Manufacturers want more than ‘talk shops’ on transformation
21 August 2014
by Mark Allix
SOCIAL dialogue is of little value in transforming South Africa’s economy as it only reinforces the positions adopted by the government, business and labour, a manufacturing forum in Sandton heard on Wednesday.
It must be “replaced with something entirely different”, including better government leadership on the economy and pragmatic action instead of “talk-shops”. But the shape and form of this remains undefined and not agreed upon.
“The way we rely on social dialogue must be done away with and replaced with something completely different,” Coenraad Bezuidenhout, director of the Manufacturing Circle said.
“It doesn’t bring government, business and labour together, but just reinforces these constituencies,” Mr Bezuidenhout said.
This kind of social dialogue was “not the way to institutionalise” economic growth as it was “adversarial and political”, he said. Instead, wage bargaining needed to be decentralised to allow unions and companies to “do pact-building from the bottom up”, rather than agreements “filtering from the top down”.
Delegates at the forum were also told that South Africa had previously been industrialised by developed-world standards, and was now seeking to “re-industrialise”.
Lack of trust
But monopolies still hampered competition and the country continued to be far too reliant on primary industrial output.
“The challenge facing industrialists is there is no cohesive plan between government, business and labour — there is a lack of trust,” Nizam Kalla, MD of personal care company Amka Products, said.
This means that everything from electricity shortages and high energy prices to the volatile exchange rate, inconsistent import and export tariffs, and South Africa’s poor investment and savings rates, was not being dealt with in a coherent way.
Mr Bezuidenhout and Mr Kalla were part of a panel from business, government and labour that was discussing the way forward for manufacturing in South Africa.
This included Jeff Nemeth, president and CEO of Ford Motor Company South Africa, and Raymond Padayachee, head of industry and manufacturing in South Africa and Africa for German industrial giant Siemens.
Jonas Mosia, co-ordinator of industrial policy for the Congress of South African Trade Unions, was also on the panel, along with Nimrod Zalk, industrial development policy and strategy adviser at the Department of Trade and Industry.
Ipap not working
The department’s Industrial Policy Action Plan (Ipap), launched in 2007, is a key pillar of economic policy and seeks to stem erosion of the country’s manufacturing base.
But Martyn Davies, CEO of consultancy Frontier Advisory, which co-hosted the event, said this had worsened between 2004 and last year, falling 5.2% on average as a percentage of gross domestic product value-add.
It had fallen 0.76% on average between 1994 and 2003.
Mr Davies said this pointed to the Ipap “not working” in the context of economic headwinds that were particularly fierce, including the global financial crisis that coincided with South Africa’s chronic electricity shortage, and serial and violent strike action.
Mr Davies said that in Southeast Asian countries, the state had adopted the role of “entrepreneur”.
Negative head space
In South Africa, however, commercial enterprise was faced with red tape, administered prices and an unstable currency, and was in a “negative head space” in terms of the country’s political economy.
This meant the country had a “largely intractable employment problem” insofar as it was “haemorrhaging industrial capacity”, he said.
Part of the problem is that South Africa’s domestic market is too small to properly create economies of scale. To this end, the nation’s much vaunted automotive industry is heavily subsidised to attract investors.
“We need to be able to export to allow us to continue to manufacture in South Africa,” Ford South Africa’s Mr Nemeth said.
BusinessDay