THE INTIMATE RELATIONSHIP AMONG THE SECTORS MEANS THAT IF ONE GOES DOWN, ALL GO DOWN
Any disruptions or slowdown in activity in any one of the four sectors influence the others. If the slowdown in domestic car sales is severe and not counter-balanced by sustained or growing exports, it could initiate another wave of lower demand for the metals and engineering sector and exacerbate the already bleak situation, with more retrenchments resulting.
A similar symbiosis exists with mining – and the sector waits with baited breath for the conclusion of this year’s gold mining wage negotiations. We can only hope that it will not lead to a repeat of the disruptions that occurred in platinum mining at the beginning of 2014.
Retrenchments in the mining sector resulting from lower commodity prices, cost pressures and losses have already had a very negative impact on demand in the metals and engineering sector. The latest threats by the Department of Minerals to revoke mining licenses will no doubt send another confidence shock through the sector – and that will delay recovery, something which our country can ill afford.
The construction sector has been in dire straits for several years. In recent times, only housing construction, which has the smallest impact on metals and engineering demand, has shown some life. However, even in the case of housing construction, the impact of the latest confirmation that interest rates are on an upward trajectory is bound to be negative.
Both non-residential building and construction works have not had the expected impact on demand in the metals and engineering sector, even though the latter seems to be on an all-time high, according to the South African Reserve Bank. The only possible explanation is that the current phases of the investment projects are at their highest import-intensive stages possible. Unfair competition from highly-subsidised Asian economies resulted in accelerated import penetration of their products into the South African market in recent months.
As a result, the metals and engineering sector shed an estimated 16 000 jobs at the end of the fourth quarter of 2014. There were some gains during the first quarter of 2015, but this trend will not be sustained. Retrenchments have accelerated in the second quarter of 2015 and are likely to escalate in the third quarter. Our estimate is that, in the second quarter alone, between 6 000 and 10 000 workers have been laid off.
All indications are that output in the sector declined by an annualised 5% during the second quarter, with imports increasing by an estimated 5% and exports declining by 2,5%, thus resulting in a trade deficit of over R30 billion. Fixed investment within the sector declined by 9% during 2013 and a further 17% during 2014. This trend is not expected to be reversed during 2015.
The impact on the sector and the economy at large could be severe. The metals and engineering sector’s contribution to the economy declined from 4,3% in 2007 to 3,4% in the first quarter of 2015.
The four sectors (metals and engineering, construction, mining and automotive) combined contributed 20,6% to GDP in 2000, but that contribution had dropped to only 16,8% by the first quarter of 2015. Their combined workforce dropped by an estimated 30 000 people since 2014, and this could be much worse with the latest announcements of retrenchments. Combined fixed investment has declined by 2,5% in 2014.
The most worrying factor is that the four, inter-connected sectors’ combined trade balance has reversed from a R50 billion surplus in 2011 to a deficit of an estimated R70 billion at the end of the second quarter of 2015. Their collective value add to the economy is estimated to have dropped by an annualised 4,1% during the second quarter of 2015, with the total impact on the country’s GDP growth amounting to an estimated -0,7% contraction.
The one question currently on most people’s lips is: how long are the current economic difficulties likely to last? Closely allied to that question is the follow-up: what is to be done?
It is our considered view that the metals and engineering sector (and, perhaps, the other three as well) is going through a fundamental structural adjustment, and not just a cyclical correction. If this is correct, then the recommended action would be completely different from one that is reacting to a cyclical downturn.
The fact that the current crisis in the metals and engineering sector seems to be seven years in the making should also be seen in the light of fundamental shifts in the drivers behind its growth both historically and now. During the seventies and middle eighties, the sector was riding the crest of a wave of investment and economic expansion not seen since.
The mining sector was investing heavily, reaping benefits from the then commodity super-cycle peak. South Africa’s reaction to the 1973 and 1978 oil crises was to build the oil-from-coal projects, general government fixed investment (water projects and roads) was at a peak, the nuclear programme started at Pelindaba (reactors and uranium-enrichment plant), investment in the arms industry exploded and the previous round of power stations were built. Such investments have long withered away, followed by the shrinking of the metals and engineering sector base to support them.
