Johannesburg, 12 Jun 2018
Industrialised countries across the world have been realising that a vibrant manufacturing sector is an essential part of their economy and the value chain creates huge amounts of wealth for the citizens. It is essential to the social fabric of the economy. Manufacturing, together with mining and agriculture, are the only industries with a 10 times or greater multiplier effect on the economy.
Agriculture and capital goods manufacturing, despite their small direct share of the total GDP, remain critically important sectors in the South African economy.
The goals of the Integrated Growth and Development Plan include attaining equity and transformation, economic growth and competitiveness, as well as environmental sustainability and good governance.
A modest economic growth rate of 5% is expected in 2019, compared to the average rate of less than 1.5% over the previous five years. The expected increase is supported mainly by the improved business confidence index, the Infrastructure Capital Investment Programme and the National Development Plan.
We cannot rely on the depreciation of the rand to sustain these sectors. While the weaker rand is supporting the survival of smaller farmers and producers, we need to take full advantage of all opportunities to increase productivity, streamline efficiency and cut costs significantly (without reducing the labour force) in order to increase profitability and ensure long-term sustainability.
Parallels exist in every sector of the industrial market sector, and efforts need to be applied.
Strategic infrastructure projects should be implemented, which aim to improve investment in infrastructure to support agricultural production, processing, energy and transportation. These will assist when they take a developmental agenda: buy local first; if it is not available locally, help an entrepreneur do it.
Additionally, a national re-industrialisation programme has been re-enforced to emphasise the importance of the industrial sector in building an inclusive economy. The Pan African Report of November 2011 is a great example of its impact.
Digitisation across the enterprises (large and small) is the first step on the road to fulfilling the competitiveness behind the global market participation, through the Internet of things (IOT) on the journey to Industry 4.0 or smart manufacturing. Smart manufacturing, far from reducing jobs, will form the basis of well-paid work in a highly skilled economy.
Transformation needs to take place. This means transformation to reflect the demographics of the country, and business process transformation to meet modern business practices. Both dimensions need to be tackled together.
Waste removal of unnecessary processes from any business helps a company be more resilient and reduces value-chain costs over time. Questioning "why do we do this?" at every stage is important.
Recapitalisation needs to take place. Many businesses today need to source capital to bring themselves in line with their global peers, or face extinction. Protectionist measures tend to breed uncompetitive practices, so while they might put food on the table today, there are many incentives and investors willing to support a well-qualified action plan, which will breed sustainable solutions.
Buy local and make it easier for local vendors to survive. Often, this can be as simple as paying them on time, ensuring they are on an equal footing, and many will be surprised at how quickly they become competitive. A small specification change could result in a product made locally.
The time has come to start implementing the great policies that have been circulating for roughly 10 years. This implementation is at all levels, small business to mega-companies, civil society to government. Perhaps now is the time for the old byline "simpler, better, faster" to be the mantra of industry.
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