing SMEs so that they
become sustainable manufacturers in the long term.
Wellness Programme
The DCC hosted Peer Educator training for cluster members in 2013 in order to better equip
organisations with the knowledge required to assist and communicate with their peers on all
Wellness and HIV/AIDS related issues. Peer Education is an approach to health promotion, in which
employees are supported to promote health-enhancing changes amongst their peers. Peer
Educators offer HIV-related education, counselling and support to other employees in the
workplace.” This comprehensive two day training session was modified to also include Tuberculosis
which has become one of the greatest health challenges facing South Africa.
MCEP Assistance
MCEP is a Department of Trade and Industry incentive programme of which the objective is to
promote enterprise competitiveness and job retention within the manufacturing industry. The DCC
is assisting member firms to benefit from the Capital Investment portion of the programme, which
falls under the Production Incentive. The primary objective of this particular incentive is to support
the investment in capital equipment upgrading and expansions within the manufacturing sector that
will support not only the retention of existing jobs but also lead to the creation of new jobs. During
2012, the DCC assisted member firms with their MCEP applications to the value of R30 million for
capital upgrading.
Annual Financial Statements
Report on the Annual Financial Statements (AFS)
We have audited the annual financial statement of the Durban Chemicals Manufacturing Cluster,
which comprise the statement of financial position as at 30 June 2013, and the statement of
comprehensive income, statement of changes in equity and the statement of cash flows for the year
then ended, and a summary of significant accounting policies and other explanatory notes, and the
director’s report, as set out on pages 5 to 15.
Directors’ Responsibility for the Annual Financial Statements
The directors are responsible for the preparation and fair presentation of these annual financial
statements in accordance with International Financial Reporting Standards, and the requirements of
the Companies Act of South Africa, and for such internal control as directors determine is necessary
to enable the preparation of annual financial statements that are free from material misstatements,
whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these annual financial statements based on our audit.
We conducted our audit in accordance with International Standards on Auditing. Those standards
require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance whether the annual financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the annual financial statements. The procedures selected depend on auditors’
judgement, including the assessment of risks of material misstatement of the annual financial
statements, whether due to fraud or error. In making those risks assessments, the auditors consider
internal control relevant to the entity’s preparation and fair presentation of the annual financial
statement in order to design audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit
also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by the management, as well as evaluating the overall presentation of
the annual financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Opinion
In our opinion, the annual financial statements present fairly, in all material respects, the financial
position of Durban Chemicals Manufacturing Cluster as at 30 June 2013, and financial performance
and cash flows for the year then ended in accordance with International Financial Reporting
Standards, and the requirements of the Companies Act of South Africa.
PKF Durban
Practice Number: 906352E
CHARTERED ACCOUNTANTS (SOUTH AFRICA)
REGISTERED AUDITORS
30 JUNE 2013
Directors’ Report
The directors present their report for the year ended 30th June 2013.
Review of Activities
Main Business
The company is engaged in the provision of cluster-based development support to the chemical
manufacturing sector in Durban and surrounding areas and operates principally in South Africa. The
operating results and state of affairs of the company are fully set out in the attached annual financial
statements and do not, in our opinion require further comment.
Events After Reporting Date
The directors are not aware of any matter or circumstance arising since the end of the financial year.
Directors
The directors of the company during the year and to the date of this report are as follows:
R. J. Archer
D. S. Comrie
R. Govender
O. T. Maluleka
Auditors
PFK Durban will continue in office in accordance with Section 90 (6) of the Companies Act.
