THE ROLE OF THE PRIVATE SECTOR IN AGRICULTURAL DEVELOPMENT
Presentation by Pillman
This presentation was delivered by
Francois Pillman, Managing Director of Pillman Tractors (Pty) Ltd
on Monday the 9th of June 2003
PILLMAN TRACTORS (PTY) LTD
1.) WHO IS PILLMAN?
Pillman has been active in the South African engineering sector since 1919, manufacturing for the mines, chemical, government and other industries. Pillman is currently in negotiations with a black group on the formation of a Black Economic Empowerment company.
2.) WHO AND WHAT ARE PILLMAN TRACTORS?
The Pillman Tractor is South Africa’s first locally designed and built agricultural tractor, spearheading a South African tractor industry that will be of strategic and economic importance to the country as a whole and the South African farmer in particular.
Pillman Tractors (Pty) Ltd was incorporated on the 18th of October 1973, specifically to found and develop this local industry.
The first step was to design and perfect the Pillman diesel engine which was done in association with an independent international research and development centre for internal combustion engines, namely AVL Gesellschaft fur Verbrennungskraftmachien und Messtechnik m.b.H. situated in Gras/Austria.
PILLMAN TRACTOR ASSEMBLY ON TEST BED picture not included
The 4-cylinder Pillman engine is exceptionally heavy, being cast from superior strength steel. It is robust, designed for a 30,000 hour life with low fuel consumption and easy, inexpensive servicing, and offers highly efficient power production: 60kW nett at 2,100 r/min, and 75kW when turbocharged.
COMPLETED TRACTORS AT PILLMAN HEAD OFFICE picture not included
Local content by Value of the Pillman Tractor amounts to 93%. This can spearhead a drive into Africa of an African tractor, for African people and African conditions.
Compared to Pillman’s 93%, the local content of competitive tractors averages only 20%. This gives Pillman an advantage in terms of purchase price as well as spares when considering the effect of fluctuating exchange rates and import taxes.
PILLMAN FOUNDRY
Because of local content at 93%, the low exchange rates will also make it viable for Pillman to enter the export market and secure considerable growth for the company and its shareholders, as well as earn valuable foreign currency for the country. It is worth noting that several countries smaller than South Africa manufacture and export their own tractors.
3.) WHAT DO THE EXPERTS SAY OF PILLMAN?
"It is meaningful that a number of countries with either the same or smaller tractor population than South Africa already manufacture their own tractors, including Mexico, India, Brasilia and the Argentine." Furthermore:"The following advantages may be forthcoming from the establishment of a local tractor manufacturing industry:
A saving in foreign currency;
Provision of employment;
Utilisation of local materials;
Capital investment in local industry that would mean dividends and profits stay in South Africa;
Availability of both tractors and spare parts at all times;
Local construction to local conditions and mechanical skills, resulting in lower repair and maintenance costs;
Strategic and/or military advantages may be gained from the existence of such a specialized industry and highly schooled labour force;
The demand of certain raw materials and spare parts created by a local tractor industry will have an effect on other industries, acting as a stimulus to the South African economy."
"It would appear that this tractor is a product which merits encouragement …… without detriment to other firms in the market."
"Finance and government commitment would have to be obtained to proceed with full production."
A detailed cost analysis can be presented, and is available on request. Details on the proposed company structure are also available on request.
4.) WHAT DOES THE MARKET SAY OF PILLMAN TRACTORS?
During the development period, Pillman commissioned several market research studies by independent professional consultants.
The findings of the most recent reports were tabled during May 1986:
The concept of a South African manufactured tractor was exceptionally well received, eliciting comments such as:
"South Africans must support South African products."
"Yes, our own tractor for a true South African."
"Yes, I will support it."
While farmers interviewed will support a local manufacturer, the product must be of good quality, reliable, easily serviced and maintained on the farm, cheaper than imports, with spare parts readily available.
Asked if they would invest in a local tractor manufacturing plant, respondents remarked:
"Yes, our own tractor – I will invest."
"We must support our country."
"I will support them."
In order of importance, the following factors were the main criteria in respondent’s decision to purchase:
Service;
Reliability;
Spares;
Fuel consumption;
Price.
