South Africa is facing significant headwinds, coupled with a growing sense of negativity as illustrated by an announcement of the business confidence index having reached a 20-year low, so said BUSA Vice President Martin Kingston.
Delivering a closing address at the Southern African Metals and Engineering Indaba at the IDC Conference Centre in Sandton recently Kingston said the environment facing the country is one that is hallmarked by a constrained global macro environment, aided and abetted by unprecedented geopolitical tensions and stubbornlyhigh unemployment. Add to this SouthAfrica’s expanded definition of unemployment at almost 40%, whilst youth unemployment is 55%, infrastructure challenges, a hostile labour market and the need to address the skills shortage as well as the country’s credit rating at risk of being downgraded to sub investment grade.
“We are in the eye of the storm where we need to take responsibility for the circumstances confronting us. All stakeholders need to urgently accelerate efforts to create an environment conducive to stability and investment given the significant headwinds we need to navigate. The private sector, including the metals and manufacturing sectors, has a critical role to play in assisting the State to achieve inclusive economic growth and reach its developmental goals, primarily through investment but also through collaboration with government and its social partners.”
Remarking on the role of the metals and engineering sector in turning South Africa’s economy around , Kingston said the mining, metals, engineering and manufacturing sectors have long been viewed as labour-absorbing industries that could provide a significant solution to South Africa’s structural unemployment and assist in driving GDP growth. However, both manufacturing and mining industries have seen a decline in their contribution to the overall South African economy.
He said the downturn in South Africa’s manufacturing sector has been driven largely by unreliable and uncompetitive electricity supply, high administrative costs, inadequate skills, outdated technologies, cheaper global competition and weak demand.
“Rectifying this is critical as manufacturing is a key enabler of development
given its role in promoting productivity growth, skills development and
relatively high income elasticity of demand in world markets. The metals
sector has a significant role to play in South Africa’s economic trajectory.”
Commenting on Eskom, Kingston said the manufacturing, metals and mining sectors account for just under two thirds of South Africa’s electricity consumption. Eskom’s current financial crisis (in excess of R440bn in debt), represents a material threat to these industries (as it does for the rest of the South African economy), with the key issues relating to the reliability, predictability and competiveness of electricity.
He said failing to deal comprehensively with Eskom is no longer an option. It must be restructured, a significant proportion of its debt must be assumed by the state directly, its workforce must be right sized, its cost base and clients addressed and competition introduced.
“It is critical that all stakeholders recognise that economic growth is the most effective instrument to address South Africa’s challenges. Whilst the private and public sectors are collectively looking to drive growth and attract investment, it is in fact private sector investment that is the key lever to delivers sustainable and inclusive growth given public sector constraints.”
“I fully agree that neither government not business can achieve this independently of one another. We need to harness the energy that I have seen here, speak openly and directly and commit to implementable actions where we take individual and collective responsibility for navigating our problems thus ensuring that South Africa properly positions itself for success,” Kingston concluded.
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