The manufacturing industry has
called for urgent government
intervention and reform to counter
the threat of de-industrialisation.
South Africa’s current
fiscal policies did not support
manufacturing growth,
chairperson of the Manufacturing
Circle, Andre de Ruyter, told
FTW on the sidelines of the
Manufacturing Indaba held in
Johannesburg last week. He said
that while the sector contributed to
13% of the country’s gross domestic
product – down from 24% over
three decades ago
– South Africa’s
marginal tax rate was
among the highest
in the world for the
manufacturing sector.
“Manufacturers
get hit with a raft of
direct and indirect
industry taxes,
ranging from a
carbon tax to sugar
tax, to a packaging
tax and more.
Couple this with
the other challenges
of the high cost of labour and a
generally slow response to import
competition, and manufacturing
investors become very skittish,” he
commented.
De Ruyter conceded that
there were strong government
intervention policies in the form
of incentives but highlighted that
these were often very fragmented.
“There are no less than four
ministries tasked with various
forms of economic reform and
not enough communication and
collaboration between them.”
He pointed to the example of
Japan which has one international
minister of trade and industry
who manages all trade-related
economic policies. “There is less
red tape, faster response to import
threats, and improved ease of
doing business for manufacturing
investors,” said De Ruyter.
He highlighted a recent
discussion with the Minister of
Finance, Malusi Gigaba, where he
called on the minister to consider
certain tax reforms, particularly
those that de-incentivised local
manufacturing.
“Many countries have introduced
tax holidays – periods where new
entrants to the market are not
taxed for a period
of time while
they build their
business,” De Ruyter
said.
Other government
reforms should
include better
management
of state-owned
enterprises, linking
performance-based
outcomes.
“They manage
and regulate
many aspects that
impact on how manufacturers
do business – electricity, water
supplies and rates, transport
and logistics infrastructure,
preferential procurement and skills
development, amongst others – and
could contribute significantly to
the re-industrialisation of South
Africa,” he pointed out.
De Ruyter acknowledged
that the private sector should,
in turn, offer a ‘quid pro quo’
by committing to continued
investment, improving job creation
and supporting ownership and
empowerment initiatives such
as the Black Industrialists
Programme.
South Africa’s
marginal tax rate is
among the highest
in the world for the
manufacturing sector.
– Andre de Ruyter
The textile industry has been hit hard by Chinese imports ... government's
fiscal policies are accused of failing to support manufacturing growth.
