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South Africa’s 12 years as a democracy  seen trade barriers with other countries fall away, exposing local industry to new import and export markets. The truck transport industry is no exception in this regard, with a growing number of products coming from nations that once boycotted the industry. During the apartheid years, Europe and Japan were the major foreign suppliers of trucking equipment to South Africa. While a happy  marriage between European and Japanese truck OEMs continues to thrive, new road transport products are entering the country from other regions, particularly the USA and the Far East. The upshot of this is a host of new economic forces putting pressure on the local truck product supply status quo, effecting both prices and volumes of units sold in this growing sector. There are new ‘suitors’ in the house and the relationship our transport industry has with Europe and Japan looks set to change. In this Special Report, Fleetwatch investigates how  South Africa’s various import and product control mechanisms are responding to the onslaught by foreign truck product exporters, focusing specifically on the issues surrounding truck tyres and brakes. 

One of the business advantages South Africa has gained, now that it is a player in the global economy, is the ability to source products from a larger pool of suppliers, which effectively brings wider choice and increased competition into the local marketplace. The South African truck transport industry is subject to the rules of supply and demand as much as any other and the fact that it is growing significantly year-on-year has attracted the interest of a plethora of foreign OEMs who have traditionally never done business in our market. 

Waging the price war 
These new importers include truck suppliers as well as component manufacturers who have shaken up the industry in recent years with quality products at prices far cheaper than those offered by traditional suppliers. The local truck tyre industry in particular has felt the effect of this influx of cheaper product and has struggled to keep its margins consistent over recent years. Companies like Goodyear, Continental and Dunlop have millions of rands invested in local production facilities which provide jobs for tens of thousands of people. Right now, a price war with Asian truck tyres is seriously threatening the market share and job positions of these established manufacturers. 

Truck brake suppliers are also feeling the pinch. Cheaper ABS systems and other friction components (brake shoes, drums, linings etc.) are flooding the market. While many are of a quality sufficient to meet SABS (South African Bureau of Standards) specifications and are fitted by OEMs, there are inferior quality components entering the market that pose a serious risk to transport efficiency and safety. 

No one can argue that having friendly trade relationships with as many nations as possible is good for a growing free-market economy and South Africa’s President Mbeki has made it clear that trade links with rising economic powers like China, Korea and India are integral to his programme for ‘accelerated economic growth’ in South Africa. However, at what point does government have to intervene in order to protect local industries crumbling under the wave of cheap imports? One need look only as far as our local textile industry, which has lost 60 000 jobs in the last three years due to cheap Chinese imports, to see how devastating a ‘free-for-all’ attitude to import control can be. 

Anti-dumping 
The South African Tyre Manufacturers Conference (SATMC) is a joint body representing the major local tyre manufacturing organisations, notably Goodyear, Dunlop, Continental and Bridgestone-Firestone. The pressure these companies have experienced recently from cheap Oriental imports led the SATMC to request a formal investigation into tyre dumping (exporting tyres cheaper than they are sold in the country of manufacture) by the Department of Trade and Industry (Dti) through the International Trade Administration Commission (ITAC), in the hopes of having anti-dumping legislation instituted to protect the local tyre manufacturing industry. 

The case is explained in Government Gazette, 28 October 2005: "The International Trade Administration Commission (the Commission) accepted an application alleging that tyres originating in or imported from the People’s Republic of China are being dumped on the Southern African Customs Union (SACU) market, causing material injury to the SACU industry concerned. 

"The application was lodged by the South African Tyre Manufacturers Association, being the industrial organization representing the manufacturers of the product under investigation in the SACU. The Applicant alleges that it cannot compete with the low prices charged by the importers and that the allegedly dumped products are causing it material injury. The Applicant submitted sufficient evidence and established a prima facie case to enable the Commission to arrive at a reasonable conclusion that an investigation should be initiated on the basis of dumping, material injury and causality." 

The product allegedly being dumped includes truck tyres, the Gazette states, and explains how ‘dumping’ is defined and determined: "The allegation of dumping is based on the comparison between the normal values and the export prices from the subject country. The normal values for the subject country were calculated using the price list obtained on a confidential basis. The export price was determined based on the official import statistics obtained from the South African Revenue Service. On this basis, the Commission found that there was prima facie proof of dumping. 

