Jewellers' Network

Pneuma: Questions & Answers Part 3

By Michael Pneuma

Could you give us some financial stats regarding the implications of locally manufacturing as opposed to Importation?

Localisation has got huge advantages over imported product. Some examples of the benefits:

  1. Importers need to have cash up front in order to purchase overseas – because of the relationships developed locally by manufacturers with local wholesalers, payment terms of 30 to 90 days from invoice are common – thus, your cash-flow is healthier, because you will be able to sell product before you actually pay the supplier.
  2. With a healthier export market FROM SA OUT, since the same rules may apply, there will be a faster, healthier flow of cash that will also beneficiate the downstream industry in SA.
  3. Transport costs of bringing in product too regularly also means that Importers need to purchase more product – they hence require more capital, creating possible cash flow problems – this may also lead to “dead stock”, with an added headache being that faulty items cannot feasibly be returned – thus, local business means that these issue can be dealt with faster, with repairs & replacement (after-sales service).
  4. Therefore, we also positively affect our carbon foot-print.
  5. Then there are the administration / paperwork headaches of importing.
  6. Foreign exchange fluctuations also add to the problem, as pricing of product becomes volatile.
  7. The local taxes / vat etc. the importers need to pay on imports is another disadvantage.
  8. The equalisation of the rand to the RMB over the last few years makes it attractive NOT to import, but to increase export.
  9. Your transport costs visiting overseas suppliers, jewellery fairs, etc. is very high.
  10. Your product hits the shelves much faster when locally purchased – it’s speed to market is a huge plus.
  11. The cost of visiting overseas suppliers is huge.
  12. Exchange rate fluctuation may also negatively impact the stability of your operation.
  13. Imported stock also means longer supply lines, if we use shipping (cheapest option) as it can take as long as 6 weeks before reaching customs.
  14. Air transport is faster, but more expensive.
  15. Then, there are the possible customs delays, so turn-around times are slow, with an impact on your cash-flow.
  16. As for the quality, or SA hand-made jewellery is of superb quality – we can make exclusive jewellery exactly to customer specs.
  17. Purchasing locally also means that we can purchase less, in accordance with market needs and cash-flow – this is a much more dynamic and faster process.
  18. There is also more flexibility, because of the fast turn-around in the product that sells, with faster turnaround.
  19. Also, tourists will prefer buying local goods: “Made in SA / Proudly South African”, especially with the weaker Rand – an added bonus is they can claim back the VAT paid on purchases, on leaving the country.

How would you suggest we create jobs for skilled Jewellery Artisans?

  1. Grow the industry as per suggestions above.
  2. Ensure training is undertaken to a very high standard – there is a formula to do this, as has been proven by the PAE’s 90% placement rates of graduates.
  3. Formalise the successful, proven training MODEL across the sector – successful training is successful training – let’s share our IP with other manufacturers, in order to assure top-notch-quality, standard, consistent, measurably-benchmarked and universally accessible training across the board – we then slowly start filling the pipeline with highly-qualified artisans – uniformity is KEY.
  4. Once a large pool of manufacturers is training to internationally acceptable standards, everything falls into place.
  5. Create and maintain healthy constructive dialogue within the industry – we need cohesion; we need stakeholder alignment – this is KEY.
    1. That space can then be taken up by the middle-sized companies to grow into, for the supply to local wholesalers & retailers.
    2. This will then further open up a space for small manufacturers to grow into.
    3. Consequently, this will then create a vacuum to be filled by a new genre of HDSA / SMMEs to enter into, towards becoming sustainable.
    4. For all of the above to be possible, a relationship between all stakeholders MUST be built and strong ties created.
    5. The industry is then revolutionised through a well thought out strategy of transformation and localisation.
  6. All stakeholders must align and do their best in trying the utmost to assist in the regeneration of our manufacturing sector, in all industries including jewellery, If this doesn’t happen, the future will remain bleak, in terms of crime, and the very real risk of a revolution of by the youth – they have not received the quality of education and training required, in order to be internationally competitive in the workplace – we must change that.
  7. All stakeholders must work together – government (SADPMR, DTI, CoM, DMR, SARS, etc.), manufacturers, training providers, importers, the media and also the JCSA and JMASA, for transformation to effectively take place – otherwise, SA will not be able to benefit as an exporter and will fail to benefit through globalisation & preferential agreements such as AGOA.
  8. For the above to take place, serious honest channels of DIALOGUE need to be opened up.
  9. The JMASA / JCSA may be in an ideal position to facilitate meetings between the wholesalers & retailers, with the manufacturers – we need to open the channels of communication and create TRUST – we’re all on the same side here.