Jun 22, 2012
Upstream firms seek trade protection, but downstream firms ditherBack
Africa|Education|Environment|Standard & Poor|Sustainable|System|Africa|South Africa|Automotive
© Reuse this
I recently read an article which dealt with South Africa’s widening current account deficit, our worrying levels of unemployment and how the clever chaps at Standard & Poor’s (S&P’s) believe that both of these matters represent “key challenges” facing South Africa.
Nothing new, but maybe this is just another confirmation that our most basic challenges are not going to disappear soon, and certainly not without significant intervention.
Broadly speaking, a growing current account deficit simply means that we are importing more than we are exporting and this difference can’t keep growing indefinitely. This difference is largely funded at present through foreign direct investment and foreign investment in our stock market. Without question, this is not a sustainable situation, especially when the whole world appears to be in a growing crisis and we may soon find that capital inflows start drying up.
Addressing unemployment and correcting the current account deficit boils down to the key focus of developing and protecting local industry. The long-term fix is to create an environment where our manufacturers are more competitive and can sell our manufactured goods locally (replacing imports) and abroad (growing exports).
Addressing skills shortages is the topic of discussion at many forums and the importance of addressing enormous structural concerns in our education system is known. What is clear is that the solution will be a long-term one. A more immediate intervention is required to deal with existing unemployment levels.
Getting beyond this realisation is proving to be easier said than done. Government has gone to great lengths to outline policies and initiatives to assist, but our skills situation and growing input costs are not addressed over night.
Focused interventions to become globally competitive and part of global supply chains, like the support provided for the automotive sector, require medium to long-term programmes.
The only other logical alternative is to slow imports entering the market, which can be done by increasing the duties on imported goods. This is now happening at a rate not seen for at least 20 years. Strangely enough, we are not seeing the number of antidumping applica- tions that we antici- pated for 2012, but there is still time and we may see the activity pick up later this year.
Against this backdrop, we are seeing government taking a more interventionist stance in the trade arena and begin- ning to increase levels of protectionism through increased import duties in support of local industry and, in a broader sense, discouraging increasing levels of imports where practically possible.
It would appear that companies that are producing locally are now in the best position vis-à-vis duty protection that they will be for a very long time and certain industries are taking advantage of the protective stance taken by government. Yet, many industries are still not exploring this avenue and are merely struggling along, probably largely out of ignorance.
It’s quite ironic actually that the industries that are pushing hard for duty increases are the very big, often primary, industries. Duty increases this far upstream actually push up prices all the way downstream and then make the downstream industries even less competi- tive.
The industries that are further downstream seem to struggle to coordinate their efforts and, as a result, find it very difficult to effectively apply for the very protection government appears to be eager to provide. The opportunity is simply passing them by.
Edited by: Creamer Media Reporter© Reuse this Comment Guidelines (150 word limit)
Other Pieter du Plessis & Donald Mackay News
Updated 7 hours ago The government of St Helena (SHG) and its Department for International Development (DFID) on Friday appointed airline Comair as the provider of air services to St Helena with the Island’s first airport opening in 2016. Comair would offer a weekly Saturday service,...
Updated 7 hours ago The Department of Communications (DoC) digital terrestrial television (DTT) project team was accelerating its efforts to “revive” South Africa’s long anticipated transition from analogue to digital broadcasting. After a more than six-year delay, the next few weeks...
Updated 7 hours ago Residential property prices are forecast to grow at 7.2% this year, on the back of 6.72% growth in 2014.
Recent Research Reports
Projects in Progress 2015 - First Edition (PDF Report)
In fact, this edition of Creamer Media’s Projects in Progress 2015 supplement tracks developments taking place under the Renewable Energy Independent Power Producer Procurement Programme, which has had four bidding rounds. It appears to remain a shining light on the...
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...
This Week's Magazine
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...
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....
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.
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...
Poor infrastructure planning and inadequate maintenance are becoming increasingly problematic for new developments and the associated infrastructure required to support such developments. In many urban and rural municipalities, the state of infrastructure has been...
Next ArticleCompetition vs protection