SETP No. 14 The Economic Value of Incremental Employment in the ...

6 The Macro Economic Impact of the Local Manufacture of
Construction Equipment
6.1 The objective of this chapter is to determine the macro economic impact of the
local production of construction machinery.
6.2 Bell Equipment, based in Richards Bay KwaZulu Natal, is a local manufacturer of
construction equipment. Bell Equipment had, in principle, agreed to discuss the
research project and assess their role in the investigation. Unfortunately, given
the competitive nature of the industry, there was less enthusiasm once the
degree of disclosure became clear. Other industry players such as Bateman
Earth Moving Equipment, Barlows (Caterpillar) and Komatsu were approached
with a similar lack of success.
6.3 Because of the above constraints the investigation focussed on one form of road
construction equipment – the wheeled loader. This particular piece of equipment
was selected as it is one of the most important areas where we are able to
substitute labour and machines in road construction, on the one hand, and
because it is an important locally made machine, on the other.
Description of Methodology
6.4 In the first instance the methodology is the identical to that applied in Section 5.
The constituent capital parts of wheeled loaders were disaggregated into key
components. These components were in turn reallocated to SIC code. The
potential range of import component was estimated. Finally, using input output
multipliers, the macro economic impact of the local production of a wheeled
loader was estimated. The model calculated the corresponding direct, indirect,
induced and total economic effects for each imported content scenario.
6.5 The model assumes that no local macro economic benefit is derived from an
imported component. For example if tyres were imported, the rand value for tyres
in the input spreadsheet was entered as zero, thereby nullifying any effects that a
change in demand for tyres would have on the tyre manufacturing industry and
on the South African economy as a whole.
Data
6.6 To accomplish the revised research objectives it was necessary to establish:
• The cost of wheeled loaders similar to those manufactured by Bell
Equipment.
• An estimate of the cost breakdown of the above wheeled loaders i.e. the
contribution of the various components to the total cost of a wheeled
loader.
• An estimate of the probability of a particular component being imported.
6.7 Table 6.1 provides some key information on price and bucket capacity of a
selection of wheeled loaders that are available in South Africa. Three makes of
wheeled loader are reported in the table – Komatsu, Caterpillar and Bell. These
range in size from 10 ton machines, to 13 ton machines and finally to the colossal
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