5.) WHAT DOES THE ECONOMY SAY?
The following graphs show the extent and seriousness of the current recession: picture not included
TOTAL TRACTOR SALES IN SOUTH AFRICA
While this graph paints a somber picture, a balanced perspective suggests that:
The economic view that a boom follows a recession.
Economists and business leaders agree that a recession is the time to plan ahead and put your house in order, for the better to follow.
The drought must and will pass, and South Africa must maintain food production in line with population growth here and in the rest of Africa.
Pillman does not intend to be the biggest tractor manufacturer in one quick jump, but will capture a significant percentage of the South African market by virtue of the unique features for that market and the company’s unique position in the country.
Our calculations show that between 20 and 30 direct job opportunities of current value will be created for every tractor manufactured in South Africa, and with a multiplier of between 5 to 10, the potential is enormous, not to even mention all the other benefits.
A massive opportunity exists to expand this local tractor into Africa and other developing countries.
6.) WHAT DOES AFRICA SAY?
Due to longstanding wars and instability there is a need to develop from the ground upwards, as per President Mbeki’s statement that Africa must start looking for solutions for Africa, from Africans.
The tractor can also become the transport backbone of the rural community throughout Africa, where the road systems are in poor condition and transport is urgently needed for development and upliftment.
We see this as a golden opportunity to support the new agricultural development policy for Africa, especially in view of NEPAD.
7.) SKILLS DEVELOPMENT
A whole new industry could develop around tractor manufacturing due to the interaction between the specific farming conditions in a country and the design criteria of a tractor.
Benefits in the labour sector will be that low skilled people will be employed and through training can work their way into the medium skilled sector, the medium sector can be trained and turned into highly skilled employees, reversing the effects of the "brain-drain".
America built their pride in the nation through development of sophisticated aircraft, Germany through motor vehicles of high standards. South Africa could do the same with this tractor, which is developed by South-Africans, for South-Africans.
It seems illogical for South-Africa to "give away" these huge job creation and skills development opportunities to Europe and America when this industry could be providing jobs for South-Africans. At present, there is under utilized capacity in South-African engineering and manufacturing industries that could easily be utilized to produce components for this tractor project.
The promotion of this industry could lead to large-scale sustainable job creation, not only with new tractor production, but also in the spares sales and after-sales service industry.
Increasing of rural area development through the establishment of tractor maintenance and servicing depots.
8) THE ECONOMIC VIABILITY OF THE PROJECT AND RELATED STATISTICS:
South Africa is currently importing approximately 4,000 tractors per year, at an estimated cost of R1 billion. These tractors are used in the production of food for approximately 40 million South Africans.
Therefore, calculation show that we need 40,000 tractors per year to feed 400 million people, and this only accounts for about 50% of Africa’s population.
According to the above calculations, the potential African tractor market is valued at approximately R10 billion per year.
Rather than importing expensive, complicated tractors, we could use this saving in foreign currency to develop Africa, rather than fuel foreign coffers.
9) ACTION TO BE TAKEN (from Pillman’s viewpoint)
As mentioned previously, we are in negotiations with a Black Empowerment Company to assist us in sourcing previously disadvantaged people to help build on this idea.
Government support would be needed in the following areas:
Every Local Municipality should participate in this venture by purchasing local South-African produced tractors.
Central State Departments should also support this initiative.
The Embassies should also be actively involved in promoting the African tractor as a more cost-effective alternative.
Central Government can assist by introducing an additional import duty on all imported tractors coupled with additional tender preferences for local manufacturers.
Subsidies could be paid to local manufacturers, to encourage the market growth and financial growth Africa so desperately needs.
Low-interest loans are to be obtained from the Industrial Development Corporation, or other financial institutions, to assist with the funding of development process and speed up the establishment and extension of the production facilities.
COMPLETED TRACTOR ON SHOW picture not included
For any further information, please feel free to contact us:
Office Tel: 011-823-3948 Office Fax: 011-823-1869
e-mail: [email protected] Alternative Fax: 011-826-6157
Mr. Francois Pillman (MD) Cell: 082-770-2349
Or visit our premises on the corner of Innes & Jansen Roads,
Jet Park, Boksburg