The import of cheap goods from China was one of the largest external factors inhibiting the exploitation of the manufacturing sector in South Africa, said Manufacturing Circle chairperson Stewart Jennings on Wednesday.
Speaking at the launch of the Manufacturing Circle’s position document ahead of the African National Congress’s (ANC’s) Mangaung conference in December, he criticised the Free Market Foundation statement last month claiming that cheap imports were not hurting the manufacturing industry, saying that local jobs were being lost and exported to China, in particular.
The manufacturing sector had lost in excess of 300 000 jobs between the first quarter of 2008 and the first quarter of 2012.
He also noted the closure of about 440 000 small businesses, of which some were a direct result of Chinese imports, in addition to a depressed sector.
Manufacturing Circle executive director Coenraad Bezuidenhout added that the proliferation of unfairly incentivised imports from China, in the context of a global downturn and Chinese pressure in other markets, was the biggest threat to South Africa’s manufacturing industry.
Jennings noted that South Africa could not compete with Chinese products, which were often between 25% and 30% cheaper than locally produced items.
“Administered prices in other Brics countries have decreased by over 36% in the last decade, while South Africa’s electricity cost [for instance] have increased by over 170%.”
South Africa’s purchasing management index registered a three-year low, owing to bad business conditions and contraction in manufacturing, and Jennings forecast a further decline in the next two years unless key domestic policy issues, and the levelling of the trade situation, were not addressed immediately.
The trade deficit between China’s imports to the country and South Africa’s exports currently registered at 6.4% of gross domestic product.
“Manufacturing is among the top three multiplier sectors in terms of value addition, job creation, export earnings, and revenue generation for every R1 invested. It also provided the only viable means of beneficiating natural resources in the country,” the position document said.
The manufacturing sector provided the “greatest opportunity for job-rich economic growth”, but it was in crisis and key interventions were required by the ruling ANC to correct its path.
Government needed to ensure fair trade through the necessary adjustment to tariff and nontariff barriers; strengthening bilateral and multilateral regional and key export market ties; promoting a competitive and stable exchange rate; and improving transport linkages to regional and other key markets.
The Manufacturing Circle’s position document, which was presented to the ANC, tabled a number of proposals aimed at placing South Africa as the “gateway manufacturing destination” for exports to sub-Saharan Africa and enabling the country to compete domestically on an equal footing with imports. This, in turn, fed into the aims of pushing the country to become a competitive beneficiator of its own resources.
The report also tabled possible suggestions for interventions to promote a competitive currency and battling volatility, industrial policy, infrastructure and industrialisation and local procurement and industrialisation.