South Africa’s manufacturing sector needs to act as an engine for rather than a mirror of economic growth and it was up to manufacturers themselves to see this, Manufacturing Circle spokesperson Stavros Nicolau told delegates at the KwaZulu-Natal Manufacturing Indaba, in Durban, on Tuesday.

During his keynote address, Nicolau, who is also senior executive of strategic trade at Aspen Pharmacare, noted that South Africans tended to be manufacturing pessimists who did not trust their own products. That mindset needed to change, he stated.

Using his own company as an example, he said it was necessary for manufacturers to take bold decisions and implement clear strategies, as well as be on the same team as labour. 

Aspen had acquired South African Druggists as an underperforming company. It was described as “a mouse that swallowed an elephant” and, during the first six weeks, the company was advised to close down and relocate manufacturing facilities from South Africa to India.

During a trade union meeting, Aspen was also described as an asset stripper.

He said Aspen realised that manufacturing was at the heart of the company and instead focused on building world-class facilities and developing skills. It was now the world’s fifth-largest manufacturer of generic drugs and the largest in Southern Africa. Of its 26 global manufacturing facilities, 15 were in South Africa.

Pointing out that economies that had successfully pulled themselves out of poverty had relied on strong manufacturing sectors, Nicolau said that, for South Africa to deliver urgently needed job-rich growth, it needed to generate per capita gross domestic product (GDP) growth above 30% – almost three times the current estimate.

He acknowledged that the manufacturing sector faced significant challenges, but said it was important to grow the sector as it already employed more than 1.6-million people; provided the base load and scale for key national infrastructure such as electricity, rail and municipal services; was among the top three multiplier sectors in terms of value addition, job creation, export earnings and revenue generation; and was a driver of tertiary education and absorption of people into the workforce.

He added that the manufacturing sector provided the only viable means of beneficiating the country’s mineral resources.

“The days of exporting tons of iron-ore and then bringing it back as a few grams in a cell phone have to come to an end,” he said.

He warned that any positive contribution from the manufacturing sector was declining.

Since 2008, more than 300 000 South African manufacturing jobs were lost and manufacturing’s contribution to GDP had slipped from more than 15% to 12.8% in 2014. Key contributors included electricity supply constraints, rapid increases in administered prices, labour instability, competition from predatory exporters, unfairly incentivised goods and importers and exporters flouting both domestic and international regulations, he said.

He said the manufacturing sector needed to prioritise three goals that were identified by the Manufacturing Circle as a means to kickstart growth. 

The first was to create competitive manufacturing environments by encouraging coherent, coordinated and consistent economic policy, regulations and policy implementation. This entailed advocating efficient spending, cost recoupment and price regulation for public infrastructure and utility services that supported manufacturing growth, supporting the development and maintenance of a skills pipeline and endorsing environmental measures and legislation that promoted sustainable access to land, raw materials and beneficiation opportunities.

The second was attaining a supportive international trade position by ensuring fair trade through the effective use of tariff and nontariff barriers and developing trade and transport linkages within the African region and other key export markets.

The third goal – advancing the reputation of South African manufactured products – would be achieved through promoting preferential procurement for locally manufactured and beneficiated products that were competitively priced and partnering in an effective multifaceted buy-local campaign, he said.