Not a lasting solution

2018-11-14 15:07
Clive Ndou.

Clive Ndou.

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While the KZN government’s decision to step in at the Hammarsdale factory of towel manufacturing giant Glodina, which was on the brink of collapse, has brought festive cheer to some families, unfortunately it is not the correct response.

Economic Development MEC Sihle Zikalala and other government leaders’ intervention saved the jobs of 137 employees who were part of the 500 who had been left jobless following the company’s decision to halt production.

Zikalala and the other government leaders were able to convince the state-owned Investment Development Corporation (IDC) to buy the factory from its previous owners who had decided to close shop due to massive financial losses in recent years.

The IDC, which has so far invested R150 million in the project, has made a commitment to hit the ground running in a bid to ensure that all the 500 workers are rehired within a short space of time. On the surface, Zikalala’s intervention looks great, particularly given the difficulties being experienced by many businesses in the province, specially in the textile sector, which has shed thousands of jobs in recent years.

However, a dissection of the problems encountered by businesses in the province at the moment exposes some major flaws in the provincial government’s response to the Glodina problem.

In his address to guests at the official reopening of the factory in Hammarsdale this month, IDC chief executive Geoffrey Qhena said something which, even though it was said in passing, should not be ignored: “Generally, as the IDC we don’t own companies — this is an exceptional case.”

What Qhena did not tell his guests — perhaps out of fear of spoiling the jovial mood at the ceremony, is that the government and its entities have an awful track record when it comes to running companies.

Endless problems at companies owned by the government, ranging from South African Airways to arms manufacturer Denel, are a sad reminder of how appalling the government can be when it comes to running businesses.

By investing public money in what is supposed to be a privately owned company, the government is indirectly admitting that it has failed in one of its key mandates — that of providing the right environment in which private businesses can prosper and create much-needed jobs.

One of the main reasons that led to Glodina’s previous owner, Kap Industrial Holdings, halting production at the Hammarsdale plant is the government’s failure to create an environment within which businesses can thrive.

Had the IDC not pumped taxpayers’ millions into Glodina, the factory would have become another name on a long list of the province’s textile factories that have closed shop in recent years.

A friend of mine who inherited a family textile business in Durban but had to close shop two years ago following massive losses, recently shared his views on the textile industry.

“There is no way a local textile business can compete with shops that sell imported textile products from China. If you are a local guy selling a shirt for R100, it would be crazy to expect people to buy from you if they can get something similar for R50,” he said.

What he was complaining about is a problem that falls squares on the shoulders of the government.

The Department of Trade and Industry, which has the power to protect local businesses from the influx of cheap imports by, among other things, keeping import tariffs at levels that would make it difficult for countries to dump their products on the South African market, is simply not playing ball.

The problem faced by local industries is compounded by the fact that the bulk of textile products that come into South Africa enter through the country’s porous borders without any import levies being paid at all.

For a government that clearly has failed in its duties to protect local industries suddenly to assume the role of an entrepreneur, without first demonstrating that it can execute the basic tasks which the country’s citizens assigned it, is absurd, to say the least.

Had the government focused on its basic task of formulating policies that make it possible for local industries to grow, there would not have been a need for the IDC to invest R150 million in the Glodina project as the company would have been able to take care of its own business.

As long as the government continues to abdicate its core responsibilities, more businesses will close shop.

While the government’s intervention might help the 500 former Glodina employees go back to work, it is certainly not the kind of response that will bring a lasting solution to the job bloodbath being experienced in the province.

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