Very little has changed to reinvigorate the base. Instead, the local mining sector has not benefitted from the most recent commodities cycle and finds itself at the bottom of the trough; there is no nuclear programme; energy price deterioration has virtually frozen expansion in the oil sector; general government fixed investment has never recovered since the middle eighties; and investments by State-owned companies (as in power stations and rail expansions) have so far proved to be highly import intensive. Ironically, the arms industry seems to have found some demand again for its products.
For recovery to commence in the metals and engineering sector, export markets need to recover and domestic demand from mining, the automotive sector and construction has to resume. Whatever policy response is considered, it must take these dynamics into account if it is to succeed. Import tariffs will help in the short term, but sustainable recovery needs a longer-term view.
Henk Langenhoven is the Chief Economist of the Steel and Engineering Industries Federation of Southern Africa.
Women have made significant inroads into the world of commerce, but a lot still needs to be done to put them on par with their male counterparts
While one cannot argue that, as a country, we cannot or should not be proud of the significant strides that women have made in the world of commerce, the fact remains that in certain sectors of the economy, such as the metals and engineering sector, women still lag far behind their male counterparts in terms of leadership roles, among other things. According to a study conducted by the Engineering Council of South Africa (ECSA), a total number of 18 067 professional engineers were registered with the council in 2004.
By 2014, this number had escalated to 23 634. In terms of the gender split, in civil engineering, which constitutes the largest group in the engineering fraternity, there were 650 (or just over 3%) of women working in the profession in 2004. By 2014 the number had increased to 2110 or 9%.
The ECSA study, which also looked at two other important groups in the engineering fraternity – engineering technologists and technicians – found that in 2004 there were 4 594 technologists and technicians and by 2014 the number had almost tripled to 13 460.
In terms of the gender split, the number of women employed as technologists increased from 500 in 2004 to 2 900 or 21% in 2014.
This is an encouraging indication of improvement. What is even more encouraging is the increase in the number of female students who enrolled for these professions at tertiary institutions within the same (2004 to 2014) period.
According to the ECSA study, there was a 220% increase in women registered for the Pr Eng qualification, a 312% increase in women studying to be technologists and a 118% increase in those studying to be technicians.
According to the manufacturing, engineering and related services SETA, just over 20% of all people employed in the metals and engineering sector in 2013 were women. Comparing that with overall employment in the sector means that there were about 80 000 women employed in the metals and engineering sector.
However, a large majority of the women employed in the sector held clerical support positions (36 000 or 45%), sales and service position (23 200 or 29%) and only 20 800 or 26% held technical and professional positions.
Furthermore, women comprise 45% of the economically-active population in South Africa, but only comprise 21% of top management. In the private sector, only 19% of top management are females, compared to 37% in national Government and 28% in local government.
From the figures above, it is evident that transformation is taking place at a snail’s pace. But why are females lagging so far behind when compared to their male counterparts?
Many reasons can be cited, ranging from lack of mentors owing to the small number of female leaders, through to cultural perceptions about the roles of women. These explain why the engineering field is still so heavily dominated by men.
Not choosing a career in the engineering sectors is also possibly caused by perceptions from a young age that engineering means dirt, spanners and engines. It is now up to us to change that perception and to instil confidence in our children that they can be whatever they wish to be. Parents should encourage and allow their children to spread their wings in whatever directions they want.
This should be the case not only with girls who want to be engineers, but also with boys who want to be nurses.
Transformation takes commitment, time and energy – there are no quick fixes. While we are proud of the fact that we have many employers in the metals and engineering industries that have embarked on a dedicated drive and made resources available for the important objective of increasing female participation in the sector, it is also crucially important for these companies and various other stakeholders within the sector to continue to support industry bodies that aim to encourage meaningful female participation not only in the metals and engineering sector, but in the economy as a whole.
Elsa Venter is the Deputy CEO of the Steel and Engineering Industries Federation of Southern Africa.
Press Release - 2015/08/05: JULY PMI OUTCOME OBSCURES POOR STATE OF THE METALS AND ENGINEERING SECTOR
The seasonally-adjusted overall index remained unchanged when July 2015 is compared to June 2015, but showed a substantial improvement of 11,3% when July 2015 is compared with July 2014.
