First on bucket list: less myopia

YOU have to suspect that something has gone badly wrong with South Africa’s industrial policy when Qian Sijiang in Wuhan, China, is employed by a South Africanowned company to convert polypropylene, imported from this country, into a plastic bucket that is exported back to South Africa.

Converting the polypropylene into a plastic bucket, mop, garden chair or any one of hundreds of other items does not involve rocket science.

And it does not require the sort of skills that would be needed if South Africa wanted to create jobs through the beneficiation of its valuable mineral assets such as gold, diamonds and platinum. It requires the sort of skills South Africa has in large supply.

There is the additional fact that South Africa happens to have one of the largest and cheapest sources of polypropylene in the world.

Currently, there are many South Africans employed in its conversion into buckets and mops and other stuff. But it seems there are far more Chinese involved in converting South African polypropylene than there are South Africans.

You don’t have to be a rabid nationalist to sense that this is not as it should be.

Even if you believe we are entering a post-industrial world dominated by 3D printers, industrial robots, IT geeks and bankers, there is surely still scope for job opportunities in old-fashioned manufacturing — scope to use our cheap supplies of polypropylene and provide job opportunities for our abundant supply of labour.

So why are Qian and her friends in Wuhan getting the work and not South Africans? There are many reasons apart from our administered prices.

Some, such as China’s scale efficiencies and labour costs, are acceptable in terms of fair trade obligations. Then there are the more questionable advantages such as the Chinese government’s subsidies on all sorts of inputs, including electricity and finance, as well as the attractive tax incentives on offer. In addition to these advantages is the considerable fact that the South African company can get supplies of polypropylene cheaper in Wuhan than it can in its South African factory.

The Competition Commission argued it was because Sasol, which is able to produce polypropylene cheaply as a by-product of its coal-to-gas technology, developed decades ago with government funds, was doing something illegal: charging South Africans an “excessive” price for polypropylene.

That, at least, is the story that unfolds from reading some of the thousands of pages of evidence and arguments in the Competition Tribunal’s hearing into the Competition Commission v Sasol Chemical Industries case.

But be warned if you are hoping for a clear analysis of this part of South Africa’s economic landscape — in the thousands of pages generated by this six-year-long case, there is no single “fact” or claim presented by one side that is not challenged by an army of lawyers or a brigade of economists.

The definition of excessive price is interrogated ad nauseam, as is the concept of “economic value”.

The lawyers even manage to devote pages to considering the meaning of “bears no reasonable relation”. All because an excessive price is deemed to be one that “bears no reasonable relation to the economic value of the goods”.

For Sasol, the enormous expense of its defence is justified by the potential costs of losing the case — either in the form of penalties or future profits.

For the government, the costs are justified by the need to create an economic environment that is closer to that envisaged in the preamble of the Competition Act, which talks of the need to balance the interests of workers, owners and consumers. This case is part of the Department of Trade and Industry’s desperate bid to create a coherent industrial policy.

This week, the tribunal cut through the economic and legal clutter and ruled that Sasol was indeed charging an excessive price.

In a successful developing economy, the government would now be able to persuade the likes of Sasol to see the bigger picture. It is a sad indictment of both the government and Sasol that a prolonged appeal is more likely.