by Pneuma Academy of Excellence
How would supporting Local Manufacture assist our economy if at all?
- Job creation – by increasing our manufacturing footprint locally, we create jobs.
- Poverty alleviation, community development – for every person in work in SA, an additional 3.5 people benefit (secondary beneficiaries – family members and/or dependents).
- Social cohesion ultimately leads to political stability – very important in SA – employment of the youth (a potentially volatile sector of any country) is very important.
- LED (Local Economic Development):
- The additional capital injected into the economy by workers through disposable income plays a vital role in economic growth.
- Increased manufacturing has positive spin-offs upstream as well as downstream, because of the support-services injected into manufacturing from a number of suppliers and retailers, thereby further growing the economy.
- SMME development: As Cyril Ramaphosa pointed out in his SON address on 16 Feb 2018, a country’s economic growth is ultimately sustained by SMMEs. This is because from 65% and up to as high as 90% of new jobs are created by SMMEs – their sustainable growth and expansion of their businesses is vital.
- Flight of capital: Localisation can lead to huge volumes of cash remaining in the SA economy, as we will no longer be dependent on foreign imports and the subsequent flight of capital out of the country – this will also elevate our balance of payment wrt foreign debt – as Finance Minister Malusi Gigaba pointed out last year, growth and tax revenue are falling short of target in SA, forcing the government to borrow foreign capital (Gross government debt is projected to jump to around 60% of GDP by 2021).
- We must strive to reduce imports of product we already have the manufacturing capacity for, and only need to import what we do not or cannot produce locally.
- Therefore, a healthier balance of payment is a huge benefit since Localisation will ensure a greater injection of capital locally – with more money being available to, for example, SARS, leading to a much better budget deficit and a healthier economy.
- Higher import duties (possibly as high as 35%) on finished and semi-finished product may also directly contribute financially towards the redevelopment and revitalisation of our own manufacturing – this, coupled with financial incentives for our exporters will have a huge positive effect (the balance on payment would be immense – especially since only VIABLE exporters would be assisted).
- Trade and Industry Minister Dr Rob Davies, speaking at the 2017 Proudly South African Buy Local Summit, in Johannesburg: “Localisation is an important policy tool for industrial development in South Africa, and will assist in growing the economy and the manufacturing sector”. He highlighted that the policy stipulates that it is government’s preference that State entities buy locally manufactured goods.
- Davies also said that the public infrastructure build programme, which is operating under the slogan ‘Turn South Africa into a Construction Site’, has 17 strategic programmes that are both geographic and sector specific.
- “The programme has led to a significant increase in investment in building and construction. The industry has grown sevenfold since 2 000, with investment increasing from R55-billion to R380-billion,” he said.
- This is a very good example of how localisation can turn around a flailing unstable and limping economic sector !
- Therefore, the drive towards localisation is being pushed from THE VERY TOP.
- A healthy and positive view of the stability of SA going forward, with very attractive incentives to attract foreign capital and investment into manufacturing sectors, will prove justification for proper training, assist productivity, and give dividends from profit rather than interest for debt.
- This allows SA to prioritise on its own solutions, customised to our own successes rather than having to follow the strict rules of the international monitory establishment, for example, IMF, WB, etc. (the more we borrow – the more they dictate to us on what we must do).
- As easy as it may be to borrow, the massive repayments of interest come directly out of funds that can be better used for growing our infrastructure, the economy, with the view of SA becoming autonomous.
- For SA to survive and prosper, we need a very powerful industrialisation and a strong social conscience.
What suggestion’s do you have for the South Africa Manufacturers Association in order to grow the Industry ?
It stands to reason and it doesn’t take a rocket scientist to identify the following:
- The JMASA can meet with its executive, in order to gain inclusive perspective on industry requirements and
remedies necessary to transform from an importing to a local manufactured and exporting industry,
- The JMASA can meet with the ministry, requesting remedies and assistance with respect to favourable lending to exporters, subsidies towards manufacturing costs and tax incentives for companies large enough to be able to export.
- This will make it possible for the large companies to STOP wanting to produce for local market, as they may earn more by exporting.
- The above will have the following effect:
- As the large companies move up the ladder into exporting, they open up the space they were taking up when they were manufacturing for local markets.
- That space can then be taken up by the middle-sized companies to grow into, for the supply to local wholesalers & retailers.
- This will then further open up a space for small manufacturers to grow into.
- Consequently, this will then create a vacuum to be filled by a new genre of HDSA / SMMEs to enter into, towards becoming sustainable.
- For all of the above to be possible, a relationship between all stakeholders MUST be built and strong ties created.
- The industry is then revolutionised through a well thought out strategy of transformation and localisation.
- 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.
- 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.
- For the above to take place, serious honest channels of DIALOGUE need to be opened up.
- 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.