Let me start by quoting the United Nations Industrial Development Organisation Industrial Development Report (2009).
The report, written in the wake of the global economic crisis, notes: “Over the entire 25 year period, six sectors stand out consistently as highly sophisticated sectors—paper and paper products, fabricated metals, machinery, electrical equipment, transport and other equipment. Richer countries are intensive exporters of these products.”
This is manufacturing par excellence. We need to learn about the economic structures of these economies, and how they protect and expand their manufacturing sectors.
South Africa is the opposite of these. We import more than 80% of all what successful economies export, and we have been importing more of these over the past 17 years.
The weaknesses between downstream and upstream industries in South Africa are revealed by the increase in the share of manufacturing imports in the economy, when fast-growing, labour-intensive economies, are increasing exports.
Between 2003—2008 the share of manufacturing imports in total imports rose from 73% to 81%.
Furthermore, 82% of manufacturing imports was driven by 5 sub-sectors: machinery and equipment, transport equipment, (petroleum, rubber, chemicals and plastic products), (TV, radio and communication equipment), (Radio, TV, Clocks and Watches). Overall, the trade deficit of the manufacturing sector was driven by 4 sub-sectors.
Here are some facts, covering the past 10 years, about how much we import compared to how we export:
• Television, Radio and Communication Equipment: 431% deficit
• Radio, Television, Clocks and Watches: 397% deficit
• Machinery and Equipment: 120% deficit
• Transport Equipment: 24% deficit
Trade liberalization is promoted in order to enhance “international competitiveness”.
This, it is often argued, is a requirement for successfully integrating the South African economy in a rapidly changing global environment.
In South Africa, trade liberalization has strengthened the power of multinational corporations; it has weakened the power of the state to direct industrialization and has led to disintegration of productive structures at local level.
Multinationals are freely procuring goods from abroad, and instead of supplying downstream industries with what they have produced, they export.
An example is the import-parity pricing of steel, manganese, food, and almost everything in our country.
This occurs in conjunction with massive import flooding from China, and other countries who kept their duties, barriers, and tariffs high to protect their industries.
The secondary sector has been losing jobs since 1995, thanks mainly to trade liberalization.
Between 1995—2008, the secondary sector lost 350 000 jobs.
The policies of the past 16 years have thus failed to promote labour-intensive industrialization, in line with historical positions of the democratic movement. A
Further 250 000 jobs were lost in the manufacturing sector since 2009, and we are still counting the losses.
To solve our problems, NUMSA has been demanding the following:
1. Cut interest rates, tax short-term capital inflows, bring back capital controls, to manage the exchange rate at a level that expands the manufacturing sector.
2. Introduce capital allocation mechanisms to ensure the financial sector directs credit to productive sectors. This means that there should be taxes of financial transactions to discourage speculative investment.
3. Drop inflation targeting, target employment and industrial development. South Africa is the “last man standing”, in support of the defunct and discredited Washington Consensus.
4. The above measures are critical to realised a competitive exchange rate which our manufacturing must have and government must also intervene and reduce electricity tariff that is directly responsible for number of many retrenchments and plant closures in particular of small medium size companies who can’t compete under the current electricity tariff government must ensure that electricity continues to be our competitive advantage for instance we risk losing all our foundries and such would leave more economically depressed provinces extremely poor.
5. Increase Tariffs, raise import duties, in order to protect and expand industrial linkages between upstream industries and downstream manufacturing.
6. We are happy but still expect implementation of 75% local procurement across the board in the economy, including in expenditure on social services such as health and education. This must be linked to all kinds of state support.
7. Numsa is firm that there is an extreme urgent need to review and renew mandates of DFIS in particular IDC and DBSA so that where critical companies central to industrialization and manufacturing of our country like Scaw Metal South Africa are sold they should fund such companies and don’t allow a country to risk losing such a capability and numsa takes a firm view that manufacturing matters and unless government quickly move and take measures the current de-industrialization has a potential to plunge the country into a permanent crisis and this levels of de-industrialization are such that as a country unless we act now we shall not recover again .
More detailed proposals on support for local industry are contained in the COSATU Growth Path Strategy.
Irvin Jim, General Secretary, National Union of Metalworkers of South Africa, 17 November 2011
NUMSA General Secretary – 073 157 6384
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