The met­als and en­gi­neer­ing sec­tor has lost hundreds of thou­sands of jobs since the global fi­nan­cial cri­sis and was also one of the first in SA to feel the de­struc­tive machi­na­tions of the Gupta fam­ily

Financial Mail - - FEATURE - Mark Al­lix al­lixm@busi­

SA needs a “na­tional deal” to re­solve is­sues around tech­nol­ogy dis­rup­tion, con­cerns over state cap­ture and the con­cen­tra­tion of pro­duc­tive as­sets that suf­fo­cates com­pe­ti­tion. Eco­nomic development min­is­ter Ebrahim Pa­tel says this must lead to broad-based eco­nomic trans­for­ma­tion, in­tegrity of gov­er­nance and the in­clu­sion of the ru­ral and ur­ban un­em­ployed.

“Step by step we are putting le­gal and pol­icy pro­cure­ment in place to grow local man­u­fac­tur­ing,” Pa­tel says. The process, he adds, needs care­ful mon­i­tor­ing, as it is only as strong as the level of com­pli­ance.

Pa­tel added that the pro­vi­sion of In­dus­trial Development Corp (IDC) fund­ing to SA in­dus­try has been vi­tal in sus­tain­ing the sec­tor dur­ing the years fol­low­ing the global fi­nan­cial cri­sis. To­tal man­u­fac­tur­ing in SA con­trib­utes about 13% of GDP.

The state-man­dated na­tional development fi­nance in­sti­tu­tion sits within Pa­tel’s min­istry. The min­is­ter has also set up the R1.5bn steel in­dus­try com­pet­i­tive­ness fund, to help pro­tect the down­stream in­dus­try.

Be­fore govern­ment started des­ig­nat­ing steel prod­ucts, SA im­ported minibus taxis and buses. Now, many of these are as­sem­bled lo­cally. More re­cent des­ig­na­tions of var­i­ous fab­ri­cated steel prod­ucts are meant to ben­e­fit SA’S steel pro­duc­ers and also the con­struc­tion and en­gi­neer­ing in­dus­try.

Pa­tel was ad­dress­ing a host of busi­ness, labour and po­lit­i­cal lu­mi­nar­ies at the re­cent South­ern African 2017 Met­als & En­gi­neer­ing Ind­aba at the IDC. Their at­ten­dance was an in­di­ca­tor of the im­por­tance of a sum­mit about an in­dus­trial sec­tor that drives ex­ports and is a ma­jor job mul­ti­plier.

Along with the af­ter­shocks of the global fi­nan­cial cri­sis, it was also one of the first in­dus­tries in SA to feel the de­struc­tive machi­na­tions of the Gupta fam­ily, and to give ad­vance notice of state cap­ture.

Among the is­sues dis­cussed was whether man­u­fac­tur­ing in SA was in­ter­na­tion­ally com­pet­i­tive, and whether govern­ment, busi­ness and labour could con­clude a “so­cial com­pact” to make SA in­vestable.

There was also de­bate on whether Brics mem­ber­ship has com­mer­cially ben­e­fited SA, and whether the coun­try’s na­tional development plan is “a re­al­ity or a mi­rage”.

Also on the agenda were the ef­fects of policymaking and growth in the econ­omy. This came amid con­fir­ma­tion by govern­ment that once a prod­uct has been des­ig­nated for local pro­duc­tion, all or­gans of state must com­ply with these re­quire­ments.

Kaizer Ny­at­sumba, CEO of the Steel & En­gi­neer­ing In­dus­tries Fed­er­a­tion of South­ern Africa (Seifsa), says SA will not re­alise its po­ten­tial un­less govern­ment, busi­ness and labour co-op­er­ate. Seifsa’s lat­est data shows there has been a gen­eral de­cline in the metal and en­gi­neer­ing sec­tor’s con­tri­bu­tion to GDP from 3.7% in the fourth quar­ter of 2016 to 3.5% in the sec­ond quar­ter of 2017, slip­ping to R27.33bn, out of a to­tal man­u­fac­tur­ing con­tri­bu­tion to GDP of R94.25bn in that quar­ter. The em­ployer body says the to­tal num­ber of jobs lost in the sec­tor from 2008/2009 to March 2017 is 78,384. An­other 27,500 jobs in the sec­tor are ex­pected to have been lost since then, Seifsa says.

