Research on the performance of the manufacturing sector
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- Source: Plastics SA
- The Plastics Sub Sector Supply Chain
- Size of the Plastics Industry
- State of the Industry
- The role of SMMEs in the plastics sector
- Challenges and Barriers Facing the Plastics Subsector
- Employment Creation Ability of the Plastics Subsector
- The Plastics Subsector: SWOT Analysis
The Plastic SubsectorThe South African plastic industry, which is coal-based and dependent on feedstock from Sasol, is well established. The market is divided into six segments according to plastic type: Polypropylene (PP); Linear-low-/low-density polyethylene (LL/LDPE); High-density polyethylene (HDPE); Polystyrene (PS); Polyvinyl chloride (PVC); and Polyethylene terephthalate (PET). Polystyrene is completely imported and is not manufactured in South Africa at all, while the other commodity polymers are manufactured in South Africa, with shortfalls being imported. While the end-user industry is diverse, the primary users of polymers are the packaging and construction industries, which use approximately 52% and 7% respectively. Exports comprise 25% of total South African polymer sales. The primary driver of the South African plastics market is supply and demand, meaning that the product supply and demand are the main drivers of plastic production in the plastics sector, there are other factors that have a bearing on the industry as a whole, factors such as a growing environmental consciousness, peculiar trading realities, including the vexed issue of import parity pricing (IPP), as well as government initiatives aimed at the development of downstream beneficiation. The South African market is small in global terms, with the per capita consumption of plastics averaging about 20kg per head. The per capita consumption of plastics in a country tends to reflect the development of the economy, and in developed countries such as the European countries and the United States of America, it is over 100kg per head. Below is a comparison of the estimated annual per capita consumption for 2009. Per Capita consumption of plastics: India 7 kg South Africa 26 kg Brazil 26 kg Australia 80 kg UK 82 kg Japan 108 kg Italy 119 kg Source: Plastics SA Figure 18: Plastic Market Sectors (% Polymer converted) 
Source: Plastics SAPackaging plastics is by far the largest plastic market sector at 52%. The rest of the sectors are evenly spread with the exception of building and electronics at 7% and 6% respectively. This highlights the potential that the smaller plastic sectors have for growth and development. With the current legislation of packaging plastics and the drive to recycle packaging plastics, opportunities exist for SMMEs to take advantage of this new cheap supply of raw materials as a supply base to the plastic manufacturing process.The Plastics Sub Sector Supply ChainFigure 19: The Plastics sub sector supply chain 
The plastic sub sector is supplied raw material by the agriculture, mining and chemical sub sectors which is then converted into plastic by businesses operating as plastic convertors and plastic product manufacturers who intern sell their products to other manufacturing subsectors as inputs or it is sold directly to the consumer market. Size of the Plastics IndustryAccording to Plastics South Africa the plastic industry is estimated to be worth R35bn annually, employs approximately 40 thousand people throughout the plastics supply chain. This is made up of more than 1 800 companies, comprising polymer producers, polymer processors, plastics converters and plastics recyclers, supplying products to almost every sector of the economy. Source: Plastic SA State of the IndustryWhile the plastics industry did not escape the economic downturn of 2009, the industry fared better than others due to the fact that plastics are used by such a wide variety of other sectors such as the mining, chemicals, automotive, and retail sectors. Prior to the global recession, the local plastics industry had experienced a number of good growth years on the back of strong consumer spending. Despite the global financial crisis the local industry has remained relatively stable. While there had been a decline in consumer goods, the food and drink-packaging sector, which accounts for 52% of plastics demand, had remained reasonably constant. (Source: Plastics SA) This indicates that the plastics sector is robust and can remain relatively stable through negative economic climates. Plastics products play an important role in the manufacturing of motor vehicles the recent decline in the automotive manufacturing sector did affect some smaller businesses within the industry; however there were also reports of growth as small companies that normally supplied the automotive sector began to diversify their business away from the automotive sector towards appliance, electronics and medical products. This indicated the flexibility of the plastics industry and its ability to adapt in changing economic environments
Plastic Convertors Due to its low raw material input costs and labour intensity Industries product manufacturing Due to labour intensity and growth potential derived from high demand for plastic products. Easy to diversify products The packaging industry has the potential to accommodate SMMEs due to the growing demand for plastic packaging. The major plastic converters in the packaging sub-sector are Nampak, Astrapak, Mondi Plastic Containers and Polyoak Packaging. While these companies are larger concerns and major players in the industry there is room for SMMEs to operate in the plastic convertors sector such as packaging and moulding. There are already a number of established companies that by definition fall into the category of SMME. Table 18: List of major plastic sub sector manufacturers
Challenges and Barriers Facing the Plastics SubsectorThe main barriers to entry for polymer processors are the supply of necessary polymers at reasonable prices and the high capital cost of equipment. Newcomers and smaller market participants also experience difficulty in competing at the level of the already established producers. Amongst the challenges in this industry, high technological barriers to entry are restraining local infrastructural growth. The high costs of equipment, together with the small market size, do not justify this investment. South Africa’s distance from high consumption markets restrains infrastructural development for exports. Some of the challenges facing the plastics subsector are: With the current electricity crisis facing the country, the ever increasing electricity costs do pose a challenge for small business wanting to operate in this sector, as in the manufacturing process equipment which requires large amounts of power to operate. Imports from the Far East have posed a threat to local plastic manufacturers, especially in the secondary plastic products sector where secondary products are used in the manufacturing of consumer products. With the advancement of technology and new methods in manufacturing, expensive equipment is required. Small businesses could possibly find it a challenge to acquire expensive equipment. Environmental issues relating to waste management and the impact of plastic manufacturing on the environment. The economic environment has a large impact on the plastics industry, especially in relation to polystyrene, which is 100% imported. Much of the manufacturing equipment is imported, thus capital outlay is affected. Local polymer prices are based on import parity and as a result the exchange rate can have a significant impact on the cost of materials and therefore operating margins. The price of crude oil also has an impact on the price of plastics as oil and natural gases are major raw materials in the manufacturing of plastics. Chemical scare stories relating to rumours and internet spread myth about plastic products and the chemicals used to manufacture them. E.g. the current concern regarding the effects of bisphenol-A (BPA). Rising costs of raw materials has also recently become an enormous challenge for existing SMME manufacturers in the plastics industry. The local market is hampered by the common practice of import parity pricing (IPP). The practice involves the inclusion of notional charges, which are costs that are not actually incurred by the supplier, in the price of the products being traded on the local market. Labour resources have also proved to be a major constraint in this sector. Employment Creation Ability of the Plastics Subsector
The Plastics Subsector: SWOT Analysis
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