Speaking after the release of the PMI figures, SEIFSA Chief Economist Henk Langenhoven said that the business activity sub-index showed extreme variations. July recorded a 3% improvement on June, and the average for the year to date was 9% higher than last year.
“July 2015 is 30,5% higher than the strike-hit July 2014 . However, the 12-month comparison, ending July 2015, is probably a better indication of activities; the latter was 3,3% higher than the same 12 months, ending July 2014,” Mr Langenhoven said.
He said that the distorting impact of the volatile first seven months of 2014 was evident in the year-to-date numbers as well as the year-on-year comparisons.
“To evaluate if some normality is returning to the metals and engineering sector, comparing July with June (2015) is appropriate. Taking this approach, the PMI subindices spell out a dire situation:
- New sales orders declined by 3,7%;
- Inventories are increasing (+6%);
- The price index declined by 2,7%; and
- The employment index declined by 3,7%;
The figures above indicated a weakening situation for the manufacturing sector generally and confirmed similar observed patterns within the metals and engineering sector.
“It is perplexing that the business activity, purchasing commitment and expected business activity sub-indices are improving slightly. This ambiguity was mentioned by the Bureau for Economic Research in its press release yesterday,” Mr Langenhoven said.
These PMI indicators, therefore, did not change SEIFSA’s views that tough times lie ahead in 2015. The production numbers to be released shortly by Statistics South Africa will give some indication of the actual, current economic activity.
“Nevertheless, the anecdotal evidence from the metals and engineering sector is very concerning,” Mr Langenhoven concluded.
Press Release - 2015/07/24 : HIGHER INFLATION OUTLOOK FORCES DIFFICULT DECISION ON INTEREST RATES
Speaking after the Reserve Bank Governor, Lesetja Kganyago’s, announcement of the rate hike this afternoon, SEIFSA Economist Tafadzwa Chibanguza said despite the heavily-constrained economy and the downside pressures on both the global and domestic economies, the South African Reserve Bank (SARB) has opted to maintain its credibility and its policy stance of tightening the monetary cycle.
According to Mr Chibanguza, of primary concern to the central bank and the reason for the 25 basis point increase include the higher inflation outlook expected to be driven, mainly, by global factors as well as domestic ones.
On the global front, Mr Chibanguza said that it was evident that rate normalisation in the United States was a major concern for the central bank.
“The bank is of the view that the United States will begin its rate hiking cycle this year and is, therefore, concerned of the impact that the move in the US rates will have on the Rand and the subsequent effect it would have on inflation. It is clear the bank does not want to get caught off-guard when the US rates are increased and has opted to act ahead of the US hikes. The Governor’s precaution should help to minimise the potential weakening of the rand,” Mr Chibanguza said.
Mr Chibanguza added that weaker commodity prices, a function of supply glut and weak global demand, did not bode well for the South African terms of trade and the Rand.
This was yet another reason motivating the Central Bank’s 25 basis point hike.
Mr Chibanguza said that there was notable acknowledgment by the SARB that the domestic economy was not in good shape and most aspects of the domestic economy would have, in fact, advocated for an unchanged repo rate.
These aspects include deteriorating consumption expenditure, deteriorating consumer confidence, moderating wage inflation and moderating food inflation at the consumer price index level.
“There is no doubt that, while the decision to increase rates is good for a credible monetary policy, consumers will have to bear the ultimate brunt,” Mr Chibanguza concluded.
GOVERNMENT SHOULD FAST-TRACK THE ROLL OUT OF INFRASTRUCTURE PROJECTS TO STIMULATE ECONOMIC GROWTH
Infrastructure development plays a critical role in job creation and economic performance. To date, the goals of the National Infrastructure Development Plan have appeared to be quite ambitious. The Cabinet and the Presidential Infrastructure Coordinating Commission developed 18 Strategic Integrated Projects (SIPs) to support economic development and to address service delivery on the overall projects. Among these projects are the Spatial Strategic Integrated Projects, the Energy Strategic Integrated Projects and the Social Infrastructure Strategic Integrated Projects. These projects are at the core of improving the living conditions of the disadvantaged communities in South Africa, with the view of addressing the imbalances that currently exist in the South African landscape.