The goal is to bal­ance price com­pet­i­tive­ness with development ob­jec­tives, while re­ly­ing less on im­ports.

“Broadly speak­ing we found the best way to in­crease in­no­va­tion is through com­pe­ti­tion — so in­no­va­tion be­comes a driver that dis­tin­guishes one com­pany from an­other,” Pa­tel says. “I have no doubt that, as we im­ple­ment this sys­tem, there may be prob­lems.”

Ex­emp­tions will be asked for and reg­u­la­tions will of­ten be breached. But Pa­tel says the process has been tested in cloth­ing and tex­tiles with gen­eral suc­cess.

“In the same way we need to de­velop that part­ner­ship in the steel and en­gi­neer­ing sec­tor,” he says. Crit­i­cal to this process is a “ca­pa­ble state” that acts against cor­rup­tion and mal­ad­min­is­tra­tion, and part­ners with busi­ness, labour and civil so­ci­ety.

ANC trea­surer-gen­eral Zweli Mkhize says there are con­cerns in the party around clean gov­er­nance and the fight against cor­rup­tion. “An at­tempt ini­tially by the ANC to in­ves­ti­gate this quickly proved that this is­sue is too large for the ANC [alone]. It was quickly aban­doned,” he says. “We agreed that it needed to be taken up by var­i­ous in­sti­tu­tions with the nec­es­sary ca­pa­bil­ity and re­sources.”

Mean­while, SA needs to quickly broaden and de­ra­cialise the econ­omy — this is what rad­i­cal eco­nomic trans­for­ma­tion means, he adds.

Mkhize says SA’S rat­ings down­grades are re­ceiv­ing ur­gent attention, and govern­ment ac­knowl­edges “pol­icy un­cer­tainty”. He says the pub­lic and pri­vate sec­tors need to work to­gether closely, and some com­mon ground has been es­tab­lished over a min­i­mum wage and labour sta­bil­ity.

SA has lost hundreds of thou­sands of jobs in the wake of the global fi­nan­cial cri­sis and since the Marikana mas­sacre of plat­inum min­ers by police in late 2012, along with deadly worker un­rest in the steel and en­gi­neer­ing sec­tor in 2014. “In­dus­try strug­gled to re­cover and this had an im­pact on long-term trends and in­vest­ment,” Mkhize says.

Joel Net­shiten­zhe, a key fig­ure dur­ing Thabo Mbeki’s pres­i­dency, says cor­rup­tion and “il­licit ac­cu­mu­la­tion” in govern­ment is “lead­ing so­ci­ety to self-im­mo­la­tion”.

He also says SA’S “noisy civil so­ci­ety and au­ton­o­mous pri­vate sec­tor” are vi­tal to any so­cial com­pact. The coun­try, he says, needs to take ad­van­tage of jobs cre­ated by the re­lo­ca­tion of lower-end Chinese man­u­fac­tur­ing and be­come in­valu­able in global pro­duc­tion chains.

For­mer ANC MP Makhosi Khoza, who has been in trou­ble with the party for her com­ments on state cap­ture, says po­lit­i­cal lead­er­ship mat­ters for eco­nomic and so­cial development — and that SA has not had this un­der

Pres­i­dent Ja­cob

Zuma. “The moral com­pass of lead­er­ship is non-ne­go­tiable,” she says. The

ANC is now

“be­tray­ing the mis­sion of the lib­er­a­tion move­ment” and the econ­omy is suf­fer­ing.


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