‘Labour-intensive industry is critical’

The impact of current global
realities on the shipping
industry is impossible to
predict, but Safmarine’s Africa
region executive Jonathan Horn
expects global container trade
growth of no more than 6-8% this
year, with South Africa probably in
the same ball park.
“The realities are plain for
all to see,” said Horn. “The two
traditional engines of the world
economy – the US and Europe –
have some very serious challenges
to tackle. And if you pull that
thread through, those economies
are high-consumption areas that
drive production in the likes of the
Far East manufacturing hubs such
as China, Korea, Thailand – and
that kicks back to the commodities
trade in Africa which feeds that
manufacturing cycle.”
“We’re therefore unlikely to see
double-digit trade in and out of
South Africa this year as caution
is exercised in terms of supply
chains and inventories.
“If you look outside of South
Africa, the bulk of Africa’s
economies are commoditiesbased
and driven. China, with its
burgeoning middle class and strong
infrastructure development, will
still have relatively strong growth
fuelled by its own internal needs,
but if the economies of Europe and
the US move into a recessionary
mode, South Africa could
potentially head in the
same direction.”
Trade with Africa however
remains an opportunity to be
explored, in Horn’s view.
“Africa has been delivering
growth well above the global
average – and with that growth
comes an increased middle class.”
While Horn concedes that the
growth comes off a very low base,
growth generates demand for goods
and services. “Over time that means
we will see much more inbound
traffic of white goods, electronics,
general retail merchandise, motor
vehicles and the like.”
During the recessionary
period, the impact in West and
East Africa was less evident and
delayed compared to first world
economies – and that was largely
thanks to commodities. “But pure
dependence on commodities is
not a good thing for Africa in the
long term – and while it’s great
that we’ve got them, ultimately we
need to add value before exporting.
Over time, we must capture more
of the value-add in Africa rather
than handing this over to other
economies.”
According to Horn, there is some
diversification happening, with
manufacturing facilities being set
up on a small scale for local or
regional markets.
What Africa needs, however,
is labour-intensive industry
to solve the key challenge of
unemployment – for example
industrial-scale agriculture, mining
and basic manufacturing.
What is also needed to get
people to invest is institutional
stability, greater predictability and
investment incentives – a lot of
which is starting to emerge, in
his view.
“Reliance on commodities
can lull you into a false sense of
security but it’s not sustainable.
However, unless you can provide
a value-competitive package, the
opportunities to build value-adding
facilities will be lost to other
competing emerging economies.”