Over the past years service delivery protests have been on the rise in South Africa as a result of people getting impatient with the Government’s lack of implementation of NDP initiatives and its failure to improve the living conditions of the poor. Coupled with these service delivery protests has been the Afrophobic attacks on foreign African nationals over economic participation, among other things. This is nothing less than disadvantaged South Africans who find themselves frustrated due to lack of employment opportunities and ever-increasing costs of living can expect. It is also important to note that much of these protests take place in the townships where there is extensive lack of infrastructure development and service delivery.
If these socio-economic issues are to be addressed, the Government should, as one of the measures aimed at resolving such issues, fast-track the implementation of the strategic projects identified in the NDP. The implementation of these projects will not only contribute towards the eradication of poverty as a result of employment creation, but it will also help stimulate the South African economy and help it rise out of the doldrums.
It goes without saying that infrastructure development plays a fundamental role in accelerating any country’s economic growth. Governments’ spend on infrastructure development not only provides a stimulus to a country’s economic growth, but it can also crowd in private sector and foreign direct investment (FDI).
Countries that boast highly-developed infrastructure tend to do better than their less-developed counterparts when it comes to attracting private sector investment as well as FDI. While South Africa does boast well-developed infrastructure, when compared to its African counterparts, there is no doubt that there is still room for improvement. The improvement of infrastructure – energy, rail and road transport, dams, schools, hospitals, stadiums, etc. – will inject massive new investment in the economy and lay the basis for a strong platform for economic performance.
In addition to providing an environment conducive for economic growth, infrastructure development can also create employment opportunities for, especially, the unemployed youth of South Africa, who are typically at the forefront of service delivery protests and Afrophobic attacks.
According to Statistics South Africa’s Quarterly Employment Statistics for the fourth quarter of 2014, employment in the metals and engineering sector alone:
- dropped from an average of 394 647 (calendar 2014) to 386 910 by the fourth quarter of 2014;
- Employment numbers declined by 1,4% on the 3rd quarter of 2014;
- There was a 2,5% drop from the first to the second half of 2014;
- There was a 3,4% decline when the second half of 2014 is compared with the second half of 2013;
- The full year (2014) saw employment contracting by 2,2% on 2013 or by nearly 9 000 people;
- When the 4th quarter of 2014 is compared to the 4th quarter of 2013, the decline was 3,9% or nearly 16 000 people.
These numbers, which can also be attributed to the red tape implemented through the recent labour legislation amendments, are extremely concerning in a country, such as South Africa, where youth unemployment is at an all-time high.
In addition to fast-tracking the rollout of the infrastructure projects, the Government should, through the various SETAs, also upskill the unemployed youth of South Africa through, among others, artisan training, apprenticeship and learnerships. This will ensure that the unemployed youth is well equipped to take advantage of the opportunities that will be presented when the SIPs are ultimately implemented. The next National Skills Development Strategy should also be more aligned to respond to the NDP imperatives.
It is, therefore, of paramount importance that the Government fast-tracks the implementation of the NDP projects not only to stimulate economic growth, but also to also contribute towards eradication of poverty, and other socioeconomic challenges through employment creation.
Bridgette Mokoetle is the Legal Executive of the Steel and Engineering Industries Federation of Southern Africa.
Shale Gas Exploitation May Be Risky But It Holds Enormous Potential for South Africa
Ultimate dependence on our coal-powered stations for energy has resulted in economic growth in the manufacturing sector lagging behind. According to a recent report by the South African Chamber of Commerce and Industry (SACCI), electricity supply disruptions have largely contributed to the decline of the Business Confidence Index (BCI) to a 16-year low. In the same report, SACCI also noted that South Africa’s economic performance is falling behind both that of Africa and the rest of the world.
