Manufacturing is a vehicle for creating steady jobs, so why isn’t SA doing it?

R6 billion was invested at BMW Rosslyn plant near Pretoria North to manufacture the BMW X3. Picture: Africa Ka Mahamba
R6 billion was invested at BMW Rosslyn plant near Pretoria North to manufacture the BMW X3. Picture: Africa Ka Mahamba

The world is currently confronted with the fourth industrial revolution that has brought about a wave of significant change with a ubiquitous impact.

Among these changes is the advancement of technology in the manufacturing sector Africa and more specifically the southern African region in which South Africa is foot printed.

Manufacturing in the Southern African Development Community needs to be internationally competitive for the economic boost of the 15 member states.

Addressing industry leaders and delegates at the Metals and Engineering Indaba, Dr Martin Davies, managing director: emerging markets Africa at Deloitte, said the more manufacturing plants that can be established in South Africa, the less inequality would be seen. He added that manufacturing was a vehicle for creating steady jobs.

Making reference to inequality, Davies pointed out that South Africa had a very high genie coefficient.

“Manufacturing, competitiveness and inclusion are essential for economic growth.”

Dr Raymond Patel, chief executive of merSETA suggested that it was possible to have good policy and put everything in place legislatively, but if South Africa didn’t deal with the fundamental issues that continue to threaten the economy it would lose out.

He sought to illustrate issues that render South Africa uncompetitive in manufacturing internationally.

“Spatial inequality is founded on the 1913 Land Act and we still deal with that by moving a few people to the urban areas and closest to the manufacturing spaces, we are not dealing with the real problems in South Africa.

“Human resource development inequality still manifests itself in our workplaces and hinders competitiveness.

“Economic inequality is another issue,” he said.

In South Africa, mining constitutes about 50% of our GDP yet our beneficiation is meagre in comparison.

Patel noted that the GDPs of SADC countries were largely based on mineral resources and agriculture.

“Except for South Africa and Mauritius, which have some manufacturing capability, the rest of SADC lacks in this regard. As a region we rely on imports rather than beginning to beneficiate and grow our own GDPs.

“Some of the challenges are about relatively undiversified economies. In our SADC markets we stick to the same thing from South Africa, Lesotho, Swaziland and Botswana. We are not leveraging on what we have and how to work with it,” he said.

Patel identified challenges that need to be addressed for manufacturing reform in South Africa.

“We have been plagued by skills shortages in South Africa and SADC at large, for a very long time and the policy might be there but giving actualisation to that policy still remains a problem.

“We also sit with a high level of access to capital and outdated technology.

“We are still caught up in the old systems and old technology which affect our competitiveness and our productivity.

“Lastly, there is an inadequacy of logistics and infrastructure within South Africa and the greater SADC region followed by a lack of infrastructure and the high cost of services,” he said.

Patel said we needed to transform our education institutions in South Africa and with 5% of the education budget allocated for TVET (Technical and Vocational Education and Training) colleges, he asked about business’s involvement in these colleges.

“In Rosslyn, the industrialised automotive industry in Pretoria, there is a TVET college teaching tourism and administration.

"Why is the college not teaching motor finance, motor finance and motor human resources? Why is business not demanding this? Why is business not involved?

"Business could create development and expose learners to the industry. We need to start making a difference.

“South Africa has been in the motor manufacturing for 100 years but we have not yet designed a single car. We are only in the business of assembling cars.”

In a similar vein, Garnief Badier, senior industry development manager, machinery, said manufacturing promotes technological catch up and industrial upgrade. He exemplified that China went from being cellphone assemblers, to currently producing their own cellphone brands.

“We should able to go beyond our competitive advantage of minerals and agriculture and be able to manufacture sophisticated goods which can be exported to the rest of the world.

“Manufacturing drives rapid economic growth. For instance, East Asia rakes in a manufacturing GDP of above 30% and grows fast because manufacturing has spillover effects due to gaps that entrepreneurs identify in the industry.”

Badier explained the significance of manufacturing in Southern Africa Development Community.

“Member states of the bloc have their respective policies, political contexts, cultural practices and economic structures.

"It remains with each member state to define its own industrialisation ambitions within their economic and political arrangements including the skills and capabilities of citizens.

"It’s essential to have a coherent and well-formulated industrial strategy, but obviously you can’t move from agriculture to manufacturing in one go.

“Industrial policies around the SADC region should promote linkages in regional value chains, for example, we (South Africa) have a decent mining equipment sector and we could cooperate with countries in the copper belt where South African OEMs [original equipment manufacturers] could export some of their manufacturing facilities to ensure a high level of local purchasing and local content in the region.”

Badier said the SADC bloc also needed to mobilise capital within the region for industrial infrastructure development.

“A good starting point for some of the member states would be to select at least one flagship infrastructure and industrial project to be implemented in a five-year time frame and be used as a basis for more projects.

"For example, South Africa is involved in world-class fourth industrial revolution developments in the aviation sector and in medicine.

“We should buy more from each other while being sensitive to the trade imbalances in the region because we don’t want a situation where, as a power house in the region, we just export everything into the region.

"In this way more regional economic activity can be fostered between member states while, at the same time, creating the institutions and economically operating infrastructure that will promote the structural industrial change that is required.”

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