‘SA’s transport infrastructure a major constraint to exports’

2014-05-25 06:00

Transport costs can be the difference between a locally manufactured product that is globally competitive and one that isn’t.

The Steel and Engineering Industries Federation of Southern Africa (Seifsa) says the inadequate and expensive transport infrastructure in the country is a major constraint to exports.

“Products can often be produced in a factory in Gauteng, at a world-competitive price, but after transport costs and inclusion of the risk of delivery delays, the competitive edge is lost,” says Seifsa chief economist Henk Langenhoven.

Seifsa have said more support needs to be given to exporters, especially through financing and a more strategic focus on export promotion.

According to Seifsa, exports as a percentage of production have increased in South Africa from around 10% in the 1970s to more than 60% over the last decade.

But imports have also risen as a percentage of the domestic market – from about 30% to as high as 60% lately – which means domestic producers have the minority share of the domestic market.

“Analysing this further shows that the more sophisticated the products, the more negative the trade balance. South Africa may generally have a comparative advantage, but not necessarily a competitive advantage,” said Langenhoven.

He also said basic ferrous (metals containing iron) and nonferrous (such aluminium and lead) exports have fared the best over time, while metal products, machinery and electrical machinery and equipment have had declining success in export markets.

Langenhoven also said commitments to diversifying African economies and building regional markets were important determinants for sustainable industrialisation in the medium to longer term.

Previously, Seifsa had expressed concern about the domestic outlook for metals and engineering, which are heavily influenced by prospects in the mining, auto and construction sectors.

“The mining sector is currently under siege from industrial action, the auto sector has revised its production forecasts downward and construction shows very little signs of recovering from its three-year slump. These weigh heavily on the medium-term outlook as the dynamics in the four sectors feed on each other,” explained Langenhoven.

But he did acknowledge that the latest version of the Industrial Policy Action Plan made more pronounced statements on export promotion than before.

And he stressed it was very important for the relevant players to procure their goods and services domestically.

“There is grave concern that the rolling-stock tenders awarded to foreign companies will have the same result. If localisation is not successful, the commitments to developing an export base could also falter,” he said.

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