SA is no longer a bread basket

2009-08-06 00:00

ALMOST a year ago, when we began to feel the pinch of declining consumer demand, cancelled orders, etc., an Indian diplomat predicted that the Indian economy will contract from nine percent growth to about five percent growth in terms of GDP, and that, in all possibility, the economy will begin to recover in the last quarter of 2009. In reply to a question “how will India maintain a growth of more than five percent, when the rest of the world is preparing for a recession?” the diplomat said that India produces more than enough for its own consumption.

Now isn’t this a good position to be in as a developing country?

Regrettably, we cannot say the same of our economy. I am neither an economist nor an analyst, but noting what economists and analysts have been saying, we have lost the urge to produce. The roaring demand from China, India and other developing and developed countries for our minerals generated massive revenues and boosted our GDP growth to an average of around three percent to four percent over the past 10 years. This increased liquidity encouraged massive consumer spending on mainly imported merchandise, since we do not produce our own. I am told that our iron ore and other additive minerals exported to China will be made into steel pipes by Chinese manufacturers and then brought back to South Africa to be used for the new fuel pipeline from Durban to Gauteng. This tells us that we are incapable of manufacturing pipes or of adding value to the many other raw materials that we are blessed with.

It is sad that we have become a net importer of food. South Africa and Zimbabwe were regarded as the food baskets of Africa. In KwaZulu-Natal, we require almost two million goats per annum for traditional purposes alone. We only produce 200 000 locally and import the rest to meet our demands. The KZN midlands, for decades, produced the best beef and dairy for all our needs. Today we import dairy and the Cato Ridge abattoir is closed because there is a short supply of animals.

Business Report recently ran a story noting that almost 60% of the cables used by Eskom and Telkom are imported. South African cable manufacturers are not benefiting from local orders because our procurement system allows agents to tender and source goods from wherever and from whom-ever. This system creates wealth for the agents but destroys the local industry. I am sure many other sectors are affected by this practice as well. Clearly this practice presents a huge threat for local growth and job creation.

In our country, like most developing countries, 60% of our people are located at the bottom of the economic pyramid. This means that 60% of our people earn less than R16 per day ($2 as per World Bank stats). In his book, The Fortune at Bottom of the Pyramid, (eradicating poverty through profits), economist C. K. Prahalad describes various projects, such as the innovation of Bangladesh’s Grameen Bank, India’s ITC’s eChoupal, ICICI bank’s micro-financing model, the Annapurna Salt Story and many other innovative initiatives that successfully raised the status of the bottom of the pyramid (Bop) consumers in their respective countries. Are we innovative enough to compete with such global practices? Not yet, I am afraid. Our mind-set has not changed. We are stuck in the belief that consumers can only be found in the middle and the apex of the economic pyramid. We are also stuck in a mind-set that entrepreneurs will not succeed in business without contracts with the government, yet we have a market of over 45 million consumers. Shouldn’t we start to find innovative, effective and affordable means to produce goods rather than import them, for this market? This market presents a better business opportunity than trying to endlessly chase after government contracts.

Perhaps we are not competitive enough. This then raises the question: Are we paying too much because of:

• a failing and rather expensive road transport system;

• an inefficient rail system;

•  relatively high telecommunication costs;

• high banking costs;

• a labour force that is not sufficiently skilled and productive by global standards;

• electricity and other infrastructure that is becoming more expensive and less reliable; and

• private monopolies, etc?

The summit should provide all of us with a marvellous opportunity to talk about all of this and more. • Babu Baijoo is the deputy president of the South African Chamber of Commerce and Industry, and director of the Pietermaritzburg Chamber of Business. He writes in his personal capacity.

• The summit is being co-hosted by the KZN Department of Economic Development and Tourism, the Pietermaritzburg Chamber of Business, the Durban Chamber of Commerce and Industry, the Zululand Chamber of Commerce and Industry, and Cosatu.

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