Multiplier effect benefits us in re-industrialisation
Eustace Mashimbye
WHICH comes first, supply or demand? For Proudly South African, it is in creating both an increased supply and demand of local goods that we can, as the country’s buy-local advocacy campaign, be part of South Africa’s move towards re-industrialisation and job creation.
Re-industrialisation is defined by the Merriam-Webster online dictionary as “a policy of stimulating economic growth especially though government aid to revitalise and modernise ageing industries and encourage the growth of new ones”.
South Africa has, however, been through a period of almost de-industrialisation – our manufacturing sector has dropped over the last two decades from contributing 28 percent to the gross domestic product down to just 13 percent, but measures are now being taken to reverse this trend.
There is an advert I like to show at our business and public procurement forums. It was created by Chrysler in Detroit, and features Clint Eastwood (you can find it on YouTube). It talks about Detroit (the home of Chrysler) and the US in general going into their “second half” after pondering where their manufacturing sector, in particular the automotive industry, had gone wrong after suffering a crippling decline over the years.
In the locker room during halftime, they ask: “How do we come from behind? How do we win?” And the answer is re-industrialisation, specifically through localisation.
The Department of Trade and Industry’s Industrial Policy Action Plan (Ipap) is now in its ninth iteration, and leveraging local procurement as a contributor to re-industrialisation is one of its themes.
If we can drive local demand, as Chrysler did with their emotive call to save their brand from near-extinction, we become the definition in the dictionary and revive and even expand existing industries.
While the government can leverage public expenditure for industrial development, we are calling on the private sector to play its part in contributing to localisation, and in turn they will be the principal beneficiaries of that economic boom.
One such example is Edcon’s Celrose facility in KwaZulu-Natal. A victim of the decimation that the clothing and textile sector suffered, the factory has only now begun to recover, with Edcon’s phenomenal turnaround from offering only 18 percent local content in its Edgars and Jet stores to around 60 percent.
Today, the factory is booming and employs 1 500 staff.
To turn the tide of lost market share due to the volume of imported goods into our country, companies such as Edcon are working hard to claw back their local quota.
Massmart, mentioned before in this column, must be commended for its specific import replacement or substitution programme and its support of small local businesses.
Given these local market access opportunities, previously small companies are able to upscale, and some go on to export.
Umlilo, a charcoal manufacturer based in Hartbeespoort, is part of Massmart’s local supplier programme and is one such example.
Where they previously employed fewer than 20 people, they now have a staff complement of more than 50 to meet demand, and have had export opportunities as a result. As relatively small as this company is, this is an example of the green shoots of re-industrialisation start.
It is a commonly held belief that manufacturing and other industrial jobs are more socially and economically desirable than jobs in the service sector, but we don’t subscribe to that view.
Service sectors include, for example, tourism, which, like industry, also has enormous capacity to have a multiplier effect on other sectors, the economy and job creation. The more visitors to our shores, the more consumption of in-room guest amenities in our hotels and lodges, the more guides and game rangers will be employed, the more transport companies will be utilised, and so on.
The multiplier effect resulting from re-industrialisation is an important one.
If we take Umlilo, think of the company that supplies their packaging, the increased volume in deliveries, and therefore vehicles and drivers are required.
In the all important automotive sector, the multiplier effect is seen in the supply of components and spare parts in the dealerships and after-sales service departments.
In the fast-moving consumer goods sector, it is again the packaging and delivery spin-offs, as well as the raw ingredients required to produce the items.
So we must all have a local conscience and think of the consequences on our workforce of not buying local.
The game is re-industrialisation, and we must go on the attack in the second half, taking our chances in the penalty area, like Benni, who featured on TKZee’s track Shibobo, which is my song for the week.