Sector shows decline despite strong market growth

31st May 2019 By: Mamaili Mamaila - Features Writer and Social Media Specialist

Sector shows decline despite strong market growth

RAW MATERIALS Domestic chemical firms face multiple challenges such as access to appropriately priced feedstock, as well as large volumes of raw chemical materials that continue to be imported and are subject to exchange rate fluctuations
Photo by: Bloomberg

Although the local chemicals sector has recently been characterised by strong market growth, it has shown a consistently weak performance, with its contribution to total manufacturing output having declined significantly over the past ten years, says the Department of Trade and Industry (DTI) chemicals chief director Claudy Steyn.

“Currently, domestic chemicals firms face multiple challenges such as access to appropriately priced feedstock as well as large volumes of raw chemical materials that continue to be imported and are subject to exchange rate fluctuations.”

Other challenges include high port tariffs, a lack of rail infrastructure for chemicals transportation, unreliable supply and price hikes of electricity, she adds.

The DTI responded to this challenge by developing a comprehensive and holistic strategy framework to enhance the local growth of and demand within the sector.

“The framework was commissioned to develop a vision and set of objectives for the sector, identify appropriate policy interventions to be pursued by government in close consultation with industry, and formulate a funding proposal for these interventions by 2035,” Steyn explains.

The chemicals sector strategy has five key areas of focus: to address the challenges of feedstock development, market development, deepen value addition, develop competitiveness, and research and development linked to skills development.

These focus areas will translate into increased manufacturing value and employment opportunities.

She adds that some of these challenges affect the whole economy and are not limited to the chemicals sector.

There are also two cross-cutting elements, or themes – the transformation of the industry and support for the institutional environment – which need to be considered as an integral aspect of the strategy, says Steyn.

Moreover, she states that the DTI’s upstream desk is focused on implementing this strategy in collaboration with industry stakeholders. The department’s focus for the remainder of this year includes drafting a market development plan that addresses the challenges and opportunities identified in the strategy.

Subsequently, the DTI will also focus on a tariff review for a more nuanced, targeted, effective developmental tariff regime that provides access to cost competitive raw material inputs and contributes to industry growth.

“The aim is to achieve developmental trade policy that supports industrial development for the sector,” Steyn concludes.