"The Applicant alleges and submitted sufficient evidence to show that there is price undercutting and that the imports in question are suppressing its selling prices. The Applicant’s information indicated a decline in sales, profit margins, output, market share, productivity and capacity utilisation. It further indicated that there is a negative effect on cash flow, return on investment, wages, growth, the ability to raise capital and employment. It was also evident that the decrease in market share has been at the expense of a corresponding increase in the market share of the allegedly dumped goods. On this basis the Commission found that there was prima facie proof of material injury and causal link."

Tyre casings are worth hundreds of rands and should be managed effectively to improve overall fleet rubber costs.

Maintenance extremes - A tanker (left) in tip-top condition with wheel and tyre safety procedures clearly in place. The truck at the bottom has lost a wheel, possibly due to substandard brake drum seizure, but runs on nonetheless.

You can tell if a tyre is legal or not simply by looking for the necessary ‘E’ or ‘DOT’ markings. This tyre looks devoid of any identification marks and probably is substandard.

From the trenches 
At time of writing, 3 ITAC officials were in China working on the case. According to Etienne Human, chairman of the South African Tyre Recycling Process Company (SATRP Co) and SATMC secretary, "Chinese tyre imports have increased by 30% over the last year and this is having a serious impact on the local tyre manufacturing industry. Job numbers were down by 5% between 2004 and 2005. We know that the government is wooing China as a trade partner but what about the local unemployment problem? From an industry perspective, the ITAC investigation is commendable and we hope an anti-dumping tariff will be implemented but it is a very difficult process, hampered by political considerations." 

The rationale behind dumping is strategic penetration of new markets to gain market share within a given industry. Cheap tyre imports not only threaten the new tyre manufacturers but the retread market as well. "We are actually fighting for the same market," says Bandag Marketing Director, Laurent Colrat. "Cheap imports are almost the same price as retread tyres and fall into the ‘replacement’ market sector." 

Goodyear’s Truck Product Manager, Chris Tye, sounds a similar note: "More and more cheap brands are coming onto the market. Many ‘cheap and nasty’ brands are sold through ‘knock and drop’ distribution channels which really only serve the tyre buyer who has no concerns about quality of product or after-sales service, warranties or back up." 

Tye says that not all cheap tyres are of poor quality but that generally, while most European and locally manufactured tyres have four breakers, Oriental tyres have three: "There’s no covering belt," he says, "and they’re only good for one retread." 

Also, there seems to be a general consensus among local tyre dealers that Oriental tyres have half the durability/lifespan of their local/European counterparts. 

Better border controls 
The task of ensuring that imported goods entering South Africa’s borders meet legal requirements (be they quality standards or pricing controls), lies with the South African Customs and Excise Department and the South African Revenue Service (SARS). It is a well known fact that rogue traders and ‘smuggling’ syndicates are plying a roaring trade within our borders, selling all manner of ‘pirate’, stolen and counterfeit products. Stopping these products from being sold locally is an extremely difficult task. Customs officials are faced with tons of merchandise every day, much of it in sealed containers. Ascertaining whether every single imported product is fit for local consumption and fully declared in terms of quality and value is a nigh impossible task. 

To help fight the battle, SARS has conducted extensive investigations into the methodologies and supply chains used by syndicates. An extract from an official press statement (dated 26 January 2006) from the Office of the Commissioner of SARS states: "South Africa has a particular legacy of historical neglect in customs operations. Since the inception of SARS in 1997, the organisation’s transformation process sought to raise the profile and enhance the capacity of customs operations. In order to further improve the capacity of customs and to respond to the WCO Framework of Standards, SARS has undertaken the following priorities for 2006: Improve detection capability (A new Customs Border control unit will be created with the deployment of the first 100 customs officers during the first half of this year. This unit will investigate serious customs offences). A Customs Cadet programme will be introduced with the first intake expected by later this year. State-of-the-art scanners are in the process of being procured and the first scanner will be operational at the port of Durban by July 2006. During the following 36 months, 18 more scanners will be deployed at all major ports in South Africa. The feasibility of a detector dog unit will also be examined this year. 

"SARS will also improve its surveillance capability with new Customs control vehicles that will be introduced between April and June 2006. This will be complemented by the further implementing IT solutions including GPS tracking, smart seals, ionizer and radiation detection equipment. 

"These interventions are both important and necessary for SARS to fulfill its mandate to safeguard South Africa’s border and facilitate trade. A joint compliance and public awareness campaign by SARS and the Consumer Goods Council of South Africa since the end of last year demonstrated the harmful effect negative economic activity has on South African business and consumers. 

