Manufacturing should and could be SA’s sunrise sector
With 9.6-million unemployed South Africans we need to focus on sectors that have the potential to create jobs
On Saturday, DA leader Mmusi Maimane released the party’s most comprehensive manifesto to date. It is a document that covers every aspect of SA’s landscape from education to healthcare and the economy.
A strong focus in the manifesto is given to trade, investment and manufacturing as keys drivers for economic growth and job creation. Manufacturing is a key catalyst and multiplier for job creation and has incredible potential to stimulate economic growth, regain our space in manufacturing global value chains, and ultimately create jobs.
In SA, manufacturing has been in a deep crisis for a long time, with it’s contribution to GDP falling from 18% in 1997 to 11% in 2018.
Hundreds of thousands of jobs were lost during the “nine wasted years” of reckless ANC policies, which have seen the costs of manufacturing increase exponentially while productivity has declined dramatically.
According to the World Bank, manufacturing has the highest job multiplier of any sector. According to the Manufacturing Circle, out of every rand invested in manufacturing the fiscus gains 35c and R1.13 of output is generated. For every R1m invested three jobs are created.
With 9.6-million unemployed South Africans we need to focus on sectors that have the potential to create jobs and so drastically reduce this number. This is why manufacturing is a major focus of the DA’s manifesto, which contains some big ideas on how to make manufacturing a sunrise sector for our economy.
At the cornerstone of this policy is making manufacturing in SA an attractive place once again through lowering corporate tax for manufacturers to 15%, conditional on a percentage of turnover being re-invested in capacity that expands production, with new technology that drives down costs through improved productivity. We believe this incentive will ultimately lead to more job opportunities, skills training and corporate social investment.
The Eskom factor
One of the biggest costs for any manufacturing industry is electricity, which, through continued above-inflation increases from Eskom, coupled with unpredictable blackouts, have put the brakes on the sector and prevented growth and expansion.
The DA thus believes we must ensure manufacturing has access to cheap and reliable power suppliers to lower the cost of manufacturing. This would include bulk and long-term deals with heavy industries. We believe this can be achieved through the break-up of the energy sector, in line with the DA’s Independent Systems and Market Operator Bill.
Incentive programmes are the very life blood of the manufacturing sector, whether companies are big or small, allowing them to compete in a global economy.
There is one such programme introduced by the department of trade and industry (DTI) that was fairly successful, called the manufacturing competitive enhancement programme. The problem with it was its inability for a longer term view to be taken and its fairly limited focus.
At the time of writing, and despite my repeated requests, the DTI has been unable to provide a 10- to 15-year view for manufacturing incentives such as this, which stymies long-term production planning by the sector.
That is why the DA believes we can introduce sector-specific manufacturing incentives, with a long-term view, as a way to incentivise investment in manufacturing in labour absorptive sectors (such as agro-processing) where there is also a clear business case for successful growth.
Incentives would be based on the ability to improve production efficiencies, lower manufacturing costs, and create new jobs. These incentive programmes will focus on assisting existing firms become more competitive and adaptive, and encourage new firms to open in sectors where there is comparative or competitive advantage.
The DA’s manifesto on manufacturing is realistic, bold and a clear road map for the future of the sector. It provides certainty, and encourages investment in new technology that will increase factory-floor efficiency — that will lead to job creation. We believe this is exactly what the sector requires to make SA a manufacturing hub not only in Africa, but the world.
• Macpherson is a DA MP and shadow trade and industry minister.