Our energy crisis is a thorn in the flesh, one which should be dealt with without further delay. The Government needs to move swiftly to identify and activate enablers for economic growth, specifically energy sources. For our economy to thrive, access to adequate, affordable energy is crucial. Equally important is the need for sustainable development, and to this end the shale gas exploitation in the Karoo basin poses a dilemma. In the United States of America adverse public health risks of fracking have invoked fears among affected communities, with residents of Texas calling for a ban on fracking in November last year.
According to a presentation by Dr. Graeme Potter published on 18 June 2014 in the USA, there are about 750 different chemicals used to enhance water flow, 650 of which are carcinogens. Though it is difficult to link illnesses to particular chemical exposure, some credible data collected suggested a direct relationship between increased infant mortality and the density of fracking wells. Low birth weight has also been reported among the communities in close proximity with fracking wells. Possible contamination of underground water by carcinogens and endocrine disrupters places the lives of affected communities at risk of cancer and hormonal disorders, just to name a few.
According to the South African Constitution, every person has a right to an environment that is safe and free from health risks. An impediment of these rights to affected communities in the Karoo due to fracking will reflect negatively on the Government. Given the current stance that the community has taken to oppose shale gas exploration until the Strategic Impact Assessments have been completed, the damage on the Government’s reputation, should there be any adverse exposure, would be even greater. Apart from possible health risks, the amount of water required for fracking is huge and half of it is irrecoverable. Given our meagre water resources, there is bound to be yet again a deprivation of another human right, that of access to adequate water supply.
The Government has a vital task of drafting fracking regulations that are clear and provide precise check points and resolution processes to deal with emerging risks before, during and after fracking activities. Environmental and public health impacts can be controlled through effective regulation and implementation of strict control, monitoring and remediation measures.
There is no doubt that fracking, if carried out correctly and responsibly, has enormous potential to unlock South Africa’s economic growth not only through the provision of reliable energy, but also through the creation of much-needed jobs.
Fortunately, we are not pioneers in hydraulic fracturing. We, therefore, have an opportunity to learn from the likes of USA and Canada – with the former having considerably reduced its reliance on crude oil producers in the Middle East and other parts of the world – and avert foreseeable environmental and public health risks. Even more encouraging is the fact that fracking in the Copper basin of South Austria has taken place over the years without significant environmental impacts.
Nonhlalo Mphofu is the Safety, Health, Environment and Quality Executive of the Steel and Engineering Industries Federation of Southern Africa.
Press Release - 2015/06/17: HIGH ELECTRICITY PRICE INCREASE WILL CRIPLLE ALREADY STRUGGLING METALS AND ENGINEERING SECTOR
In its submission to the National Energy Regulator of South Africa (NERSA) on Eskom’s request for a further 25,3% electricity price increase for the year ending in March 2016, SEIFSA urged NERSA to decline the power utility’s request, arguing that its approval would have “a debilitating effect on the economy”.
“The metals and engineering sector has been struggling for more than five years, owing to fierce import competition from Asian economies, industrial action, increasing production costs and power outages, among other factors. Therefore, the sector cannot be asked to bear the brunt of another electricity price hike,” SEIFSA Chief Economist Henk Langenhoven said.
He said that the stability of electricity supply and its costs were almost as crucial as its availability. Mr Langenhoven said that given the fact that the sector exported 60% of its production, international competitiveness was vital for its competitiveness and continued survival.
“Electricity is an absolutely essential input for the metals and engineering sector.
Exorbitant price increases will have a crippling effect on an already declining sector,” Mr Langenhoven warned.
He added that the possible overall impact of the envisaged electricity price increase on inflation had been captured by the South African Reserve Bank. Its assumption was that any increase would only materialise in September, and that increases will return to +/- 13% in 2016/17 and 2017/18.
“In this scenario, headline inflation will be 0,1 to 0,4 percentage points higher at an average of 5% and 6,5% for 2015 and 2016 respectively. Most of the impact would be felt through the direct effects of the electricity price, which has a weight of 4,13% in the consumer price index basket,” said Mr Langenhoven.
The indirect effects were estimated at 0,1 percentage points in 2016. The most disturbing fact was that, despite electricity not being such a large portion of input costs, it represented a critical quantum relative to net surpluses of companies in the different industries (surplus as a percentage of all inputs, excluding allowances for depreciation).
