Peace breaks out at industry indaba

05-Jul-2016 | Duane Newman

There was shared determination at June indaba to revive manufacturing as a central pillar of our economic recovery, writes Duane Newman

A REMARKABLE thing happened at this year’s Manufacturing Indaba at the end of June: peace broke out between industry and the government. Never before have I attended an event in which there was such a degree of agreement between the public and private sectors, at which there was such shared determination to revive South African manufacturing as a central pillar of our economic recovery.

Trade and Industry Minister Rob Davies helped set the tone when he emphasised the need for close collaboration with the private sector and called for a redoubling of efforts to boost industry. To a large extent, he was echoing the message of Manufacturing Circle chairman Bruce Strong, who also called for constructive dialogue between business and government.

Of course, it is always easy to say the right thing to a conference room packed with like-minded souls. The real test of the indaba’s success will come in the months ahead, when we will see how effective the government is in engaging industry. And vice versa. Major challenges loom that will require a lot of discussion and soul-searching.

One of the most immediate is the planned carbon tax that the government seems determined to introduce in the face of widespread opposition from business. To the government’s credit, there has been a series of consultations, although they do not appear to have shaken the determination to introduce this costly measure. A central message from business has been that if this tax is introduced, the money raised must not be absorbed into some general Treasury account, but must be earmarked for incentives to encourage companies to become more environmentally active. I don’t think we have got this message across forcefully enough.

As Strong noted, the government was busy with a review of the pick-and-mix array of investment incentives that were on offer, spread across several government departments, with a lot of uncertainty over how much money would eventually be available for some programmes, and what would be done when funds ran dry. We do know that the government is targeting black industrialists and that money is already being allocated through the black industrialists incentive. This is being combined with grant funding from a grouping of state agencies. We also know there is a targeting of support for some chosen industries, such as the automotive sector, film-making and boat-building, and there will be a further emphasis on agroprocessing and rail projects.

All of this is vitally important, as any policy that targets some favoured sectors will, by definition, risk starving other, equally deserving, applicants. Whether the government should be picking these winners is a matter for much debate. Perhaps one of the most effective means by which the government can support the local manufacturing sector is through state designation and a parallel localisation of industry supply chains. This is an area where there is strong agreement, although I did notice that government officials themselves are frustrated that not all departments are applying local procurement guidelines as well as they might.

The Manufacturing Indaba, which featured an extra day-long session devoted to small business, is emerging as an important forum for discussion. The sessions on African opportunities were refreshing, as panellists were strong in their view that South Africans need to see ourselves as Africans first and as SA Inc second and to create a manufacturing base throughout Africa.

There was one big flaw in the event, highlighted by senior Department of Trade and Industry official, Garth Strachan. He noted the good number of public officials who attended, but wondered why there were so few captains of industry in the room. A fair point.

The indaba identified the way forward; we now need strong leadership from the public and private sectors. Our manufacturers deserve nothing less.

  • Newman is a director at Cova Advisory.