Let’s find our strengths and flex muscles
The Economist recently ran an article on the Taiwan Semiconductor Manufacturing Company (TSMC), which controls more than 80% of the world’s computer chip market. Not only does this translate into great operating margins, but it is at the centre of Taiwan’s geopolitical survival. Most of TSMC’s strategic client base is in the US, four times that of its closer neighbour client base in China.
TSMC has ensured the survival of its home manufacturing base through this indispensable, very specific, economic positioning. The US provides Taiwan with military support while China regards it as part of its territory. A profitable peacekeeper balance, or at least a detente.
In a far less spectacular way, perhaps, there are lessons embedded in TSMC’s strategy that are valuable to all smaller players at an early, or fragile, stage of their development. TSMC got there on purpose. It wasn’t much more than a decade ago that Intel dominated the global chip market.
The essence of the lesson is simple: if you want to secure a place of leadership in business, you need to have a specific and determined capacity, and you’ll probably need the support of your government. In an environment of increased globalisation, smaller players need to carve out a place to play if they intend to be a pricemaker.
It is imperative for us in SA to recognise where we could become significant players, if not to the extent that we’re indispensable then certainly to where our independence is assured. We already have natural resource advantages at least in mining and tourism, which we should continue to nurture, protect and expand in our trade balance equations.
But that’s not enough. We have to go well beyond that, all the while being careful not to confuse isolation with independence. We will need partners in this — investment and trading partners — but, most importantly, we’ll require local common purpose between the government, business and labour.
Let’s start with an intense evaluation of our competitive strengths — those present already and those that could be developed.
The government must take the lead in shoring up those
identified industries through local incentive programmes, tax advantages, co-investment and employment strategies — all locally focused, but never in arrogant or nationalistic defiance of the natural or developed economic forces our more powerful trading partners could bring to bear. The result has to be a win-win, balanced, sustainable trading equilibrium.
Like many other countries, we have previously introduced economic development policies.
Let’s do that again — but this time with a focus on international competitiveness rather than regional survival. I was recently in a webinar where the importance of the relaxation of import duties on inputs to the export-driven textile industry in Mauritius was explained as a case study of how to underpin a local but export-driven business, in making that a competitive offering to the world.
As a successful, wise old business colleague used to say of good ideas: “Let’s do that then.” So often the examples of success out there have such obvious embedded constructs there seems little point in seeking out a strategy that doesn’t emulate them.
We can’t be the best at everything, and sometimes, given our relative size, it would be futile to try. But we can punch above our weight in some areas. “Natural specialisation”, encouraged and nurtured as it may sometimes be required to be, is at the heart of participative commerce. Absent common purpose though, and a long-term strategy, and the patience and determination to see it through, we will remain in the main price-takers to the world economy.
That will not attract the foreign direct investment we so desperately need to grow our economy fast enough to overcome the very real social challenges we face today.
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