“This highlights the importance of administered price movements as well. When transport and logistics costs are added to electricity costs, the share of these administered prices to total input costs doubles to 8%. Producers have no control over these prices,” Mr Langenhoven said.
He added that the erosion of profit margins is most strikingly shown by the patterns of electricity increases relative to merchants and producer prices, as well as the price movements as measured at the factory gate. “Factory gate” prices were measured by the intermediate production price index which, in the metals and engineering sector, represents 70% of the latter.
“When one takes all of the above into account, it goes without saying that another increase in the price of electricity would be detrimental to the South African economy in general, but more so for the metals and engineering sector,” Mr Langenhoven concluded.
Press Release - 2015/06/12: “PERFECT STORM” OF DECLINING GROWTH THREATENS COMPANIES’ SURVIVAL IN THE METALS AND ENGIEERING SECTOR
On an annualised basis, production has declined by 3,8% when April 2015 is compared to April 2014. Production in April was only 0,9% lower than in March, but the first four months of the year recorded a 3,3% decline compared to the same period in 2014.
Speaking after the release of the production figures, SEIFSA Chief Economist Henk Langenhoven said fears that the negative sentiments reflected by the business activity sub-index of the purchasing managers index (PMI) and the quarterly manufacturing surveys of the BER would be followed by actual production declines have now come to pass.
“The flicker of light reflected by the improved January production data has now well been snuffed out,” Mr Langenhoven said.
He added that virtually every component industry of the metals and engineering sector recorded declines in April compared to March, barring plastics (+2,6%), non-ferrous (+3,2%) and general machinery (+1,1%), collectively accounting for 25% of the sector.
For the four months of the year, only basic iron and steel (+6,2%), other fabricated metals (+1,4%) and special machinery (+4,8%) production grew, accounting for 43% of the sector.
Over a 12-month, seasonally-adjusted period, none of the component industries expanded:
- General purpose machinery: -10,5%,
- Structural steel: -9,1%,
- Rubber products: -8,3%,
- Non-ferrous: -7,3%,
- Household appliances: -4,3%
- Plastics: -3,5%,
- Electrical machinery and equipment: -3,2%
- Special purpose machinery: -1,2%
- Basic iron and steel: -0,5%
“The April data released by StatsSA today effectively dashed any hopes that the sector will show any improvement during 2015. It is now clear that the small recovery recorded over the first two months was simply a normalisation after the instability of late 2014,” Mr Langenhoven said.
He said that exports did not improve during this period. Customs and excise data show that plastics and rubber exports declined by more than 30%, with base metals and machinery and equipment declining by almost 10% in dollar terms over the first five months of 2015. Capacity utilization data also started to decline again during the first quarter.
Mr Langenhoven said that theoretically the link between current and future production was the level of inventories – as inventories increased due to low or declining orders from customers (export or domestic), production had to be curtailed.
“There is an inverse relationship between inventories and business confidence.
Inventories are increasing in the sector, according to data from the Kagiso/BER PMI as well as the BER Quarterly Manufacturing Surveys. With virtually all business condition indicators for the sector pointing downwards, it indicates that production will slow down further in the coming months.
“This will inevitably lead to a ‘perfect storm’ with potentially serious consequences for companies’ survival and employment,” concluded Mr Langenhoven.
ANALYSIS: SOUTH AFRICA CANNOT SUCCEED FOR AS LONG AS THE GOVERNMENT VIEWS BUSINESS AS AN ENEMY
The 5,6% growth attained in 2007 was the highest since 1990, and the 3,4% growth registered in 2011 was the highest attained under the Zuma presidency. Since then, the country has struggled to record a growth rate higher than 2%, at a time when South Africa desperately needed more jobs to be created and when the Government itself had promised a million jobs in its first term.
In its election manifesto for the 2009 elections, the ANC pledged to create “more jobs, decent work and sustainable livelihoods”. In particular, it stated: “Make the creation of decent work opportunities and sustainable livelihoods the primary focus of our economic policies. We will make maximum use of all the means at the disposal of the ANC government to achieve this [goal].”
