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Small manufacturer support crucial to navigating South Africa’s difficulties

22nd May 2023

By: Simone Liedtke

Creamer Media Social Media Editor & Senior Writer

     

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The inability to effectively reduce the crime rate, coupled with government interference in the manufacturing sector, slow economic growth, infrastructure deficiencies, and rising steel prices, inflation and interest rates, create a daunting landscape for South Africa’s local manufacturing sector.

In addition to these challenges, the sector – and the nation in its entirety – continues to struggle with the detrimental impact of loadshedding which is costing the country an estimated R900-million a day per stage of power outages. Strained water infrastructure and a 35.6% unemployment rate add to the difficulties.

Another pressing concern is the country’s excessive importation of goods, amounting to about $759-billion or R14-trillion a year, South Africa Capital Equipment Export Council (SACEEC) CEO Eric Bruggeman highlighted during Creamer Media’s local manufacturing-focused webinar on May 10. He added that this led to a trade deficit of about R710-billion a year.

The lack of beneficiation of vital exports such as coal, iron-ore, ferrous alloys, manganese and the state of the automotive industry further exacerbate the challenges.

As such, supporting the efforts of about 10 000 small manufacturers, employing anywhere between five and 150 individuals, is “crucial in navigating these difficulties”.

Panel member, manufacturing Circle executive director Philippa Rodseth, highlighted that the organisation’s primary mandate was to “find overseas markets and support members who aim to export globally”.

However, she bemoaned the lagging contribution of manufacturers to the domestic economy, noting that one of the main challenges they faced was the “continued lack of demand for their products”, which Rodseth said was “directly tied to gross domestic product growth”.

She emphasised that “addressing this demand issue is crucial for improving the performance of South African manufacturing”.

The Manufacturing Circle, in particular, is therefore actively participating in identifying local opportunities for demand generation, which includes initiatives like the Steel Master Plan and implementation projects aimed at driving demand, “not only for steel but also for the entire value chain”.

The organisation’s focus, she added, was on identifying projects in areas such as public procurement, infrastructure and private-sector demand.

“By keeping a close eye on these projects, we can ensure manufacturers are well-positioned to take advantage of the opportunities they present.”

However, while local demand remained a challenge, Rodseth recognised the importance of export-led growth for manufacturers.

“We understand that exporting is a pathway to competitiveness despite the existing challenges. To foster export growth, we aim to learn from successful exporting companies and leverage their expertise. By identifying key projects and expanding the value chain, we can create additional opportunities for smaller companies to contribute to the export market,” she said.

Nevertheless, metallurgy and process engineering company Multotec CEO Thomas Holtz added that, in the face of these challenges, “resilience and adaptability are essential for operating in Africa”.

Considering that market entry barriers were high, he emphasised the importance of “operating ethically and honestly”.

Additionally, preparing as much as possible for the market being accessed is crucial to success, and can be done through, for example, investing in alternative energy sources, such as solar plants, to help mitigate the impact of power outages domestically and in other countries where the available power supply is unstable.

“Despite obstacles such as freight costs and logistical issues, some manufacturers have managed to export a significant portion of their products, demonstrating resourcefulness and agility,” Holtz said, referencing Multotec’s success in being able to expand outside of South Africa’s borders.

He added, however, that “uncertainty in the global market is not exclusive to South Africa or Africa, but it's a shared reality worldwide”.

Holtz suggested that to succeed in exporting, it was necessary to learn “through experience and overcoming obstacles”.

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