Chris Barron talks to Coenraad Bezuidenhout, the executive director of the Manufacturing Circle
Image: PICTURE: KATHERINE MUICK-MERE.
Coenraad Bezuidenhout hopes policies will make a difference
" The sector is fighting a losing battle against low productivity, skills shortages and high wages
Government's R5.75-billion incentive programme to make the local manufacturing sector more competitive won't be enough to save it, says the Manufacturing Circle.
At about the same time Trade and Industry Minister Rob Davies unveiled his latest programme, the Manufacturing Circle released a bulletin warning that SA would lose its small manufacturing base if fundamental challenges were not tackled quickly.
The sector is fighting a losing battle against skills shortages, high wages for unskilled workers, lack of productivity, inflexible labour regulations, red tape, a lack of delivery of crucial municipal services and spiralling administered prices.
The Manufacturing Circle represents the top 42 manufacturing companies but its bulletin reflects the views of businesses across the sector.
Executive director Coenraad Bezuidenhout admitted it was a gloomy picture. But he said there was "quite a bit of enthusiasm from our side" that Davies's incentive scheme "might have some meaning".
He conceded this may be a triumph of hope over experience: there is no shortage of programmes from government to enhance competitiveness, but they're not being implemented.
He gave some concrete examples. Companies manufacturing processed food for the local market and for export are "finding it very difficult" because "every container that goes out gets inspected", but incoming containers do not get inspected.
This means they are being hammered by global competitors who are getting their products to foreign markets much quicker, and into local markets much cheaper, than properly administered polices should allow.
This situation has deteriorated over the past 10 years "because it has not received resolute attention", he said.
A "large part of the problem" is that many of the policies and programmes to boost manufacturing require government departments to work together, but they're demonstrably incapable of doing so.
"It has been a consistent concern in organised business that there is not sufficient coordination and coherence between government departments."
This is mentioned consistently in just about every submission organised business makes in the National Economic Development and Labour Council, said Bezuidenhout.
Similar ineptitude is hampering local and preferential procurement. The policy is in place, "which manufacturing depends on to reverse or stave off the decline". But it is not happening.
"There is a need for different departments and different levels of government to work in the same way and subscribe to the same policy."
Provincial procurement regulations were finalised last year but local government tenders are still being awarded "in the old way, where local and preferential procurement is not prioritised in the way it should be".
Bezuidenhout gave another concrete example of how this affects manufacturers: "We've got local producers of generators, but no consideration is given to a suitable differential for muni-cipalities to buy a local generator rather than a cheap one from China."
So while Davies launches his latest programme, existing policies and regulations which would make "a huge difference" to the competitiveness of the sector are not being applied.
Still, "a number of our members will be making applications under this programme", said Bezuidenhout.
He admitted, however, to "ongoing concern" among his members about the department's capacity to apply the programme.
"It has happened in the past that incentives would be announced, but months would go by and we would still not know of anybody who was able to access these incentives."
This time "we will monitor the applications that go in and if they're not being processed quickly enough we'll approach the Department of Trade and Industry to explain what's happening or expedite it. We've been given an undertaking that there will be open dialogue on the process".
He conceded that there had been similar undertakings before, but said there have been signs of a change in the department's attitude. "We're now seeing certain actions being undertaken and followed through on which we haven't seen before.
"Our confidence is stronger than it used to be that this may actually be implemented in a way that has meaning at the end of the day."
But the problems that confront manufacturing in SA will "certainly not be cured by a single incentive programme," he said.
"We have to work towards a macroeconomic situation that favours manufacturing more than it favours the banking system or domestic retailers."
This is a polite way of saying that his members, who include SABMiller, Sappi, Nampak, PG Group and Bell Equipment, want government intervention to ensure a favourable exchange rate and temper the use of interest rates to keep inflation in check.
"If you have a situation where the rand is a bit stronger and where the interest rate is used to keep inflation down, that has certain repercussions at the end of the day."
Bezuidenhout agreed it is "not an easy thing to confront because something like the exchange rate has got broad implications, but at the end of the day you must make a choice.
"Countries like Brazil and India are becoming less scared to intervene, and currencies like [that of] the Chinese are being kept artificially low. It's time to review the whole policy framework. We'll have to look at how we spend public money so that administered prices can be brought under control, so that the costs of doing business are controlled a bit more."
Bezuidenhout, 34, ran Business Unity SA's economic policy desk. Early this year he was hired as executive director of the Manufacturing Circle.
The malaise that the manufacturing sector finds itself in should not just be blamed on government, he said.
"In the past, manufacturing has either not had a voice or not exercised it strongly enough."
http://www.businesslive.co.za/southafrica/sa_markets/2012/05/26/champion-for-manufacturers
