With respect, Prof, a counter point

6th April 2018

Editor –

In an article published in Engineering News in March, Professor Robert Lawrence warns us “not to be mesmerised by manufacturing and industrialisation and realise the economy is hugely diverse”. He states that most jobs in the South African economy are likely to be created in the services sector. While some jobs may be created there, the reality is we are in the middle of the Fourth Industrial Revolution and South Africa is underindustrialised.

Trade and Industry Minister Rob Davies says this past decade has been a hard and bruising one for the global and local economies. He says the early iterations of South Africa’s Industrial Policy Action Plan (IPAP), coinciding with the onset of the Great Global Recession of 2008/9, got IPAP off the ground in the teeth of the most severe economic headwinds since the crash of 1929. While South Africa’s predicament has not been unique – it certainly has distinct and some unique features.

Ten years on, he believes, we must reflect on what industrial policy could and could not achieve in these highly testing circumstances – and on what it can achieve now and in the decades ahead. It is vital that we critically assess what has been achieved and redouble our efforts to ensure that the lever of industrial policy plays a decisive role in delivering on our shared vision of a more prosperous, dramatically less unequal, nonracist, nonsexist South Africa.

This implies a need to come to grips firstly, as far as is practically possible, with both the extreme uncertainty of the current and immediately foreseeable global environment and ongoing critical constraints and challenges in the domestic economy. He suggests we should not underestimate the potentially huge obstacles that lie ahead – many of which are both global and local.

The standout issues include the impact of the Fourth Industrial Revolution. In an already uncertain global environment, this will have further disruptive impacts on both developed and middle- income countries, affecting not only ‘how things are done’ in the economy but also the whole future of manufacturing. Moreover, since its effects are likely to be felt not only in the productive sectors of the economy but also across the interlinked service sectors – including ecommerce – we have no option but to prepare ourselves as quickly and creatively as possible, Davies says.

Tools such as blockchain and cryptocurrencies are likely to drastically alter the landscape of services such as auditing and legal services, given the benefits of transparency and accountability embedded in the system through smart contracts. The demand for bookkeepers could be reduced, given that transactions being verified across so many servers would make them virtually impossible to delete without a trace. Initial coin offerings and tokens can create an instant bartering and crowd funding platform.

Even when referring to information technology services, their infrastructures and cooling systems need to be manufactured. In addition, people providing services require transport, so the need for buses, taxis and trains will not be eliminated. Instead, public transport needs are likely to increase. And, in order to fulfil that crucial need, infrastructure and transport systems (all manufactured) will need upgrading as a matter of urgency, while ongoing maintenance will be required indefinitely.

Because of the importance for South Africans to be internationally competitive, adding value to products and beneficiation is the only way to go.

According to the ‘Pan African Report’, manufacturing (with the related mining and agroprocessing sectors) is the sector that has a ten-times downstream effect, especially in a resource-rich country such as South Africa. Without it, the economy would grow at a significantly slower rate, if at all.

So, in fact, the only thing we should be mesmerised by is manufacturing.

Lawrence says US manufacturing has slumped since 2010. However, recognising the need for reshoring, the US has taken the lead from Canada and the Netherlands in an effort to keep local currency within its borders, which is exactly what should be happening in South Africa to turn our economy around.

With unemployment at a 14- year high of 27.7%, business confidence at its lowest level in a quarter of a century, and more than half of the population living in poverty, delivering jobs and inclusive growth has to be the highest priority for government, business and labour.

If manufacturing could expand to 30% of the gross domestic product, between 800 000 and 1.1-million direct jobs could be created, with five to eight times that number being indirect jobs.

Caroline Carter

Rifle-Shot Performance Holdings