SA needs to think big

2018-10-11 15:08

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The opening of Sumitomo Rubber South Africa’s new truck and bus tyre factory in Ladysmith last week was a great moment for industry in South Africa.

A gigantic R970 million was invested to build a new factory. This was superseded by more than R1 billion that was spent to upgrade the existing factory since 2014.

It has been by far the biggest investment in that region for many years.

Japan’s Sumitomo Rubber Industries is congratulated for bringing new jobs and economic opportunities to a region desperately short of both.

On route to Ladysmith, one drives past the Ezakheni industrial area, and its rows of empty, dilapidated factory buildings that are testimony of the extent of the jobs holocaust that low growth, policy blundering and deindustrialisation have wrought upon that part of the world.

In this context, Sumitomo’s investment, their only truck and bus tyre factory outside of Asia, seems even more remarkable.

It made me realise just how much resolve it must have taken to create those 1 100 direct jobs at the factory, and to bring a new factory up to the standard where it can produce products that meet demanding international quality specifications.

My understanding very early on in this expansion was that the municipality was very supportive.

Years ago it made land available to Sumitomo for the new factory, adjacent to the existing factory, virtually free of charge.

I can’t help but compare this with an interview I had last year with former Msunduzi municipal manager Ray Ngobo.

A big, new retail and commercial development was planned for the site of the old polo fields adjacent to the Invesco Centre in Pietermaritzburg.

Hundreds of permanent jobs would have been created.

Admittedly the tender process was marred with allegations of corruption from municipal officials.

But it was made clear to me at that interview, that actually, the municipality had reconsidered its plans and was no longer interested in selling the land.

In fact, the successful tendering company, which had spent millions of rands preparing the tender, was not even formally notified by the municipality that the project had been put on hold — they had to read about it following The Witness’sown inquiries.

It is this kind of chopping and changing of government and municipal policies that wreaks havoc on investment planning.

Msunduzi’s flip-flop on this project is just one small example of what are termed structural problems in the broader economy.

South Africa has deep structural problems that scare away developers and industrialists from setting up new facilities and plants.

The other major fault lines that affect investment include infrastructure deficits, red tape, regulatory uncertainty, rigid labour markets, skills shortages and low education outcomes.

Many commentators have, through the years, said South Africa will not reach its real economic potential unless these problems are addressed. And they will take years to turn around.

President Cyril Ramaphosa’s latest economic stimulus package does attempt to tackle some of the structural problems. For instance, a more favourable visa regime will not only stimulate tourism, but it is expected also to make it easier to bring in scarce skills.

Plans to establish an infrastructure fund are a step in the right direction to address infrastructure shortages, while some interventions in education and health, and investment in social infrastructure in municipalities, are planned.

This package was mostly well-received by local commentators, although some analysts said it is just not enough.

My own view is that it is a band-aid.

The economy is in such a downward spiral that it will take years to turn around.

In the meantime, while the government’s ability to provide services and infrastructure worsens, the massive wealth inequalities, joblessness and other societal problems such as crime can only get worse.

It is, frankly, an emergency that requires a commensurate response.

Sumitomo Rubber Industries had the right approach. Plan for a new world-competitive South Africa.

For instance, don’t just plan to improve education outcomes a little bit.

Determine what it will take to get our education right up there with the best in the world. Bring in an organisation such as the World Bank that has years of experience and research in this field.

Commit to spending however many funds towards it as required. Run up the debt if required.

Cut back on other government spending priorities further if needs be.

Get a firm commitment from the private sector to support the plan, with appropriate public-private participation options.

Then implement the plan relentlessly until the job is done.

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