Manufacturing industry calls for intervention tactics
Inconsistent policy and aggressive Chinese imports have shrunk local business considerably, writes Aneesa Fazel.
Did you know that vuvuzelas are no longer produced in South Africa? This was one of the points made, in a presentation by the Manufacturing Circle on Wednesday, to illustrate the changing circumstances local manufacturers face.
The organisation released its position document as well as the key interventions it believes are needed by government to support the manufacturing industry.
It emphasised once again its concern about cheap Chinese imports and the effects they were having on local manufacturing, which Circle chairperson Stewart Jennings said was an issue not being given enough attention in the media.
While acknowledging the government's commitment to support the interests of local manufacturers, the Circle said more needed to be done.
Executive director Coenraad Bezuidenhout said that even though manufacturing made a great contribution to the economy, it was under severe threat.
"Manufacturing in South Africa employs about 1.7-million people, accounts for 15% of gross domestic product and is among the top three multiplier sectors for value addition, job creation, export earnings and revenue generation for every R1 invested. However, since the beginning of 2008, 300 000 jobs have been lost. The negative situation in manufacturing contributed to the loss of 440 000 small businesses between 2006 and 2011".
He said that a "political intervention" was needed and believed the ANC needed to be aware of the positive difference it could make to local manufacturing.
Jennings said that the South African economy had grown after the recession in 2009, but job creation had not. "There has been a huge deterioration in imports and exports in South Africa between 2011 and June 2012, when imports drastically exceeded exports."
China has been the biggest exports to South Africa since 1988, sending in goods worth nearly R100-billion in 2011.
"Exporting to China is difficult, but coming into South Africa with their products is easy because of the free market. Chinese products come in 40% cheaper than the cost of South African products and this is due to unfair labour practices. We must put a stop to these reckless imports," said Jennings.
The Manufacturing Circle highlighted four goals to put South Africa on a job-rich growth path and enable the industry to compete globally.
The first is to offer a business environment that attracts investment in manufacturing and nurtures existing companies. This would be achieved by getting government to be coherent, co-ordinated and consistent on economic policy and regulation and the promotion and maintenance of the skills pipeline.
The second is for South Africa to be the gateway destination for exports to Sub-Saharan Africa and for South African manufacturers to compete domestically on an equal footing with imports. This, it believes, would be achieved by strengthening regional ties with key export markets and ensuring fair trade through the adjustment of tariff and non-tariff barriers.
The third is for South Africa to be a competitive beneficiator of its own resources.
And finally, for locally manufactured products to be preferred by South Africans and for them to have an excellent reputation by effectively promoting the benefits of "buying South African" to consumers, public and private-sector decision-makers and national investors.
The organisation also hopes that the ANC will make interventions in economic policy and regulation surrounding local manufacturers. It put forward proposals on monetary policy, proposing that "government should strengthen its reserve position (as it is currently below the adequacy range as defined by the International Monetary Fund)".
On industrial policy, government should "propose an electricity subsidy for manufacturers". On trade policy, government should "benchmark South African trade and non-trade barriers against peer countries and take much bolder postures in bilateral and multilateral trade negotiations".
On infrastructure and industrialisation, the Manufacturing Circle said: "We acknowledge government intent to use the infrastructure programme to support growth, but spending is too uneven and private-public partnerships still underutilised". And on local procurement, it proposed that government intensify efforts to ensure compliance from government departments.