MCEP can help Limpopo entrepreneurs revive local economy
Local industry is on the rebound, and other African countries are hungry for our manufactured goods
As the Covid-19 pandemic continues to impact the global economy, it’s evident that supply chain disruptions have practically affected manufacturers across the world. In the local economy, this is evident in the increasing number of manufacturers that have shut their operations in the wake of the pandemic and lockdowns. This has had a knock-on effect on Limpopo — just like the rest of South Africa’s provinces.
Although the threat of Covid-19 is likely to recede in the long-term, it’s a fact that the pandemic has not only turned industry on its head but shaken the core of South Africa’s industrial base.
Pre-the 2009 financial meltdown, manufacturing was vital to South Africa’s economy. However, fortunes have waned. A recent report by global auditing firm Deloitte states that the sector has lost over 300 000 jobs in the last decade.
This can be blamed on the fourth industrial revolution and a mix of other factors, including local products’ failure to compete aggressively against imports, but the reality is that local manufacturing is facing an existential crisis due to increased automation and the invention of more advanced manufacturing technologies. As the industrial sector slowly grinds its way out of the lockdown and localisation of products becomes a dominant theme, there is however renewed optimism for a potential rebound rooted in import substitution and appreciation for locally manufactured products, among other factors.
It is encouraging that Limpopo is not only rich in mineral deposits, but also has a robust agro economy. This bodes well for growth of beneficiation as well as localisation industries. Even as supply chains begin to re-align globally, the question is, how long will it take for local manufacturing to return to its stellar years that once made it the bedrock of our economy? It was the enforced economic embargo of apartheid that prompted South Africa to establish Sasol, which has now become a global petrol-chemicals giant. The same could be attributed to the birth of aluminium manufacturing behemoth Hulamin, phosphate and fertilizer manufacturing giant Foskor, then steel merchant Iscor, among other companies formed to fortify economic independence at the height of international isolation.
Far from nostalgia, it’s this resolve and resilience that raises the optimism that faced with a daunting challenge, homegrown ingenuity can also help South Africa to overcome its economic challenges. Some of the biggest take-aways for local manufacturing from the pandemic is an acute need for them to become more agile and nimble in this fast-changing manufacturing terrain — and never again to be caught up in a dependency syndrome for raw materials. For example, did we really have to resort to importing ventilators, sanitisers, masks and other essentials to meet demand as we did during the peak of the pandemic?
Perhaps drawing on lessons from the far east, notably China, countries that have successfully made the transition from low-income to upper-middle and
high-income status have relied on, among other interventions, reconfiguring manufacturing so the industry becomes the main driver of growth. China’s exponential economic growth and industrialisation makes this model worthy of examination.
For local entrepreneurs, including Black Industrialists looking for lift-off in an economy characterised by a rarity of green shoots, timing is everything. It’s for this reason that the government launched programmes such as the Manufacturing Competitiveness Program (MCEP). Launched in 2012, MCEP was established to support existing manufacturing enterprises through interventions to improve competitiveness in manufacturing as well as encouraging manufacturers to upgrade their production facilities in the process, to help sustain employment.
Several factors continue to impact the industry, including constraints of an infrastructural nature, rising input costs and an unreliable energy supply regime, among others. However, it is encouraging to see focused attention on two vital pillars in our national recovery plan — restoring manufacturing to its pre-imminent status, as well as the government’s envisaged rapid rollout of infrastructure projects.
Other opportunities in various state-led infrastructure development projects, including the construction of road networks, bulk water supply infrastructure, and energy capacity building projects identified in government’s Reconstruction and Recovery Plan bode well for the future of local manufacturing.
But most importantly, the rest of Africa presents a great opportunity for the revitalisation of local manufacturing. The continent is an expanding market, with 93.2% of South African exports to other African countries being manufactured goods. Therefore, a re-invigorated focus to make MCEP a success also provides a great opportunity for Black Industrialists looking to break into a sector that for long has been considered exclusionary.
Joanne Bate is the Chief Operating Officer at the Industrial Development Corporation
*This article first appeared in Business Report