Localisation mirage will be our ruin
Iwas going to use this column to try to begin a conversation about how SA should be responding to the beginning of the end of the damage the virus has done to us. The government was in one way rather pleased about the pandemic because it thought it would provide it with an opportunity to recast a “new economy” from the ruins it imagined the virus would leave behind.
Sadly, things haven’t turned out that badly and the government finds itself implementing industrial policies based on a seismic event that only ever existed on paper. Yes, we may get a third wave, and yes, the virus may disrupt our personal lives for years to come. But an industrial watershed it is not.
Then I saw a report dated Tuesday from the SA Government News Agency, which I didn’t even know existed. “Government in talks to localise more products in manufacturing,” read the headline. The story quoted small business minister
Khumbudzo Ntshavheni saying her department was “in talks” with the department of trade, industry & competition (DTIC) “to designate more products under the 100% local content category to support SMMEs [small, medium and micro enterprises] in the local manufacturing sector”.
My own 100% local content guarantee to you is that Ntshavheni doesn’t know what she is talking about. That won’t stop her, of course.
“Ntshavheni said SA runs an open economy,” read the report. “However, the DTIC designates certain products for 100% local content, which means that products that are produced in other countries in certain categories cannot be allowed into SA.
“We are working with the DTIC to designate more products for 100% or 80% local content to minimise the entrance of other products in the country. In addition, we are working with Revenue Service and customs to make sure that those products that are designated for 100% local content are not allowed in our shores to protect local companies.”
Ntshavheni, if accurately reported, is almost childishly artless. She proposes breaking the most basic rules of the World Trade Organization, where SA has done so well on vaccine patent waivers.
Ntshavheni is close to President Cyril Ramaphosa. She replaced minister in the presidency Jackson Mthembu after he died earlier in 2021. Reports identify her and communications minister Stella NdabeniAbrahams as two ministers Ramaphosa won’t lose in a cabinet reshuffle despite their weaknesses because he needs their political support in
Limpopo and the Eastern Cape.
Ramaphosa may have seen off suspended ANC secretarygeneral Ace Magashule, but that doesn’t mean his agenda for reform is suddenly free and useful. In fact, if we are talking about economic reform at all it threatens to stall, leaving the local economy structured as it was before the pandemic. That, in comparison with the fantasticated dreams of an Afrikaner nationalist siege economy that makes everything for itself, is way more preferable.
The sad fact is that the small business minister is not alone. Over at the department of trade, industry & competition a more sophisticated Ebrahim Patel is also gripped by the same siege fervour, and it is fascinating to understand just how deeply rooted in the ANC and the “progressive” Left is the notion that SA somehow committed a grave error after becoming a democracy by opening its borders to the global economy.
This new industrial nationalism is spurred on by Donald
Trump and the Brexit campaign in the UK. At its heart it is nationalism parading as the obvious. Except that the obvious cannot happen. We are 25 years on and some sectors of our economy have been sunk by the ANC and its inability to keep the lights on at a competitive price. They cannot be revived other than by way of making products that reflect the costs of making them here. Can we really produce a garden fork more competitively than we can import from India? And if what we make becomes unaffordable, wages have to rise and inflation rises.
Localisation may sound sensible, but it is a mirage. First, millions of jobs already depend on local firms importing things they then add value to and sell in our small home market or export. Second, so powerful is the global economic rebound from the pandemic that it will suck out all the natural resources we have to sell long before we figure out what else to do with them. Third, the only way you get this right is to control input prices (electricity, iron ore, water, labour), and once you’re on that road, ruin is a certainty.
Do we really want to get in the way of an export boom in our core industries — mining and agriculture? That’s the trick Ramaphosa has missed. He’s listened to Patel and assumed Ntshavheni can’t do that much harm. But instead of building an immigrant-friendly, exportready, enterprise-driven economy he has instead battened down the hatches.
An R800bn infrastructure programme is treading water, and when I last looked the avian flu outbreak in SA had reached six farms and broken out in Gauteng. Hundreds of thousands of birds will have to be culled. But under new siege economy industrial policies we are making it harder for importers to bring chicken in. What are the poor supposed to eat?