We’re in deep trouble and need to pull together
SOUTH Africa is placed in position 165 out of 175 countries currently reflecting an economic growth rate better than zero. This is around the same position as the Republic of Congo, but well below that of Ethiopia at 7.5 percent, Tanzania and Senegal at 6.8 percent, Ghana at 5.8 percent , Malawi and Mozambique at 4.5 percent, Botswana at 4.1 percent, Namibia and Egypt at 3.5 percent and even Zimbabwe at 2 percent.
We operate in conditions where South Africa’s share of the global economy is declining year-on-year and our position is further aggravated by the fact that our growth continues to weaken while the rest of the world’s is improving.
We hold a 0.4 percent share of the global economy. Unless we embrace and implement plans and strategies to improve the manufacturing, value creation and export sectors, we have no hope of improving our position and our share of the global economy will continue to decline.
The recently released Global Competitiveness Report showed South Africa sliding 14 places to 61st, and noted that the fourth most problematic factor in doing business in South Africa is the overall effect of tax and imports.
With real steel consumption being a key indicator of economic health, we recognise that a continuing gross domestic product (GDP) below 2.5 percent further drains and diminishes employment, capacity and resources in our industry.
Over recent years, our GDP has not even kept pace with population growth, meaning that South Africans measured by GDP per capita are getting steadily poorer.
Our unemployment rate is at a new 14-year high – 28 percent – which will increase if recent media reports on job losses in the mining, manufacturing and construction sectors are accurate.
Together with corruption and systemic abuse within the South African economy, the above data and numerous related concerns suggest that we should anticipate further hardship before we can see any improvement in the economy.
Meeting the budget shortfall will probably mean increased taxes and punitive compulsory bond investments to secure under-performing State-owned entities.
There is obviously understandable concern in a growing number of quarters that the country is de-industrialising.
This concern is a direct consequence of the ongoing decline of manufacturing’s contribution to South Africa’s GDP over the past few decades.
While indications are that a positive growth trajectory will be maintained, growth for the metals and engineering sector is anticipated to be marginal at best. There are signs of a slight up-tick in business activities, judging by the performance of key relevant macro-economic indicators.
Seifsa’s strategic role in influencing policy cannot be underestimated. The federation’s involvement with business, the government, institutions like the International Trade Administration Commission and Business Unity South Africa and labour are geared towards improving the business and regulatory framework for the sector.
The recent ferrous metals industry crisis has brought the importance of this fact into sharp focus. The main question is: what should be done to bring the sector back to an even keel and rekindle growth in production and employment?
Certainly, part of the answer is that all stakeholders within the sector must work together.
It is imperative that the government, business and labour find the solutions to significantly increase South Africa’s GDP and, by implication and action, increase our apparent steel usage well beyond the moribund five-million ton level.
South Africa needs to reposition for growth in key areas – agriculture and agro-processing, mining and related beneficiation, manufacturing, urban development and rural infrastructure and development, water supply and storage, desalination and recovery, transport and logistics, low cost energy and tourism. We simply have to create decent jobs.
To sustain them, we have to grow our economic pie. The continent of Africa consumes less than 2 percent of world steel; there has to be a major opportunity here. That Africa has the potential to feed not just itself but the world and spends$68 billion (R904.62bn) on food imports annually (and the number) is increasing and is an incredible opportunity that can be the engine for growth, employment and economic transformation.
Fundamentally, the manufacturing, steel, engineering and construction community is dependent on all the other sectors contributing to South Africa’s overall GDP table for its business. We need to better marry the trade protection afforded to the upstream steel industry participants with appropriate and reciprocal benefits for the downstream participants.
We need to grow the downstream market place in South Africa and beyond our borders, and we need secure and appropriate government support for our industry and export incentives ensuring the competitiveness and ongoing viability of the downstream participants in the export market.
Together with all stakeholders committed to economic growth, we require policy certainty and stability. Challenges will continue to confront us, and potentially worsen, until such time that South Africa Incorporated – government, business and labour – gets together to address them constructively, putting the country’s interests above all else, and then implementing the solutions agreed to.
We operate in an environment challenged by weak economic conditions and a radical disregard for good governance throughout the governing hierarchy.
Failure to respond to allegations of State capture and corruption, ineffective boards and delinquent management, political and other appointees that disregard accountability, integrity and competence as non-negotiable elements of office, selective law enforcement, absence of a sound strategic plan to recover from junk status, inability and/or reluctance to eliminate wasteful expenditure by organs of the State, shocking audit revelations from the Auditor-General, ill-considered regulatory impositions and attacks on independent institutions such as the South African Reserve Bank would be alarming if considered individually. Together, these factors indicate contempt for good and responsible governance.
It is time for business, labour, civil society, community bodies and politicians to claw back our country. Standing together against all the evils permeating our activities would be a good start.
It is time for business, labour, civil society, community bodies and politicians to claw back our country. Standing as one would be a good start.
Michael Pimstein is the president of the Steel and Engineering Industries Federation of Southern Africa (Seifsa) and the chairperson of its board of directors.