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SABS to invest R300m in laboratory infrastructure as part of turnaround

6th March 2019 BY: Terence Creamer
Creamer Media Editor

The South African Bureau of Standards (SABS), which is currently in administration, has initiated a process of renewing its laboratory infrastructure as part of a broader turnaround plan under way at the organisation.

The SABS was placed in administration by Trade and Industry Minister Dr Rob Davies in July 2018, following a rise in customer complaints, allegations of serious governance breakdowns and a decline in operational and financial performance.

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The Auditor-General attached a disclaimer audit opinion to the organisation’s 2017/18 annual report, partly owing to its inability to provide sufficient information to justify the going-concern status of its subsidiary, SABS Commercial. The organisation also recorded a precipitous fall in revenue from certification and laboratory services, however.

In 2017/18, the standards agency recorded a net loss of R48-million on the back of revenue of R516-million and it is expected to record another loss in 2018/19, despite the adoption of a turnaround plan during 2018.

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Acting CEO Garth Strachan, whose term, along with that of the administrators, has been extended by Davies to October 31, 2019, reports that in the first six months of 2018/19 the trading deficit was R24-million.

He tells Engineering News Online that the anticipated full-year loss is partly attributable to the additional costs being incurred to fill mission-critical posts and the investments necessary to address maintenance, equipment and skills backlogs.

Despite plans to bolster revenue and decrease costs, the SABS will break even only in 2020/21, before returning to profitability in 2021/22.

Strachan says the extension of the administrators term is driven by a desire to ensure that the turnaround plan is executed so that the SABS is fully stabilised ahead of the appointment of a new board and permanent CEO.

The investment in laboratory infrastructure, meanwhile, is being pursued as part of an effort to both restore SABS’s operational capabilities, as well as to support its future growth.

The investment is being enabled through fiscal transfers from the Department of Trade and Industry over a three-year period.

Strachan said that the SABS had budgeted R300-million for capital expenditure, of which R58-million had been approved for the upgrading of critical testing infrastructure in the petroleum, chemicals and materials, agroprocessing laboratories.

A further R80-million has been set aside for the digitisation of business processes, while R95-million is earmarked for maintenance of infrastructure, including the National Electrical Test Facility, in Olifantsfontein.

The investments are being pursued following the SABS’s recent sequential reinstatement of customer specific requirement testing, also known as partial testing.

The suspension of the service, together with a serious backlog in the issuance of compliance certificates, emerged as a major source of frustration, as well as client complaints, ahead of Davies’ announcement last year that he had dissolved the board and placed the SABS in administration.

“Our focus currently is on restoring relationships with our clients, which had, unfortunately, become adversarial in recent years,” Strachan reports.

He reports that the SABS is also looking to digitise key processes and practises to improve turnaround times for certification.

Concerted efforts are also being made to restore relations with industry with the aim of improving the output and productivity of the technical committees that are critical to the development of the country’s national standards.

“There is still a long way to go, but we feel that we are making good progress in placing this important institution back on a firm footing,” Strachan avers. 

EDITED BY: Creamer Media Reporter
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