Throughout the 15-page manifesto, growing the economy is not listed as a priority on its own. Instead, it is implied, or referred to in passing, in the context of the social rights on which the organisation places such a heavy emphasis.
In his first state-of-the-nation address on 3 June 2009, President Zuma promised that his Government would create “about 500 000 job opportunities” by December that year and “four million job opportunities by 2014”.
In his own words, he stated: “We will reduce the regulatory burden on small businesses. The matter of being stifled by regulations has been raised by the sector several times. In another intervention to create an enabling environment for investment, government will move towards a single integrated business registration system. This will improve customer service and reduce the cost of doing business in South Africa.”
Regrettably, six years later, the cost of doing business in South Africa is anything but reduced. On top of the various constraints and higher administered costs, now Zuma’s government has deemed it wise to further burden the business community with carbon taxes, unlike the majority of rich, First World countries that have refrained from doing so. Australia, which was on the verge of introducing carbon tax at the beginning of the year, reconsidered its decision and walked away from the concept.
Contrary to some of the promises made by the ANC in its election manifesto in 2009, more people are unemployment now in the manufacturing sector than was the case then. In 2009 1 782 163 were employed in manufacturing, and that number stood at 1 349 262 in 2014. In the metals and engineering sector, 402 625 people were employed in 2009, and that number stood at 394 647 at the end of last year. That means that a massive 432 901 jobs in the manufacturing sector and 7 978 jobs in the metals and engineering sector were lost in President Zuma’s first term in office. Regrettably, the bleeding continues as more companies downsize this year or face the prospects of going out of business altogether.
And what is the Government’s response? It stands aloof and refuses to engage meaningfully with the business community. For the Southern African Metals and Engineering Indaba that took place in Johannesburg last week (28-29 May), President Zuma and a number of his Ministers simply ignored invitations to engage with concerned business leaders.
President Zuma was first invited in September last year to open the conference on 28 May, with subsequent invitations sent to him in November and a number of times this year, but, apart from an acknowledgement of receipt by his office, he steadfastly ignored the invitations and never even bothered to reply.
Much was expected of his deputy, Cyril Ramaphosa, when he was eventually elevated to the second most senior position in the country. Many had thought that, given the fact that he had previously served with distinction first as a labour leader and, in subsequent years, as a business man, he would be much more accessible to all stakeholders, including the business community which creates jobs, but this appears not to be the case.
It was certainly not the case when, spurned by his principal, we turned to him with an invitation for him to open the conference. To our bitter disappointment, he, too, never bothered to reply.
A number of Cabinet Ministers invited to engage with business and labour leaders at the Indaba responded similarly. Economic Development Minister Ebrahim Patel could not be bothered to respond to an invitation to be part of a panel discussing the National Development Plan, or even to acknowledge its receipt, just as Energy Minister Tina Joemat-Petterson, Public Enterprises Minister Lynne Brown and Cooperative Governance and Traditional Affairs Minister Pravin Gordhan ignored invitations to discuss the electricity crisis facing South Africa and its impact on the economy (coupled with some municipalities’ reluctance to pay Eskom for power used).
On other occasions, we have invited, without success, the affable but also inaccessible Lindiwe Zulu, Minister of Small Business.
Nothing speaks more eloquently about the disdain that the Zuma government has for the business and the labour communities (but especially the former), whose leaders participated actively in the conference’s discussions on Thursday and Friday. Present were captains of industry like ArcelorMittal CEO Paul O’Flaherty, Business Leadership South Africa Chairman Bobby Godsell and Telkom Chairman Jabu Mabuza, to mention only three, labour leaders like NUMSA General Secretary Irvin Jim and his Solidarity counterpart Gideon du Plessis and many academics, among others. These are the people to whom the Government showed an up-yours finger.
Unsurprisingly, when political leaders treat others with disdain, the civil service follows suit. That is why Trade and Industry Director-General Lionel October and his counterpart at the Department of Economic Development also ignored our invitations.
