Feb 03, 2012
Is South African industry globally competitive?Back
Africa|South Africa|While Building|Chemicals Industry|Duty Applications|Far East
© 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
Other Pieter du Plessis & Donald Mackay News
Recent Research Reports
Automotive 2014: A review of South Africa's automotive sector (PDF Report)
The report provides insight into the business environment, the key participants in the sector, local construction demand, geographic diversification, competition within the sector, corporate activity, skills, safety, environmental considerations and the challenges...
Construction 2014: A review of South Africa's construction sector (PDF Report)
Construction data released during 2013 hints at a halt to the decline in the industry during the last few years, with some commentators averring that the industry could be poised for recovery. However, others have urged caution, noting that the prospects for a...
Electricity 2014: A Review of South Africa's Electricity Sector (PDF Report)
This report provides an overview of the state of electricity generation and transmission in South Africa and examines electricity planning, investment in generation capacity, electricity tariffs, the role of independent power producers and demand-focused initiatives,...
Defence 2013: A review of South Africa's defence industry (PDF Report)
Creamer Media’s 2013 Defence Report examines South Africa’s defence industry, with particular focus on the key players in the sector, the innovations that have come out of the defence sector, local and export demand, South Africa’s controversial...
Road and Rail 2013: A review of South Africa's road and rail infrastructure (PDF Report)
Creamer Media’s Road and Rail 2013 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...
Liquid Fuels 2013 (PDF Report)
Creamer Media’s 2013 Liquid Fuels report examines South Africa’s liquid fuels market, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing,...
This Week's Magazine
A structured approach, wherein managers personally engage at each level of the project, is necessary to mitigate delays to the workflow on mega construction projects, says State-owned Eskom Kusile power station projects GM Abram Masango. The 4 800 MW Kusile power...
Construction of transmission lines to evacuate power from a regional hydroelectric project in East Africa, which was hanging on the balance following the withdrawal of financing by key partners, is now back on track. After six months of uncertainty, the African...
Three Memorandums of Understanding (MoUs) were signed between South African and Malaysian companies at the Malaysian High Commission in Pretoria on Friday. These MoUs are part of the indirect offsets programme South Africa is providing in return for Malaysia’s...
The South African new vehicle market may well dip to 640 000 units in 2014, says Toyota South Africa Motors (TSAM) sales and marketing senior VP Calvyn Hamman. This is the first prediction that anticipates a drop in the market. To date economists and industry bodies...
Nissan will re-enter the South African minibus taxi industry in March, when the new NV350 Impendulo goes on sale. The 16-seater has been specifically tailored to meet the terms of government’s Taxi Recapitalisation Programme, which aims to replace South Africa’s...
Next ArticleTrade trends and forecasts