An analysis of South African sawmilling competitiveness

Abstract

The South African sawn timber market supply and demand are in equilibrium and significantly associated with the local residential  construction market. During the great financial crisis (GFC), the local residential construction market contracted. This caused a reduction in sawn timber demand, price and margin. Subsequently, the competition between sawmillers increased and led to the closure of 41 mills. This study included a sawmilling competitiveness analysis for South African sawmills taking part in the Crickmay Intermill comparison from 2004 to 2017. The Crickmay Intermill comparison assumes that nett margin is the measurement for competitiveness. Spearman correlation tests were used to compare performance measurements with nett margin. This and other studies found significant associations between the implementation of value-adding strategies and competitiveness. Sawmills that effectively create more value from the raw material tend to be more competitive. In contrast with other studies, our research determined that people costs are significantly associated with competitiveness. However, like other studies, it was confirmed that labour productivity is not associated with competitiveness. This study argues that South African sawmillers can increase competitiveness by implementing value-adding strategies, implementing competitive remuneration policies and increasing the sawn timber usage intensity in South Africa.

Keywords: people costs, productivity, value recovery, volume recovery