South Africa missed a golden opportunity by not manufacturing its own boilers and transformers for the Medupi and Kusile coal-fired power stations, which are currently under construction.
This is according to Department of Trade and Industry (DTI) director general Lionel October, who briefed MPs on efforts to promote localisation and beneficiation in the country.
October was part of a delegation - which also included Eskom and Transnet - that aimed to bring home the necessity of following an intensive infrastructure development path to achieve economic growth.
“Our economy used to be dominated by mining. Even our industrialisation efforts were geared towards supplying the mining industry,” October said. “But as we know, globally mining is in crisis because of the lack of demand from China for (commodities) such as iron ore and platinum. We therefore need a different growth path for our economy where we build our own roads, trains, railway lines and aircraft.”
October said South Africa’s state-owned enterprises (SoEs) are key in bringing about infrastructure-driven and labour-intensive economic growth in South Africa.
“If we break the bottlenecks and improve on energy generation, transport and broadband it will give us a 2% growth rate,” October said.
He cited the Preferential Procurement Policy Framework Act, which designates specific goods that should be only locally manufactured. Tenders for these products should therefore also include only locally manufactured products with a prescribed minimum threshold for local production and content.
These designated products include rail rolling stock, bus bodies, the textile, clothing and leather sector, steel conveyance pipes, electrical and telecommunications cables and set-top boxes, among other items.
The Passenger Rail Agency of South Africa is in the process of acquiring a new fleet of some 360 coaches per year over the next ten years, which would create 65 00 direct and indirect jobs. “We’re focusing on the long-term procurement so that more than 65% of the material needed for our coaches can be procured locally,” October said.
He added that black economic empowerment and localisation are not contradictory, like some people believe. “We can have both. There are black industrialists who now manufacture bodies for the bus industry and who are involved in the ship building industry.”
During question time, the United Democratic Movement’s Nqaba Kwankwa said the DTI needs to be clear about which SoEs are strategic and which are not. “There are lots we want the SoEs to do, but there is also talk of rationalising certain SoEs.”
He also lamented the fact that South Africa was “caught unawares” when the demand for commodities plunged. “Why has it taken forever to start investing in the manufacturing sector in order to rebalance trade? There was an opportunity for us to explore other sectors.”
Democratic Alliance MP Natasha Mazzone remarked that South African youth should view a career in artisanship as something to be proud of.
“We are in need of people who can build things and our youth should see the potential in starting such businesses. Youngsters should realise what a lack there is in artisan skills.”
In his response, October said localisation can be South Africa’s game-changer. “You ask why we were missing opportunities? In the United States the mining industry, which mines iron ore, provides the American steel companies which manufacture equipment for their railways. "But in South Africa, Kumba’s good quality iron ore goes straight onto the Sishen line and goes to Saldanha, from where it’s exported to China.
“Now Kumba’s in trouble because China doesn’t want our steel any more. But we can fix this if we start buying locally and manufacturing the steel for our infrastructure projects here.”