Imports rise as government fails manufacturers

Despite the department of trade and industry’s (dti) industrialisation policies, and its push for value-added exports, cheap and often substandard imports continue to flood the market, forcing local manufacturers to either change their business model or close up shop. Last month saw a marginal increase in the Kagiso purchasing managers index (PMI), which gauges activity in manufacturing – up to 47.9 points in March 2015 over February 2015’s 47.6 points – but business is sceptical about a recovery in the short- to medium-term, noting that the sector is in “serious trouble”. Kagiso Asset Management head of research, Abdul Davids, pointed out that a reading below 50 points suggested activity was contracting. “Load shedding and a general weak demand seem to have nipped the recovery we projected earlier in the bud,” he said. A “growing number” of smaller metals and engineering companies have had to shut down their businesses over the past few years or their businesses have continued to shrink, said Kaizer Nyatsumba, CEO of the Steel and Engineering Industries Federation of Southern Africa (Seifsa). “Companies that were previously focused on manufacturing now import and on-sell a fair percentage of products that they used to produce themselves,” he said. Local industry is not hampered by a lack of experience, or because it is not sufficiently sophisticated or relies on antiquated technology, said Nyatsumba. “Instead, the global playing field is uneven. Many of the Asian imports are directly or indirectly subsidised by governments, and generally their input costs are also much lower than those faced by their South African counterparts who are lumbered with higher labour costs for the same calibre of unskilled or low-skilled employees and ever-spiralling administration costs,” he commented. According to Nyatsumba, although the dti is doing its best to support industrialisation through its Manufacturing Competitiveness Enhancement Programme, it seems as if there is little or no policy coherence at government level. Executive director of the Manufacturing Circle, Coenraad Bezuidenhout, agreed with Nyatsumba, adding: “Business has, for the past five or six years, been bemoaning the lack of coherence at government level. Instead of collaborating, they are competing at a high level.” “That said, the Industrial Policy Action Plan (Ipap) has managed to get the best degree of cooperation going. Some measures of protection have been implemented against cheap imports and there's been an increase in standards on certain imported goods through collaboration with bodies such as the South African Bureau of Standards and the International Trade Administration Commission of South Africa (Itac),” said Bezuidenthout. Acting CEO of the South African Chamber of Commerce and Industry (Sacci), Peggy Drodskie, said that manufacturers should make more use of incentives offered by programmes such as Ipap and should further exploit new market opportunities that have been created by recent trade agreements signed by the government. She conceded that many of the incentive schemes were inaccessible and that streamlining access to funding would be helpful. “Business has said that it can accommodate the various adverse conditions around manufacturing, provided that they have clarity and certainty,” said Drodskie. INSERT & CAPTION Government has no clue what manufacturing is about. – Kaizer Nyatsumba