The 2014 Budget, to be presented by Finance Minister Pravin Gordhan on Wednesday, provided the opportunity to promote growth conditions for manufacturing through cutting costs, nurturing the existing manufacturing base and helping to grow the market for manufactured goods, the Manufacturing Circle (ManCirc) said on Tuesday.

ManCirc executive director Coenraad Bezuidenhout said the organisation believed that Gordhan could announce three key interventions in his Budget that would benefit the manufacturing industry.

Firstly, Gordhan could announce a full fiscal review, Bezuidenhout said.

“Manufacturers across industry have, for the full tenure of Gordhan at National Treasury, indicated the negative impact of bunched-up administered prices on the cost-base and, therefore, competitiveness of South African manufacturers,” he noted.

Bezuidenhout added that, in many instances, such as in the case of the country’s electricity price increase trajectory and with regard to port charges, South Africa was out of kilter with its competitor markets and had, therefore, seen its export competitiveness eroded.

Further, highly marked-up municipal rates and electricity and water supply outages, owing to municipal infrastructure failures, also led to additional costs incurred by manufacturers.

“It is clear South Africa is out of sync with competitors and on an unsustainable path when it comes to the financing, funding and recoupment of funds for infrastructure provisioning and maintenance, as well as ensuring sufficient financial management and supply provisions for many local governments, certain provincial governments and certain departments and government entities.

“This can be rectified through a full fiscal review to ensure not only that our spending is productive, but that it is done in a way that does not undermine the productive sectors of the economy with out-of-kilter charges and bunched-up cost escalations,” Bezuidenhout stated.

Secondly, ManCirc hoped that Gordhan would announce that he and his department were in full support of innovative industrial policy to help dynamic local manufacturers grow.

“We need the 5% of manufacturers that are responsible for 93% of our exports to invest in product innovations and the many other manufacturers who export minuscule amounts to start exporting more,” Bezuidenhout said, adding that this could be achieved through flexible and appropriate industrial policy interventions that had to receive the support of Treasury.

“More exports will relieve fiscal pressures as it will help to narrow the current account deficit. It will also promote job creation and growth,” he said.

Lastly, the Budget Speech also had to introduce ways in which local procurement would be enforced.

“Local procurement is an important way, sanctioned by international financial institutions, to grow our market for manufactured goods, yet government-wide compliance with preferential procurement provisions and international finance agreements sometimes undermines this,” Bezuidenhout stated.

He pointed out that Treasury had recently appointed a national chief procurement officer, which had to be leveraged to enforce compliance with preferential procurement initiatives to supplement the efforts of the Department of Trade and Industry and the Presidential Infrastructure Coordinating Commission in this regard.

“It would also be appropriate for the Budget Speech to acknowledge that limited premiums may often be justified for locally manufactured goods in relation to their imported equivalents, in light of the economic benefits to the fiscus. Growing the market in this way will create space for competition in local manufacturing to emerge, which will encourage competitiveness and exports,” Bezuidenhout concluded.