SA ‘losing’ to emerging rivals in bid for investors
The global competitiveness of South Africa’s manufacturing sector has been eroded by rising production and raw material costs, taxation and the skills shortage that threaten the country’s ability to effectively compete with other emerging economies for foreign direct investment, Deloitte said on Monday.
The state wants manufacturing to play a vital role in meeting its target of creating 5-million jobs by 2020. But estimates by bankers show that companies were sitting on corporate deposits of about R520bn as of January. The sector was also hamstrung by the lack of a coherent strategy to reposition selected industries as key champions to attract investment and create jobs, Deloitte said in remarks accompanying a new report on the future of the global manufacturing sector. South Africa’s manufacturing output has been sluggish over the past five years, which the deputy director-general for industrial development at the Department of Trade and Industry, Nimrod Zalk, on Monday partly blamed on the global downturn, high energy, port and rail costs and a volatile rand which reduced export competitiveness.
FirstRand chairman Laurie Dippenaar said there seemed to be no political will to improve competitiveness. “The challenge is to make competitiveness a high priority within the political framework, but it can’t happen if you don’t have that mind-set.” Deloitte said in addition to inadequate skills — worsened by emigration — and shrinking export sales, high labour costs were also taking their toll. Congress of South African Trade Unions spokesman Patrick Craven said wages were not to blame, but rather structural problems in the manufacturing sector dating back to the days before democracy. “We have made the point over and over again that to reduce wages would have a devastating effect on the economy with huge cut in demand and more job losses,” Mr Craven said on Monday. Deloitte audit partner Bronwyn Kilpatrick said many companies were considering their options as energy costs and regulatory considerations continued to constrain their operations. “Margins are being squeezed and the point has now been reached where the question must be asked whether South Africa is really trying to make itself attractive to international investors, especially as the country is competing for investments with an entire continent that is now open for business,” she said.
Labour economist Loane Sharp from Adcorp Analytics said on Monday that South Africa had a shortage of nearly 830000 highly skilled workers in disciplines such as accounting and engineering. Deloitte said companies were struggling to fill skilled manufacturing jobs. A growing global skills gap meant an estimated 10-million of these could not be filled. “The situation in the emerging South African economy means that a hard look will have to be taken at all aspects of local manufacturing capabilities,” Andrew Mackie, industry leader for manufacturing, automotive and construction at Deloitte, said. “The present economic environment, lack of skills in the manufacturing sector and an outlook that includes years of steeply rising electricity and fuel costs, means significant investment will be required within the sector.”
The Manufacturing Circle, the industry body for manufacturers, agreed with Deloitte. Executive director Coenraad Bezuidenhout said while manufacturers felt their existing workforce was to an extent adequate, more than 70% of respondents in a recent survey said replacement skills were either “less than adequate” or poor. “Specialist skills are ageing, as are owners of small manufacturing firms, many of whom do not see enough of a future in manufacturing to expect that they will be able to avert closure in favour of selling their concerns upon their retirement,” he said on Monday.
Source: BusinessDay
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