“We can’t be consumers unless we are also producers,” Department of Trade and Industry (dti) Minister Rob Davies told Business Report on Monday. He explained the government’s strategy behind the decision to seek a review of the Competition Tribunal’s conditional approval of Walmart’s acquisition of a controlling stake in Massmart.
He acknowledged that Walmart’s arrival might help people as consumers but said, “We have taken the decision (to intervene) in favour of the production sector at the expense of other sectors such as the consumer sector”.
There was a serious risk that Walmart would “jeopardise our productive sectors, we have to act… we are looking for a stronger set of obligations (to) reduce the prospect of damage to our productive sectors.”
Asked about World Trade Organisation (WTO) restrictions on the sort of remedies that the government could look for from Walmart, Davies said the department was aware of the WTO rules and the flexibility that existed within the regime. He also believed there was “space” within the tribunal’s increasingly litigious environment to carve out more appropriate obligations.
He said the government’s response to Walmart should be seen in the context of its commitment to focus on supporting the development of the country’s manufacturing capacity.
“We need to respond to the needs and interests of our productive sectors, which involves changing our priorities.”
Davies, it seems, is a man with a mission. Some would say an impossible one given the state of the global economy. He not only wants to stitch together South Africa’s strained manufacturing sector, he has plans to help it grow. His department is playing a critical role in the government’s Industrial Policy Action Plan and New Growth Plan.
Unfortunately for manufacturers who use zinc, it is too late to rescue Zincor. Davies discovered, through the media, that two weeks ago Exxaro Resources had finally decided to close the country’s only zinc smelter. The decision followed discussions with Transnet, which were unsuccessful in resolving Zincor’s transport problems.
The sharp hike in electricity prices also contributed to the decision to close the somewhat dated plant, which had been making losses for years.
Following an investigation by a dti team, Davies believed that the location and age of the plant, high electricity prices and the exchange rate made Zincor’s survival precarious. Investment in a more efficient plant at a better location was possible, but Davies suggested that all South Africans get used to higher electricity prices.
A key aspect of the new government strategy being driven by the dti and the Economic Development Department was the revised preferential procurement regulations. These will come into effect in December. “We believe these will have a significant impact on this country’s manufacturing climate.”
During September the dti, in conjunction with industry stakeholders, will designate sectors and stipulate minimum local content thresholds in a bid to leverage the government’s multibillion-rand procurement plans to achieve maximum job creation and industrial development.
Local manufacturers were being encouraged to think long term and more strategically, said Davies, but they faced a number of challenges, including the global recession and a strong currency.
“The exchange rate is the single biggest concern of our manufacturers… followed by the level of administered prices and then the numbers of strikes.” Davies contended that manufacturers were more concerned with securing peace in the workplace than with low wages. But he noted that the current weak environment was discouraging manufacturers from undertaking the additional investment necessary to increase overall productivity.
While the big picture was daunting for the manufacturing sector and the government, the smaller one in the form of the Companies and Intellectual Property Commission (CIPC) was arguably even grimmer. The most basic corporate administration tasks have ground almost to a halt due to long-running systems’ difficulties that have been compounded by the additional burdens relating to the new Companies Act.
Davies acknowledged that the CIPC faced a very serious challenge but he was was confident that the people there “are quality people who have the capacity to turn it around”. He was equally confident that from next month there would be evidence of incremental progress, but warned that there would be no magical fix.
“It’ll require time and effort” but hopefully it’s not impossible, he concluded.