At this stage, one must thank Trade and Industry Minister Rob Davies – who subsequently withdrew on the eve of the conference because of ill health – and Labour Minister Mildred Oliphant, who accepted our invitations. Our thanks also go to Democratic Alliance Shadow Ministers Geordin Hill-Lewis (Trade and Industry), Natasha Mazzone (Public Enterprises) and Kevin Mileham (Cooperative Government and Traditional Affairs), who considered it important to interact with the business and labour communities.
It is most unfortunate that our Government does not listen. This is a government that is adept at terminological inexactitudes and grand verbal contortions.
When Eskom warned, before the first bout of load shedding in 2008, about the need to invest in new generation capacity, the then Government chose not to listen (at least President Thabo Mbeki subsequently accepted responsibility and apologised to the nation, without resorting to blaming our ignoble past). Now our government that never accepts responsibility calls our crippling power situation “a challenge”, and not the crisis that it is.
When the poor in the country’s townships urge that the country’s porous borders should be policed more effectively, with only those with scarce skills or the potential to create jobs allowed into the country, the Government responds by saying that its leaders – who were political refugees and not economic ones – were wonderfully treated in the countries where they were in exile in bygone years.
When the people of Gauteng say they refuse to be subjected to double taxation through urban tolls when they are already paying taxes, the Government rides roughshod over their objections and orders them to pay anyway. When business says that carbon taxes will further strangle the economy, the Government goes ahead with it anyway.
This is most unfortunate. The Government needs to understand that, its electoral majority notwithstanding, it cannot move the country forward on its own. It needs to understand that business is not an enemy and that it is in South Africa’s interest that business thrives so that more jobs can be created and more taxes (personal and corporate) can be paid. It needs to understand that South Africa needs a strong business, labour and Government partnership if it is to succeed.
The Southern African Metals and Engineering Indaba will take place again next year and every year after that. We can only hope that the Government will recognise the urgent need to revive manufacturing and participate in the conference in the coming years.
Kaizer Nyatsumba is the CEO of the Steel and Engineering Industries Federation of Southern Africa.
Press Release - 2015/06/01/: BUSINESS AND LABOUR URGE GOVERNMENT TO ABANDON CARBON TAXES
Made up of business and labourleaders, the delegates warned that the introduction of carbon tax would impose additional costs to business, harm the economy and impact negatively on jobs at a time when South Africa badly needs more jobs to be created.
Arguing that the country cannot afford carbon taxes, the delegates said that it was vital for the Government to show itself to take stakeholders’ concerns seriously by following Australia’s example and abandoning its plans to introduce carbon taxes.
The Southern African Metals and Engineering Indaba, organized and hosted by the Steel and Engineering Industries Federation of Southern Africa (SEIFSA), was attended by policy and decision makers, business owners, senior executives and other stakeholders in the metals and engineering sector from across the Southern African Development Community region.
Speaking at the conference, Labour Minister Mildred Oliphant said that it should be possible for business and labour to work cooperatively together in the interest of South Africa, provided that the underlying issues that have brought about the status quo are addressed.
She said that some of the underlying issues that have resulted in the trust deficit between labour and business were inequalities between top executives and general workers, lack of a direct relationship between business and labour and the belief that democracy seems to be working for business and not the workers.
“Working together cooperatively is not an option but a must if South Africa is to advance its economy and, in the process, create employment,” the Minister said.
NUMSA General Secretary Irvin Jim concurred with the Minister’s statement that it was critically important for business and labour to engage robustly after the 2014 wage negotiations in order to come up with solutions that would grow the economy, revive the manufacturing sector and create much-needed employment.
Speaking on the same panel, Solidarity General Secretary Gideon du Plessis said it was possible for business and labour to work together in the interest of South Africa, but it would not be easy to do so if one took the ideological, cultural and ethical differences between organized labour into account.
SEIFSA Operations Director Lucio Trentini said business and labour were indispensable partners that had no choice but to work together and it was, therefore, of paramount importance that the two find ways to pull together in the interest of the ailing manufacturing sector and in the interest of employment creation.
Former NEDLAC Executive Director Alistair Smith said business and labour have, over the last three decades, demonstrated that the two stakeholder groups can work collaboratively and it was, therefore, possible for the two to find a new path forward.
“It has been done before and it can definitely be done again,” concluded Mr Smith.