Last week President Cyril Ramaphosa took to the podium at the Radisson Hotel in Boksburg to address a breakfast organised by the Steel & Engineering Industries Federation of Southern Africa and, rather like a disenfranchised pundit, lamented South Africa’s industrial decline.
“We cannot accept the continued erosion of South Africa’s industrial base,” he said. “Manufacturing is not simply another sector of the economy. It is fundamental to our economic sovereignty.”
Well, quite. If only we knew anyone in any position of authority who could help reverse this sad trajectory. Or maybe, if someone had the ear of the president, he could intervene with some well-crafted policies.
Those listening to him must have thought they’d gone bonkers.
“It sounded very much like an election stump speech, as if you were telling everyone what you’re going to change once you get into power,” says consultancy XA Global Trade Advisors founder Donald MacKay, who was at that breakfast. “At the table where I was sitting, a lot of people muttered under their breath, wondering how he could say all this when it is his party that led the country here.”
MacKay says the more cynical among those at the table simply brushed it off, as if they’d heard it all before and his pledges had lost all their potency. Those cynics might point out that Ramaphosa has been the pilot of this ship for the past eight years and the deputy to former president Jacob Zuma for four years before that.
Which is why, when the president tilts at the country’s deindustrialisation, it is so arresting that he sounds more like a dissociated social media warrior lamenting the slow decay of an economy over which he has no control, rather than the steward of this decline.
Ramaphosa, of course, isn’t wrong about the trajectory. In 1981 manufacturing contributed a quarter of South Africa’s GDP, but by 2023 it had tumbled to 13%.
This cull has seen steelmaker ArcelorMittal South Africa close factories, while Bridgestone and 13 other vehicle component makers have shut down operations in the past two years. Earlier this year Nissan sold its Rosslyn plant, which had built bakkies for 60 years, to China’s Chery.
Nelson Mandela Bay Business Chamber CEO Denise van Huyssteen told the FM recently that manufacturers are in a bind due to factors under the state’s control.
She listed them: “The unreliability of electricity, water and sanitation infrastructure; political and municipal instability; rapidly declining safety and security; logistics inefficiencies [and] cheap imports."
These have placed local manufacturers in a position where they now struggle to be sustainable, she said.
Yet in his breakfast speech, Ramaphosa spoke of a new R1-trillion investment programme to “rebuild” the country over the next three years. “We should view this not simply as a construction programme. We should view it as an industrial strategy,” he said.
Good news indeed, you’d think. But hardly new.
More than a year ago, in fact during his budget vote in parliament, Ramaphosa spoke of this R1-trillion investment, saying this would become “the true flywheel of economic growth”.
The companies are deeply sceptical. “We’ve had these promises before,” Werner Jerling, vice-president of the South African Institution of Civil Engineering, told the FM in May. “We’re not seeing it in our towns and cities.”
To be fair, Ramaphosa did concede it was the government’s job to provide certainty, remove the constraints that have prevented industry from flourishing, and co-ordinate the investment in infrastructure — even if he made it sound like something that must be performed by an outsourced supplier.
“Let us build the transmission lines. Let us rebuild the railways. Let us modernise our ports. Let us secure our water infrastructure. But as we build them, let us also rebuild South African industry,” he said.
Go right ahead, those executives would have thought. Don’t let us stop you.
The reality is, nobody is seeing this mythical R1-trillion anywhere right now. What people have seen, however, is that fixed investment in the economy has tumbled to 13.9% — less than half the level the National Development Plan said was needed.
Philippa Rodseth, executive director of the Manufacturing Circle, which represents the industrial firms, puts it politely when she tells the FM this week that “there appears to be a disjuncture between what the government says and what’s actually happening”.
In May, Business Leadership South Africa’s Busi Mavuso wrote that any aspiration South Africa had of rebuilding its industrial base is disappearing before our eyes, largely because of rules implemented by the government itself.
In particular, Mavuso said the department run by trade, industry & competition minister Parks Tau was “actively driving investment away”. In part, this is due to daft new black empowerment rules that threaten to strip original equipment manufacturers of their black empowerment status if they don’t buy parts from 100% black-owned firms, not merely those that are 51% black-owned.
“Automotive components for specific models cannot simply be swapped out when the rules change,” Mavuso said. “Boards of directors, many sitting in capitals around the world, are looking at this regulatory uncertainty and comparing it with other markets.”
Business cannot afford to watch deindustrialisation happen, she said, “while government departments add to manufacturers’ challenges instead of solving them”.
For MacKay, the danger is that industrial investors may simply tune out when Ramaphosa makes assurances such as those of last week.
“If he wants to be taken seriously, all he has to do is implement what he says. Or, at the very least, stop his own government from getting in the way,” says MacKay.
