Feb 03, 2012
Is South African industry globally competitive?Back
© Reuse this
One lasting impression is that South African industry is tied into an enormous battle to be globally competitive. This view appears to be quite representative across a broad section of industries.
Severe challenges posed by imports, primarily (but not exclusively) from the Far East, are a reality. Our market is just another target market for companies producing enormous volumes and the extent of government subsidisation and support in some of these countries poses a real threat to local industry.
Against this backdrop, one would expect more frequent and more focused applica- tions for protection in the form of antidumping and countervailing duties. Yet many industries are just too fragmented to orchestrate a focused approach when applying for protection. At least, remedies are available to deal with dumped or subsidised imports and better communi- cation within industries can go a long way to ensuring that these remedies are properly exploited.
Of greater concern is the real possibility that our industries are just not competitive, even in a fair trade environment.
Our history entails a legacy of protection and a focus on being self-sufficient, stemming from the sanctions era. While we developed world-class technologies in areas ranging from defence to the chemicals industry and agriculture, very few of our major inventions and technological advances made it into the global arena in a big way.
In addition, our primary industries con- sist of only a handful of players established in an era where ‘sanction busting’ was the way to get into global markets. Many of these cornerstone industries are the ones most often applying for additional protection against imports.
Our most commonly recognised big indus- try that finds itself integrated into global supply chains is the automotive industry and this seems to be possible mainly as a result of substantial government support. While this may sound rather damning, it provides enormous insight. Most governments around the world support big industry in one way or another. Should our government not have more industry-focused programmes at the scale of the automotive industry programme?
With an enormous need for job creation, the current focus on support for small, medium-size and microenterprises (SMME) is both commendable and necessary. SMMEs are, however, exposed to global trends and unfair trade practices, with limited ability to withstand the rigours of the international market. While building an economy primarily on SMMEs may assist in job creation and provide greater social stability, it does little to integrate our industries into global supply chains, where production takes place with the benefit of real economies of scale.
To develop a globally competitive export industry, a substantial local market is often required. Even with the size of our population, our spending power on more than the most basic items is limited. For many industries, the benefit of having a significant local industry as a springboard just does not exist.
The common strategy of always seeing Africa as a primary market to develop that springboard into the global market is also flawed as most African markets are already importing at globally competitive prices, and obtaining market penetration is a lot more difficult than originally thought.
It should be clear that the stumbling blocks to South Africa becoming a global player are not only a lack of skills and perceived high electricity costs – the truth is we are behind the curve on global industrial development and challenges like skills shortages and a volatile currency are just secondary hurdles.
There appears to be only one answer – government and industry need to replicate what has been achieved in the automotive sector for other key industrial sectors, and this needs to be done with the same urgency and in parallel with the development of SMMEs.
Edited by: Martin Zhuwakinyu© Reuse this Comment Guidelines (150 word limit)
Other Pieter du Plessis & Donald Mackay News
Recent Research Reports
Electricity 2015: A review of South Africa's electricity sector (PDF Report)
Creamer Media’s Electricity 2015 report provides an overview of State-owned power utility Eskom and independent power producers, as well as electricity planning, transmission, distribution and the theft thereof, besides other issues.
Construction 2015: A review of South Africa’s construction sector (PDF Report)
Creamer Media’s Construction 2015 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; the key participants in the sector; local construction demand; geographic diversification;...
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
This Week's Magazine
Updated 1 hour 47 minutes ago Projected capital expenditure (capex) in the South African automotive assembly industry should reach a record R7.48-billion this year, says the National Association of Automobile Manufacturers of South Africa (Naamsa) in its 2014 fourth quarter business review. Capex...
Updated 1 hour 47 minutes ago After several years of navigating project-threatening red tape and currency fluctuations, the 4.4 MW Bronkhorstspruit biogas power plant, which will supply clean energy to a leading automotive manufacturer in Gauteng, is expected to enter production before June....
Updated 1 hour 47 minutes ago South African paper and pulp producer Sappi reported earlier this month that it would build a pilot plant for the production of low-cost Cellulose NanoFibrils, or CNF (nanocellulose) at the Brightlands Chemelot Campus in Sittard-Geleen in the Netherlands.
Updated 1 hour 47 minutes ago The long-term outlook for Nigeria is a country that has the potential to be very strong. So affirmed International Monetary Fund (IMF) Nigeria Mission Chief and Senior Resident Representative Dr Gene Leon on recently. "But we are starting from a point of huge...
Updated 1 hour 47 minutes ago Poor infrastructure planning and inadequate maintenance are becoming increasingly problematic for new developments and the associated infrastructure required to support such developments.
Next ArticleTrade trends and forecasts