Business

Manufacturing Circle says sector is in crisis

Penwell Dlamini

The South African manufacturing sector is in a crisis which requires changes to the country's policies, says the Manufacturing Circle.

The Manufacturing Circle has made recommendations to the government to improve the sector. (M&G)

"The sector has lost 300 000 jobs since 2010. The recession has been biting. We have also had a recession in the construction sector which has hit us severely, and then the flood of imports," chairperson Stewart Jennings said in Johannesburg on Wednesday.

"Since 2010, we've seen an enormous flood of imports from China which affected our businesses. At the same time our exports have been reduced because of the recession in Europe."

He was briefing reporters on a meeting between manufacturers and the ANC's economic transformation committee. They discussed ways of growing the sector and creating new jobs.

Jennings also attributed the loss of jobs to electricity price increases. "We've had a 200% increase in electricity in five years. No manufacturer can ... [deal with] a huge increase like that when your prices are actually coming down because of the rand. Most of the manufacturers use a significant portion of electricity."

He said Chinese imports cost 40% less than the local market price. "Some of the prices are ridiculous. They are below the raw material costs. It just cannot be done [competing with such prices]."

In the past the manufacturing sector made up 22% of gross domestic product, but had shrunk to barely 15%, Jennings said. The sector employed 1.7-million people in South Africa. The government had to do something to curb the impact of Chinese imports on the sector.

"First thing, our government has to put some duties on [imports], engage with China as part of Brics [Brazil, Russia, India, China, South Africa group of developing nations] and say we are a developing economy. The most important part of our economy is employment, so please stop these cheap imports into the country," Jennings said.

"We have to do something, otherwise we are going to continue to have more and more unemployment."

Another change in the South African economy was that more people were buying cars than were taking out mortgages. At least 72% of the vehicles sold in the domestic market were imported. This did not help the vehicle manufacturing sector, he said. "Some of the orders for vehicles produced in South Africa have been cancelled because of the recession in Europe."

Jennings said employers in the sector were prepared to pay higher wages, as long as production improved.

The Manufacturing Circle proposed that South Africa do the following:

  • offer a business environment that attracts investment and nurtures existing manufacturing companies,
  • be the gateway for exports to sub-Saharan Africa, and
  • develop an excellent reputation around the world. – Sapa

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