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Picture: REUTERS
Picture: REUTERS

There is a crescendo of heckling in some quarters (conservative think-tanks, parts of the business media and some economists) telling us that the government’s plans to kick-start the economy through localising procurement is dangerous, will not work and must be abandoned. 

These ideological hand-wringers warn against hiking the costs of doing business, increasing regulation and red tape, discouraging investment, being uncompetitive and ultimately “destroying the economy”. But this is laughable and baseless, relying not so much on evidence and established best practice as on deep antistate dogma and discredited right-wing shibboleths, sailing as far from real-world experience as it is possible to get in the 21st century. 

For decades now Cosatu and its affiliates have called for focused measures to increase employment on a mass scale through manufacturing and other identified potential growth sectors. We have now finally reached a stage where the state and business sector have accepted the demonstrated truth of this argument and are now partnering to achieve this critical national goal.

That is why we increasingly witness large retailers, brands, mining houses and other corporates seeking to work with local manufacturers and grappling with how to support the creation of new domestic manufacturing capacity. The global pandemic has played a role. Covid-19 disrupted global supply chains and has demonstrated the importance of national self-reliance in manufacturing. Some of our biggest retailers — such as Clicks, Mr Price and Pepkor — have responded by localising procurement, which has had a positive knock-on effect on small, medium-sized and micro-enterprises (SMMEs).  

“Spiralling shipping costs and Covid-19 supply chain disruptions are accelerating a shift by SA retailers to end their heavy reliance on Asia and move to source products locally,” a Reuters report read only last month. Localisation efforts are also happening through the Economic Reconstruction & Recovery Plan (ERRP) and the various sector master plans. Where big business is localising they are not doing so as charitable and philanthropic organisations but as hard-nosed profit-driven enterprises looking for competitive but local products.  

Evidence-backed facts

This is a positive development and a good start for our country’s reindustrialisation. It is therefore alarming and disheartening to see that there are still voices that would have us repeat the mistake of the 1990s: of pretending that economic success only happens for the most open of economies with a bare minimum of regulations (often with no regard for environmental or social challenges, or our entrenched historical inequalities), and where the role of the state is simply to stand back and wave as business gets on with business at any cost. This sort of 19th century-style laissez-faire economics encouraged inequality, unemployment and deindustrialisation, and a general developmental crisis that remains the biggest threat to the survival of our democracy.  

Cosatu’s long-standing call for and support of localisation of manufacturing is based not on blinkered ideology but on the following evidence-backed facts:

  • A strong local manufacturing sector is key to saving and creating local jobs;
  • Government finances are extremely limited and so every bit of financial support must be mobilised for the economy and jobs;
  • SA produces goods and services at a high-quality level and often competes well in international export markets;
  • Local procurement can help fragile companies stabilise, solidify their domestic base and eventually expand into exports;
  • Creating local manufacturing and product value chains is the simplest and most sustainable way of boosting developing economies, as demonstrated by many other countries such as the so-called Asian Tigers; and   
  • All of us — the government, local businesses, civic organisations and citizens — can create jobs with little effort by changing our consumption patterns and buying local. 

Some of the “arguments” now being chanted by the hecklers against our national goal of localisation and reindustrialisation of the economy are so simplistic and unsophisticated that it is slightly embarrassing to even respond to them. For instance, the critics argue that if consumers buy imported products it is because those products are preferable to local products. Glib phrases are good for insults and bumper stickers, but this sentiment is out of touch with the real world.  

Consumer choices are shaped by many factors, one of which is global trade patterns that disadvantage developing and industrialising economies. As happens in numerous industries such as textiles and agricultural products, products can be cheaper because they rely on extensive government subsidies and other taxpayer-funded support, or the serious abuse of workers in the country of origin. These mechanisms undercut the prices of SA equivalents.

No nation has ever developed its economy and population by making itself the dormant recipient of finished goods from other territories while it contents itself with digging up dirt and selling raw materials.

We may be unable to respond to the unfairness of trade subsidies by instituting our own subsidy regime, but we cannot respond by folding our arms and accepting our status as importers of “cheaper” but unfairly imported manufactured goods. In the history of modern economics no nation has ever developed its economy and population by making itself the dormant recipient of finished goods from other territories while it contents itself with digging up dirt and selling raw materials to the rest of the world. 

Curiously, the critics ignore one of the main acknowledged crises of our economy: joblessness. Import-based, nonmanufacturing national economies do not create mass employment, certainly not to the extent that we need in SA, where 46.6% of adults who want to work do not have jobs.  

Another factor is that there is sometimes simply poor awareness in the domestic market about the existence of suitable local alternatives. Furthermore, buyers for large companies such as retail groups may often be incentivised to buy imports rather than local products by perks such as opportunities to travel.    

We must vigilantly call out the falsehood argued by the hecklers — that localisation of the economy is somehow being offered as a lone silver bullet and is seen by the government and its partners as the only tool to get us out of the economic malaise. This is untrue.  

Anyone who is paying attention knows that bolstering localisation is but one of a selection of policy, legislative, regulatory and trade interventions that are all meant to work together to boost the economy. The Africa Continental Free-Trade Area is an attempt by SA and its continental partners to boost regional trade, industrialise and create value chains free from globally established systems of control and colonial exploitation.  

Anyone who is even remotely concerned with the business of national economies must surely accept that industrial development is a basic requirement. Sustained economic growth of the kind that pulls millions of people out of poverty and into the mainstream of the national and global economy is scarcely possible without industrialisation and the development of a local manufacturing base. Localisation is a critical tool in this strategy.   

• Ntshalintshali is Cosatu general secretary.

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