Resource-based technology innovation in South Africa: Gunric and RGR valves

Abstract

Historically, valves have been sourced from European producers, especially German firms. This reflects industrial capabilities, coupled with the importance which the mines and other local customers attach to reliability. The repair of these valves by South African firms, coupled with immigration of engineers from Europe (particularly Germany) provided the impetus for local production. A combination of local demand linkages, reverse engineering and learning-by-doing, and ongoing product development and incremental innovation in making to order has underpinned the development of capabilities. We will return to the conditions underlying successful innovation and commercialisation after describing the two firms studied here. This case study covers two firms in different product niches. One firm makes ball valves for small-diameter pipes, the other makes butterfly valves for large-diameter pipes. Their experiences have been similar in certain respects. For example, both firms are small, with innovative activity based on strong engineering skills. Both firms also demonstrate the importance of the nature of local demand in stimulating the development of production capabilities. There are also important and interesting differences between them such as the choice of whether or not to purchase computernumerically controlled (CNC) machinery, and the related training decisions. Little institutional support has been received and testing is done in-house and with customers on site. Key obstacles to commercialisation of developments and exports are the cost of meeting international quality standards (ISO 9000 and PED), and the availability (and cost) of export finance. Section 2 reviews the innovations made by Gunric Valves, and section 3 reviews those made by RGR Valves. Section 4 makes a comparative analysis of the two companies in order to arrive at insights into the main factors underpinning the innovative activities, their commercialisation, the relationship to firm competitiveness, the role of institutions, and obstacles encountered.