Let’s keep our local manufacturing sector buoyant

The theme for the majority of the new year messages that I read was that people were relieved and thankful that 2016 was over and that they were determined to make 2017 a great year. In many respects, 2016 was a tough year for most of us and it is commendable that people are starting off 2017 with a positive attitude.

I wrote the following in my January 2016 column: “A challenging year ahead – We all like to start off a new year with a positive disposition, full of fresh ideas and high energy levels. Time off over the holiday period was certainly welcome, and now that we are experiencing some respite in certain parts of the country from the hot weather and drought conditions that we have experienced over the last few months, albeit a small amount of rain, we should all be smiling.”

Our 2015 end of year holiday period had been somewhat spoilt by political struggles within the ANC government and they certainly did not end there. It was almost as if throughout the year we would just get back on track and then another political bombshell would set the country back. This was all in the face of the threat of being downgraded by the international ratings agencies, declining employment, corruption scandals and escalating protests.

Despite this we managed to survive 2016 even though we started it off with a currency exchange rate of R17.91 per US dollar. Currently the rand exchange rate is below R14.00 per US dollar and we have not been downgraded to the ‘doom and gloom’ level. Some analysts were predicting at the beginning of 2016 that the rand could be 19 and maybe even 20 to the US dollar by the end of 2016. Thankfully it did not reach these levels.

There are many examples that I have either reported on during 2016 or will be doing so in future issues, whereby there has been vast amounts of money spent on capital expenditure projects that have either been completed or are currently in progress. I have no doubt that this will continue to be the scenario but as is pointed out in the Efficient Engineering article, further on in the magazine, the company says the success of local content designation depends on active support by public and private sectors. The company also calls for more support from State-owned enterprises as the company believes that they, and many other companies in South Africa, are competing under inequitable conditions while adhering to government policy. On top of this they are not getting the support from government entities and the State-owned enterprises’ procurement departments. This is despite the fact that it has been widely reported that government’s drive is to support manufacturing development by specifying the percentage of local content required when government entities and State-owned companies procure products.

An example of this is a report over the holiday period of a US$15 million order that Indian company Jyoti Structures Limited has received from Eskom for the supply of towers and construction of 765 and 400kV Masa Ngwedi transmission lines. The company is also currently executing three contracts for Eskom with a total value of approximately US$80 million, the report says. As I have seen in the past with Indian companies contracted to do business in South Africa, it is highly likely that the same scenario will happen again. They (the Indian company) manufacture everything in India, ship all the components including the structural aspects to South Africa and then bring in their own workforce to assemble in South Africa.

There are many reasons that one could philosophise as to why this is happening, but the bottom line is that the government should not be allowing it to happen and it certainly backs up what Efficient Engineering is saying.