Commodities slump drives industrialisation

Collapsing commodity
prices have spurred
African governments and
business leaders to more
urgently address the lack
of industrialisation – one
of the biggest barriers to
intra-Africa trade growth.
This was
one of the
key findings
of a panel
discussion
around trade
and foreign
direct
investment
(FDI)
inf lows
between
South Africa
and Africa at
a thought leadership forum
hosted by the Gauteng
Growth and Development
agency (GGDA) in
Johannesburg last week.
“While we are
encouraged to see that
intra-Africa trade is on the
increase it is not significant
enough. And the scope
for growth is limited
if there is not a major
shift to manufacturing,
away from the current
commodities focus,” said
Graham Thompson, Africa
knowledge leader at Ernst
and Young (EY).
Expensive, unskilled and
unreliable
labour
along with
interrupted
power
supply are
some of the
stumbling
blocks,
director at
Deloitte
Consulting,
Gaba
Tabane,
said, commenting that
companies should think
beyond their own borders
and limitations for
innovative solutions to
manufacturing.
“If you are a South
African company, don’t
invest in manufacturing
plants in Asia, look at
investing in plants closer
to home, like Lesotho or
Swaziland, where it is
cheaper to produce goods
and you are also closer to
your destination market,”
he said.
Furthermore, he added,
South African companies
should educate themselves
about the product gaps
and find ways to
add value to
the primary
industries.
“We know
that the big
players have
the easiest
access to the
primary
industries but, by taking
advantage of opportunities
that exist within the
secondary industries,
companies can gain a
foothold in the primary
industry space.”
According to Tabane,
governments could play
a role in supporting
businesses looking to take
advantage of opportunities
in the secondary industries.
“But businesses and
governments also need to
evaluate their comparative
and competitive advantages
which will help them
identify and target
manufacturing gaps in the
market,” he said.
Thompson added that
infrastructure development
was also critical to
diversifying Africa’s
economy and that this
would be the continent’s
next big economic driver.
“Africa needs more
factories but it also needs
good roads to get the
goods in and out of those
factories,” he said.
“There has been
a major focus on
infrastructure
development
over the past
decade but
much, much
more is needed.
And it needs to be
fast-tracked,” he said.
INSERT & CAPTION
Look at investing in
plants closer to home
where it is cheaper to
produce goods.
– Gaba Tabane