Picture: 123RF/MOOV STOCK
Picture: 123RF/MOOV STOCK

It is with great interest that I reflected on Peter Bruce’s criticism of the economic policy of localisation, with which I wish to disagree (“The mirage of localisation will lead to our ruin”, May 12).

Bruce’s views may work well in a classical economic setting where the consumer is placed at the centre of policy and cost to the consumer is the only thing that matters. However, economic policy should be about more than cost, it should also create opportunity for those who have been excluded from the mainstream of the economy.

I believe localisation is essential to bring into the mainstream economy black people who have been placed on the economic periphery due to our skewed historic legacy. This legacy was created by direct intervention in the economy to keep black people out. One of the ways to rectify this is through direct intervention to empower local communities.

I am not against free trade, but I am adamant that there must be some level of protection to sustain local industries. I am not alone in my thinking. Many countries have used localisation as a policy instrument to drive growth, including China, parts of Latin America and even within SA. One argument in favour of localisation is the infant industry argument, which states that new industries require protection from international competitors until they become mature, stable and competitive.

Infant industries are usually characterised by a lack of efficiency and competitiveness, and high vulnerability to sudden market changes. When new industries are expected to compete against international competitors we run the risk of driving them out of business. It is important to enable new industries to thrive by adopting a supportive approach.

However, we must work towards making them more sustainable in a competitive foreign market. Once the industry is developed and can compete we should suspend protectionist policies to allow the industry to compete with foreign entities. In this way they would benefit from having a specialised trade in exports, giving them a competitive advantage.

For example, the Covid-19 vaccine development left SA to the whims of international trade to safeguard its population. While each import of a vaccine is heralded as an achievement, it would have been more beneficial had we sufficient local capacity, through localisation. It took a pandemic to force us to introspect and look internally to ensure our self-sustainability. Globalisation ensures competitiveness and growth, but we are a country of net importers and consumers as opposed to producers.

Localisation can have tremendous benefits for SA’s economy by reducing imports and building local capacity. A structured and methodical approach is required to move the dial from potential impact to a real driver of growth and job creation. It requires continued dialogue and research, investigating what works and what does not, identifying new ways and new opportunities, and ensuring continued designation of local content. Effective monitoring and evaluating of implementation are imperative to ensure effective localisation.

If we do not look at the economy holistically instead of just at the cost to the consumer, soon we will not have any consumers left.

Shawn Theunissen

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