It is not news that South Africa’s manufacturing sector has had a very hard time of late. And that it is likely to continue to have a hard time. Endless variables merge together to paint a bleak picture of the reality of the situation, with one of the biggest risks being escalating wages from protracted strike action and the knock-on effect of mass job losses. There is a severe misalignment in leadership, and where SA should be thriving, it is stumbling. How long will it take before the damage done is irreparable? In this detailed interview, Coenraad Bezuidenhout Executive Director of the Manufacturing Circle candidly unpacks the facts, leaving much food for thought. – LF
GUGULETHU MFUPHI: Manufacturing conditions for the short-term are rather bleak with possible job cuts on the cards. Coenraad Bezuidenhout, Executive Director from the Manufacturing Circle joins us now from our Cape Town studios. Coenraad, it’s rather interesting because every time I talk to you, we go from being optimistic to feeling a little better, but it does seem as though we’re going two steps back, once again with concerns about further job cuts in the manufacturing industry. In your consultations with some of your members, are you finding that these sentiments are true and real?
COENRAAD BEZUIDENHOUT: Well, I think what’s very important to realise about what we discovered in this latest survey is that firstly, it’s the outlook from the second quarter of the year, which was very negative for manufacturing because we had two strikes, basically, overlapping. The cumulative effect of the two are still being felt – so that’s the first thing. The second thing that’s important to realise is that we have now, with this quarterly survey that we do on manufacturing, have built up data over numerous quarters – probably for about three or four years. Consistently, over the last year or two, manufacturing sentiment has deteriorated and we’ve put out a number of messages with regard to the risk of mechanisation, of import substitution (or the substitution of local manufacturing), manufacturers importing certain inputs rather than manufacturing locally as a result of the adverse domestic situation, and the causes of that has been listed consistently.Â
They’re basically playing musical chairs. It’s administered prices and it’s the hostile labour environment etcetera. What we need to have now, is to sit and have a serious discussion, not only with the Department of Trade and Industry, but have four or five ministers, the President or the Deputy President present, and sit down and say ‘these are the four or five issues’.  Administered prices, for instance: we can get out a regime to address that within three or six months. We don’t have to wait for ten years to implement the NDP. Let’s seriously sit and address that. Utility service interruptions: let’s address that. The couple of binding constraints that we face with regard to our labour situation, which doesn’t mean you have to throw the baby out with the bathwater. There are one or two things, which we can address there, for instance, auditable strike balloting, and looking at law enforcement with regard to the violence and intimidation that we’ve seen.Â
If we can address one or two things in the short-term, the institutional aspects that we need to address can be addressed in the longer term and manufacturing would still benefit. Currently, the only positive that we have is growth in certain African markets and the industrial policy support that we receive, but those cannot constitute for the other supporting factors that you need with regard to competitive pricing of utility services, logistics, and labour stability.
GUGULETHU MFUPHI: Coenraad, it’s interesting that you mentioned that once again conversations need to take place with several members of the State. However, what if they come back and say ‘look, we’ve given you incentives’? Not only that, it also seems as though employers aren’t unified, particularly if you take SEIFSA and NEASA as examples.
COENRAAD BEZUIDENHOUT: What the State has failed to give us is joined up government. The State gives us a Department of Trade and Industry that does great work for manufacturing in certain respects, but a Department of Labour, a Department of Public Works, a Department of Energy, a Department of Public Enterprises, and a Department of Economic Development and Finance that does not, in all respects, give us the necessary support that we need. It’s not just one department that’s involved here – it’s a number. There are trade access issues that need to be sorted out, etcetera. There are compliance issues. You know that the Department of Labour for instance, administers Health and Safety regulations that has an impact on whether or not certain products are allowed to come into the country. They are not doing the necessary policing.Â
Those cheap products are coming in – unfairly incentivised -because of the lack of policing and so undermines manufacturing locally. That’s the kind of joined up effort that we need and that we are not receiving, because these Ministers have not, up until the present date, sat together in a room and said ‘this is the plan that we commit to, in order to promote manufacturing in this country’. South Africa is a quality manufacturer with a history of more than a century, in that respect. We should and could manufacture. We’re next to a huge market (Africa). There is no reason why our fortunes and things like PMI should go south, in South Africa, while in other developing markets it’s currently a positive growth story.
ALEC HOGG: Coenraad, what’s it going to take to actually open the eyes and ears of those who are clearly, are not listening at the moment? I ask this because earlier today, we had a guest from Tanzania who has just gone into Zambia, who has taken over a textiles operation that the Zambian government wasted $175m on. One wonders how much the Chinese government, which was their partner, wasted as well. It had been sitting idle for three months and surely, that is a harbinger of where we’re going in this country with the developmental state approach. What is it going to take to listen? How do you get to open someone’s eyes without poking it out with a stick?
COENRAAD BEZUIDENHOUT: Look, ours is not an ideological battle and in terms of developmental approach, there are a number of things in that regard that we definitely would support. For instance, we support the developmental approach when it comes to trade policy and the trade agreements that we use, industrial policy, and education because it takes a multi-faceted approach. What we are currently not receiving is leadership right from the top that sits and concentrates on this one, particular thing. If we say jobs and economic growth is the most important thing in South Africa, and one of the key pillars to support that is manufacturing then clearly, there must be a large degree of focus on making it work right from the top. Not from the Department of Trade and Industry that constantly has to go into a competitive Cabinet space and has to convince people that ‘this is what we need to do’ and face a lot of opposition.Â
Just one example: local and preferential procurement is one of the key pillars of industrial policy in South Africa. In the last year, the Department of Trade and Industry picked up 160 cases of non-compliance from local authorities, Provincial Governments, and national departments where they simply ignored it when they put out their tenders. That means that there isn’t leadership from the top that says ‘you have to follow the line on manufacturing promotion’. From our side, we struggle to get more than one Minister at a time, in a room. We need those four or five that are relevant to what we do and we need the President or the Deputy President to say ‘this is the action plan that we’re going to follow’ and ‘we need to make it happen’.
GUGULETHU MFUPHI: A manufacturing CODESA is what it sounds like. Thank you so much to Coenraad Bezuidenhout, Executive Director from the Manufacturing Circle.