Durban Chemicals Manufacturing Cluster
2013 Annual Report
STATEMENT OF FINANCIAL POSITION
Figures in Rand Notes 2013
R
2012
R
Assets
Current Assets
Trade and other receivables 2 369 874 483 783
Cash and cash equivalents 3 1 064 894 125 602
Total Assets 1 434 768 609 385
Equity And Liabilities
Equity
Retained income 137 642 144 842
Liabilities
Current Liabilities
Trade and other payables 4 598 505 313 660
Income received in advance 5 698 621 150 883
1 297 126 464 543
Total Equity and Liabilities 1 434 768 609 385
STATEMENT OF COMPREHENSIVE
Notes 2013
R
2012
R
Revenue 2 243 533 1 879 629
Operating expenses (2 259 895) (1 757 966)
Operating profit (16 362) 121 663
Investment revenue 9 162 288
Profit for the year -7 200 121 951
Other comprehensive income - -
Total comprehensive income -7 200 121 951
STATEMENT OF CHANGES IN EQUITY
Retained
income
R
Total equity
R
Balance at July 2011 22 891 22 891
Changes in equity
Total comprehensive income for the year 121 951 121 951
Balance at 01 July 2012 144 842 144 842
Changes in equity
Total comprehensive income for the year -7, 200 -
Balance at 30 June 2013 137 642 144 842
STATEMENT OF CASH FLOWS
Notes 2013
R
2012
R
Cash flows from operating activities
Cash used in operations 7 930 130 (225 858)
Interest income 9 162 288
Net cash from operating activities 939 292 (225 570)
Total cash movement for the year 939 292 (225 570)
Cash and cash equivalents at the beginning of the year 125 602 351 172
Total cash and cash equivalents at the end of the year 1 064 894 125 602
Member listing as of June 2013
Company name
Telephone
Facsimile
Website
Company name
Air Liquide
031 902 7807
031 902 8081
www.airliquide.co.za
Arkema Resins
Telephone 031 910 3500
Facsimile 031 902 9145
Website www.arkema.co.za
Company name
Telephone
Facsimile
Website
BASF
031 765 2249
031 765 8231
www.basf-cc.co.za
Company name Buckman Laboratories
Telephone 031 736 8800
Facsimile 031 736 1593
Website www.buckman.com
Company name
ChemSpec Paint
Telephone 032 541 8600
Facsimile 032 541 8616
Website www.chemspec.co.za
Company name Dow Advanced Materials
Telephone 031 716 5900
Facsimile 031 716 5965
Website www.dow.com
Company name Gold Reef Chemicals
Telephone 031 910 7500
Facsimile 031 910 7510
Website www.gold-reef.co.za
Company name H&R South Africa
Telephone 031 466 8700
Facsimile 031 466 87 16/7
Website www.hur.com
Company name Hosaf
Telephone 031 450 4169
Facsimile 031 468 4550
Website www.hosaf.co.za
Company name
Huntsman Tioxide
Telephone 031 910 3611
Facsimile 031 942 4191
Website www.huntsman.com
Company name
Isegen SA
Telephone 031 913 3200
Facsimile 031 902 5636
Website www.isegen.co.za
Company name
Telephone
Facsimile
Website
Company Name
Telephone
Improchem
031 949 8200
0861 064 654
www.improchem.co.za
Isncomo Trading Enterprise
073 222 5850
Company name KZN Oils
Telephone 031 570 0550
Facsimile 031 570 0522
Website
Company name
Telephone
www.kznoils.co.za
Lungelo General Dealers
084 283 3816
Company name
Telephone
Facsimile
Website
Company name
Melton Adhesives
031 500 5575
031 500 5576
http://www.melton.co.za
NCS Resins
Telephone 031 713 0600
Facsimile 031 705 8395
Website www.ncsresins.com
Company name Paperkem
Telephone 031 713 3200
Facsimile 031 713 3222
Website www.bimkemi.com
Company name Protea Chemicals
Telephone 031 468 5424
Facsimile 031 468 5429
Website
www.omnia.co.za
Company name Qolotha Cleaning and Manufacturing
Telephone 073 834 0522
Company name Sancryl Chemicals
Telephone 031 902 1422
Facsimile 031 902 1423
Website www.sunchem.co.za
Company name
Scott Bader
Telephone 031 736 8500
Facsimile 031 736 8511
Website www.scottbader.com
Company name SI Group
Telephone 031 910 7950
Facsimile 031 910 7960
Website www.siigroup.com
Company name SIKA South Africa
Telephone 031 792 6500
Facsimile 031 700 1718
Website www.sika.co.za
Company name
Synthomer
Telephone 031 480 8100
Facsimile 031 480 8298
Website www.synthomer.com
Company name
Telephone
Facsimile
Website
Company name
Steritech
031 702 7656
031 702 5576
www.steritech.co.za
Vopak Terminal Durban
Telephone 031 466 9200
Facsimile 031 466 9272
Website www.vopak.com
Notes
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Contact Information
Durban Chemicals Cluster
Tel: +27 (0) 31 764 6100
Fax: +27 (0) 86 607 4510
Email: dcc@bmanalysts.com
Unit 3 St Heliers Office Park
Valdean Rd
Gillitts
3610
South Africa
PostNet Suite 10139
Private Bag X7005
Hillcrest
3650
South Africa
www.durbanchemicalscluster.org.za
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