Sumitomo Rubber SA – Driving International Investment

Brochure

The Japanese Sumitomo Rubber Industries, Ltd (SRI) group is one of many multinational corporations bringing its products to Africa. As the African arm of the fifth-largest tyre manufacturing company in the world, Sumitomo Rubber South Africa demonstrates some important lessons for local and international companies operating within the continent’s varied markets.

 First established as an overseas division of the British Dunlop company, the company that would become Sumitomo Rubber eventually expanded overseas in its own right, coming to operate multiple plants internationally, including several in Africa.

The company has sales offices in sixteen countries worldwide and its overarching group comprises more than seventy companies dealing in tyres, sporting goods and industrial products. The corporation came to Africa in 2013 after its acquisition of Apollo Tyres South Africa, subsequently renamed Sumitomo Rubber South Africa (PTY) LTD.

Investment and expansion

The company’s primary business is the manufacture, distribution and sale of high-quality and SUV tyres as well as passenger car tyres, manufactured at its plant in Ladysmith, KwaZulu-Natal. The plant was purchased by SRI as part of its $60 million deal with Apollo Tyres in May 2013, also granting Sumitomo control of the Dunlop brand for worldwide use.

In 2016 they began a large-scale two step upgrade and expansion investment programme, investing R2 billion in upgrades and expansions to the Ladysmith plant as part of phase two. Phase one, a period of modernisation in 2014 that cost R1.1bn, is already creating new job opportunities in the area, with a total of one hundred and twenty new skilled jobs created and many already filled. Phase two will create a further three hundred jobs in the area, increasing the plant’s total workforce to more than twelve hundred, and introduce the manufacture of heavier-grade bus and truck tires for commercial customers. It’s planned to cost just R910 million and will replace the current import-based supply chain that brings in commercial tyres from SRI’s plants in Japan and China.

This development is part of the Automotive Investment Scheme run by South Africa’s Department of Trade and Industry, combined with a Tariff-free Trade Agreement (T-FTA) intended to enhance South African foreign trade. It’s been hailed as a great example of South African businesses and government agencies working together.

SRI’s Chief Executive Officer Riaz Haffejee welcomed the deal, stating “we will continue to support government with innovative solutions and constructive engagement to overcome regulatory challenges and impediments crucial to our industry and the pursuit of employment generating, high growth and competitive industrial and manufacturing initiatives.”

Social responsibility

Sumitomo Rubber South Africa (PTY) Ltd runs multiple corporate social investment programmes, based around an understanding of the deep impact its actions can have on the society in which it operates. Its social investment programs revolve around entrepreneurship development, education, skills development and health.

The company’s Tires For Good donation program is its most straightforward CSR scheme. It involves donating tyres to non-profit organisations, charities and charitable initiatives, worthy NGOs and public beneficiary organisations, helping them to stay mobile and reducing their operating costs.

Tyres Can Do More is more environmentally focused, recycling and reusing old tyres and waste materials while also helping with skills and enterprise development in peri-urban Ladysmith. Waste material from the plant is gathered from the SRSA factory and given to Eyethu Craft, a local community group assisted by the non-profit skills agency Africa! Ignite, who turn them into gift items and domestic goods for effective waste upcycling.

Sumitomo South Africa also operates a vegetable garden at the SRSA factory, tended by staff. Vegetables grown in the garden are donated to local schools and daycares. While these are all top-down initiatives, there’s also a strong culture of staff volunteerism, with staff encouraged to provide time and resources towards good causes in the community and beyond.

Working in South Africa

Sumitomo Rubber South Africa sells primarily in South Africa, although it is looking to boost its international export presence. Like most other South African firms, the company’s investors and leadership have been wary of the country’s political issues and the lack of stability they can cause. CEO Mr. Riaz Haffejee laid out the decision-making process for investment in an interview with Business Day Online:

“Politics we can’t influence. We would like it to be a lot better, certainly more stable and a lot more predictable, but I don’t think politics will be that way, certainly not now and for the foreseeable future, but having said that there’s still a market out there which requires our investment for us to make the most of it.”

Other elements of South Africa’s struggles have been more positive for Sumitomo Rubber South Africa in particular. Because it’s actually producing tires in South Africa itself, the company has benefited from some areas in which the rest of the economy has suffered. Haffejee expands: “one of the things that’s been on our side from the manufacturing point of view certainly is that the Rand has devalued significantly, and that’s provided us with a little bit of breathing space in terms of having more demand for locally-manufactured tires because of a drop in import demand.”

World leaders

80% of the factory’s output is Dunlop branded, and the Sumitomo corporation are the world leaders in selling Dunlop products. As a result, Mr Haffejee said his company’s purchase by the multinational in 2016 was positively received and unlocked new opportunities: “for us it was like coming home, and we now had access to a lot of deep technical advice, knowhow, manufacturing know-how, sales know-how, and although we had done a pretty good job in South Africa and in some of the export markets we worked in, we felt that was quite a big feather in our cap to have them on our side.

“When they saw our potential in our markets, particular with original equipment, with Africa, and also with some product sectors that we had not competed in before, they understood than an investment was worthwhile.”