BID TO SAVE INDUSTRY
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
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
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.