"Some associated risks include the destructive impact on job creation, losses in revenue to the fiscus and ultimately consumers who are exposed to illicit or sub-standard products in the confectionary, tobacco and alcohol industries (what about automotive products?! Editor). These activities directly challenge the ability of SARS Customs to detect, deter, investigate and ultimately prosecute individuals and parties responsible for illicit activity."
 

Damaged casings compromise even the toughest retread.

Controlling quality 
South Africa’s second line of defense against illegal products being sold is SABS. In the case of automotive products, SABS auditors conduct monthly random checks of local distributors of imported products (like truck tyres and brakes), seizing all products that do not comply with SABS regulations. According to SABS official Dries van Tonder, new safety rules for automotive components are being implemented. "The SA Bureau of Standards has warned that from Saturday July 1st, certain safetycritical automotive components will not be released by customs unless confirmation is available that the imported articles comply with the compulsory standards applicable in South Africa. The only acceptable confirmation to customs is a letter of authority (LOA) issued by the SABS." 

The SABS ‘man on the ground’ as far as tyres are concerned is Senior  Auditor, Jurg Potgieter: "There is a compulsory spec for imported tyres in South Africa, the ECE 54 Regulation (the European Standard). Importers need to prove compliance with this standard by ensuring that tyres carry the ‘E’ mark and come with a test report from the manufacturer. The US ‘DOT’ standard is also allowed in South Africa but importers must furnish a test report from the manufacturer that proves that all DOT tyres comply with ECE test standards. SABS then homologates the tyres and only then, is an import permit issued." 

Potgieter says that tyre warehouses are inspected every three months to ensure that tyres in stock are homologated: "The tyre homologation process has been successful over the last few years and these warehouses are 99% compliant. From a product backup point of view, tyre importers must provide details of the factory that makes the tyres. They must also have a written agreement with the factory that any tyres that fail to meet local standards are taken back by the manufacturer." 

The local truck brake industry is perhaps not quite as ‘protected’ as its tyre counterpart. Paul Williams is the Marketing Manager of Alfa International, a wholly South African manufacturer of commercial vehicle brake products. "Our business has dropped because of cheap imports on both the steel (brake drums and discs) and friction (pads, linings) products," he says. "China is able to import fully made brake drums and sell them at the same price we pay for the raw materials required to make an equivalent product! Other local factories have closed down as a direct result of cheap imports, resulting in hundreds of job losses." 

A big problem, adds Williams, is that SABS "does not check imported discs and drums. It’s only in recent months that the RMI (Retail Motor Industry) has started working with SABS to get some standards in place. At the end of the day, it’s the public who are at risk. A leading Tshwane bus company has lost 128 busses over the last five years due to fire caused by combusting substandard brake pads and linings. Several imported brake drum products are as much as 7kg lighter than the variety we produce. They cannot disperse heat effectively, they crack and warp and eventually make the truck uncontrollable under braking." 

Unlike tyres, there is no mandatory ‘buy-back’ policy in the brake sector. "SABS needs to be specific on its brake standards," Williams adds, "making clear the difference between ‘fitment’ and ‘performance’ standards. Over 50% of friction products are imported, many falling way short of SABS regulations but still finding their way onto trucks." 

This lack of clarity on performance standards extends to entire braking systems. FleetWatch has been privy to tests that show clearly how certain ABS systems fitted to truck trailers do not meet  the latest SABS ABS standards but are fitted by trailer OEMs. ‘While established brake suppliers have towed the legislative line, educated the transport market at great cost and gone the extra mile to promote compliance with ABS legislation, new importers are gaining market share with products that clearly do not meet required standards," says Mike Raath, Marketing Director of Wabco. 
 

Fire Starters  Alfa International’s 2.5 megawatt dynamometer puts imported brake discs and pads to the test, replicating a 22-ton axle at 80kph, then braking to stop within 16 seconds... the cheaper varieties frequently combust.

Policing safety 
The ‘price vs. quality’ issue will always come into play in an industry as ‘margin sensitive’ as road transport. Truck owners may be able to cut corners on certain components (like bunk curtains and floor mats) but definitely not on safety-critical items like tyres and brakes. If SARS and SABS get their controls effectively tightened across all areas of imported truck product, ensuring that quality and pricing is up to standard and SAfriendly, all that will be required to close the loop will be to get our traffic officers well versed in apprehending and prosecuting offending transporters. 

The message is simple: Only buy from recognized dealers selling recognized brands at market-related prices. It may look like the bargain of the year but chances are it’ll end up being the disaster of a lifetime. 
 

The message is simple:  Only buy from recognised dealers selling recognised brands