Engineering clusters take shape to provide more opportunities by working together.
Some of the biggest names in New Zealand industry – Fisher & Paykel, Gallagher Group, and Rocket Lab among them – owe their reputations to engineering and manufacturing excellence.
But it’s a sector that hasn’t seen a lot of love in recent years, with the pandemic and sluggish economy of 2023 leaving an already-depleted manufacturing industry in the doldrums.
“Miserable” was how BusinessNZ director of advocacy Catherine Beard described the manufacturing sector’s progress in December, when activity contracted 3.4 points for the quarter to 43.1 on the Performance of Manufacturing Index (PMI).
But engineering and advanced manufacturing are at the heart of efforts in the deep south to revitalise manufacturing by playing to the region’s traditional strengths in precision engineering, heavy engineering and metal work.
Engineering is also crucial to manufacturing efforts ranging from medical devices to the burgeoning aerospace sector, and agritech machinery, in other parts of the country, with industry 4.0 techniques such as 3D printing and robotics transforming how hardware is made.
A desire to reduce economic reliance on the Tiwai Point aluminium smelter in Southland and an emerging opportunity to take advantage of global supply chain changes resulting from growing geopolitical tensions, are central to the aims of two fledgling engineering and manufacturing clusters in the lower South Island.
The Southland and Otago Regional Engineering Collective (SOREC) got underway in 2019 with an injection of $500,000 of Provincial Growth Fund funding, and significant industry contributions.
Last year, with the initial PGF funding coming to an end, Southland split off to form the Southland Engineering Cluster, run by the Southland Business Chamber. The Southland cluster is funded out of an $8 million ‘just transition’ government funding package aimed at developing economic opportunities beyond Tiwai, and which also saw ongoing support for COIN South, the Southland startup and innovation ecosystem, as well as the local aquaculture industry.
An additional $100 million is funding green hydrogen projects in the region, via rebates for consumers of energy investing in the technology.
So why the split with Otago? Southland Engineering Cluster manager Brendan Gray puts the move down to proximity between businesses being crucial for effective collaboration.
“It’s a two-and-a-half hour drive from Dunedin to Invercargill. Cluster expert Ifor Ffowcs-Williams told us that ideally you should be in the vicinity where you can finish work and meet at the pub for a beer,” says Gray.
The Southland Engineering Cluster and SOREC will continue to collaborate on promotional and educational initiatives, adds Gray, but the government funding Southland secured last year was earmarked for the Southland region.
There are around 100 engineering firms and associated suppliers in Southland, according to Gray, the majority of them based within a 10-kilometre radius of Invercargill, but with small clusters in towns like Bluff, Winton and Gore.
“Some are more heavily reliant on Tiwai than others,” he says.
“Tiwai is responsible for 6.1 percent of Southland’s GDP. There is no one industry that will come in and take over. It will need to be multiple opportunities.”
The Southland Engineering team has drawn inspiration from HunterNet, which was established in the early 1990s when the Newcastle Hunter region of New South Wales faced an economic crisis with the looming closure of the BHP steel mill and the related decline in shipbuilding activity.
Over 30 years later, HunterNet offers networking, bid/tender advice, and export leads to cluster members, who range from large heavy engineering firms to engineering software startups.
"They knew BHP was closing,” Gray says.
“With Tiwai, the million dollar question is when? We can either sit around and do nothing or build this thing in tandem. Tiwai is still operating, which is great, but we need to bring new industry into Southland.”
Gray points to HunterNet’s motto – the power of many – as a rallying cry for Southland engineering firms too. From co-investment in machinery that can be shared by cluster members, to joint venture bids for large contracts, he sees scope for more extensive collaboration among firms that are at times in direct competition with each other.
“You could have a joint venture of four companies going after a contract, with perhaps one company taking the lead,” he says.
“For sheet steel fabrication, it doesn't make sense for everyone to go out individually and buy the machinery. Everyone’s intellectual property can be protected, everyone can get their slice of the pie. We can keep work in Southland and tender for work out of Southland.”
The same philosophy underpins the work of SOREC, says Sarah Ramsay, the CEO and co-owner with her husband Alex Ramsay of precision engineering firm United Machinists. Ramsay is also a director of SOREC.
“There’s acceptance by the industry that, actually, the whole is bigger than the sum of the parts,” she says.
Defence contracts a big opportunity
"We've got much larger customers that are starting to look at Dunedin because there’s a supply chain here that can support a whole contract as opposed to just having one relationship with one company,” she adds.
United Machinists, which specialises in precision machining of metal and composite components, has recently started exporting to Australia and is eyeing up leads in the US this year. It has invested in machines for 3D printing and metal anodising.
“We've had a lot of interest from the Australian defence industry. Defence is a dirty word to some people, but it is an enormous industry,” says Ramsay.
“The split between the US and China on manufacturing is a huge opportunity for New Zealand,” she adds.
SOREC aims to support engineering firms in collaborating to tender for big contracts from overseas, but also wave the flag for Otago engineering expertise locally.
“There’s still that perception that offshoring is the first option,” Ramsay points out. “We can actually do a lot of it here.”
Building the pipeline of engineering talent is a priority for both clusters. Ramsay says recent discussions with Te Pukenga and Hanga-Aro-Rau, the Manufacturing, Engineering and Logistics Workforce Development Council, had resulted in a new CNC (computer numerical control) machining qualification being developed. CNC machines are crucial to precision engineering.
SOREC Academy, which connects high schools in the region with engineering firms, has two more years of guaranteed funding, says Ramsay. She considers the academy to be one of the cluster’s most successful initiatives.
“The students don't just perceive manufacturing engineering as some blokes in overalls getting dirty in a workshop,” she says.
“A lot of girls' schools are reaching out now as well. Three or four years ago that never would have happened.”
Engineering startups are also emerging to join more established firms. Wanaka-based RaceRanger has spent several years developing an electronic drafting detection system for high-performance bikes used by triathletes. Its devices will be used at pro-level triathlon events this year. Dunedin-based Bison, founded in 2015 by brothers Greg and Mark Fahey, makes equipment for lifting and loading shipping containers, which is used by customers all over the world.
Long term sustainability of the Southland and Otago clusters remains an issue, with both eyeing up membership schemes to support the cluster’s ongoing operations, as well as securing sponsorship and grants.
The Advanced Manufacturing Industry Transformation Plan, which was recently put on hold by the new coalition government, was widely seen as an opportunity to give critical mass to efforts to develop high-value manufacturing nationwide.
“One of the primary initiatives was regional network funding,” says Ramsay. “We have submitted to the new minister of small business and manufacturing, Andrew Bayly, that that still needs to be a priority.”
In Southland, while the closure of Tiwai Point triggered the engineering cluster’s formation, the fact remains that the smelter’s owner, Rio Tinto Group, could remain an important customer for local engineering firms for years to come.
“If they manage to secure a long-term power deal, they may pull the trigger for a lot of work there,” says Gray.
“A large reclad project at Tiwai would be a perfect opportunity for three or four engineering manufacturing services to get together and tender for it.”
Either way, the ‘power of many’ could be the key to seeing Southland stare down economic uncertainty.
Peter Griffin is a Wellington-based technology and science writer, media trainer, and content specialist working with a wide range of media outlets and tech companies. He co-hosts The Business of Tech podcast for BusinessDesk and is the New Zealand Listener's tech columnist. He has a particular interest in cybersecurity, Web3, biotech, climate tech, and innovation. He founded the Science Media Centre and the Sciblogs platform in 2008.
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