Johannesburg, 20 September 2018 – The global trade war between two of the world’s largest economies has the potential to render global growth less synchronised, less certain and less supportive of emerging economies. Moreover, weaknesses in the global economy would make it even more difficult for South Africa to accelerate its fortunes and for the metals and engineering (M&E) cluster, the mining and construction sectors and the auto manufacturing industries to maximise their potential, Steel and Engineering Industries Federation of Southern Africa Chief Economist Michael Ade said this afternoon.
Speaking at the Southern African Metals and Engineering Indaba, Dr Ade said the four sectors needed higher growth levels underpinned by better productive efficiency. He also said that instead of continuously depending on government to boost demand via various interventions, stakeholders in these sectors needed to rally to support each other.
“Proactivity rather than reactivity is needed to take advantage of promising regional prospects, where healthy GDP growths have been projected. Targeted growth in lucrative markets of Asia and Europe should also be taken advantage of, in order to increase market share,” Dr Ade said.
He said that the four groups can leverage on existing linkages. “The M&E cluster should support the mining sector more by increasing its current procurement spend in the mining sector to over 63%.”
Alternatively, Dr Ade said the construction sector should support the M&E cluster by increasing its current share of procurement spend to over 35% and; likewise, the Auto industry should increase its current procurement spend from the cluster’s intermediate products to over 33%
Commenting on constraints to leveraging on existing opportunities, Dr Ade said the extent to which total domestic demand in the M&E cluster is satisfied by imports has increased to 54.1%, as important component manufacturers shut down; high importation of intermediary inputs, and the vulnerability to imported inflation along with depreciating currency-induced price increases.
“There is a cocktail of high costs due to issues of high logistical and transport costs, low relative labour productivity and high energy costs,” Dr Ade said.
In response to these challenges, Dr Ade said policy makers should target individual interventions to various sub-components of manufacturing and not treat manufacturing as a homogenous lot.
He said Government also needed to regulate pricing of key inputs from sole suppliers; continuously enable competition in electricity generation and reconsider administered prices for example, food and petrol, to put money back into consumers’ pockets.
Meanwhile Minerals Council South Africa Economist Tafadzwa Chibanguza said the mining sector was currently buying more than 70% of products from local suppliers, he cautioned that local suppliers were, however, not local manufacturers.
He said there was, therefore, a real need for concerted efforts by mining companies to create a market for locally-manufactured goods but warned that Government needed to diversify the economy in order to ensure sustainability for industries that supply to the mining sector.
Commenting on South Africa’s Automotive Masterplan 2035, National Association of Automobile Manufacturers of South Africa Director Nico Vermeulen said for the plan’s vision to be realised, policy certainty, stable industrial relations environment, effective beneficiation strategy and reduction in infrastructure, logistics and other input costs were needed.
Master Builders South Africa Executive Director Roy Mnisi said there would always be demand for metal and steel by the construction sector even in tough economic times however, the M&E sector needed be internationally competitive, act locally and think globally.
“The M&E sector must also protect its territory by guarding against sub-standard products entering the market,” he concluded.