Transnet provides more than ‘frills’ to local industry
Your article, headlined “SA will make locomotive ‘frills’”, (Business Report, March 24) trivialises the massive localisation benefits of the R50 billion locomotive procurement programme Transnet announced this month. This is unfortunate.
For the record, the agreements with the original equipment manufacturers (OEMs) are deliberately designed to ensure substantial, tangible and long-term benefits for South Africa’s engineering and manufacturing sectors across the board.
These are not by-products of the deal or nice-to-haves but are core to the successful implementation and roll-out of the programme. Unfortunately, certain parts of a locomotive remain the intellectual property of the OEM and have to be manufactured in their original countries. This stipulation does not detract from the massive role to be played by our local engineering and manufacturing firms.
Local industry is by no means merely supportive but rather integral to the success of this programme, with a share of up to 60 percent of the production. We estimate the localisation benefits of the programme to be approximately R90bn, based on the sector multipliers provided by the Department of Trade and Industry in the Industrial Policy Action Plan.
The benefits to the South African economy as a result is in excess of R98bn.
Our ultimate goal is to industrialise the South African economy by developing our rail-related manufacturing base into a regional hub, thereby improving local technical skills.
Locomotive tender is a missed opportunity
It was disappointing to read the story “SA will make locomotive ‘frills’” (Business Report, March 24). According to the report, the major, critical parts in Transnet’s procurement of 1 064 locomotives will be produced outside South Africa, presumably in the countries of origin of the winning bidders.
We are talking about a huge percentage of the R50 billion value of the investment going to the successful bidders, which are foreign-owned industrial giants from China, the US and Canada.
Reading this story broke my heart, since it has always been my wish to see headline after headline about our home-grown industrial entities similar to these taking advantage of huge government procurement opportunities like these.
How could it be that local producers are reduced to do work on mere “frills” and not the lucrative “core engineering parts”? Our industrial base has shrunk, we have runaway unemployment, and our balance of payments is in the red, but we continue to pay lip service to the need to improve our productive capacity with the view to increasing local production of capital goods such as these. We cannot be proud as a country to be producers of non-core goods such as the said “frills” when we have the technical skills and financial capacity to make these ourselves.
Surely this announcement flies in the face of the ANC which recently, in the party’s manifesto, spoke about a plan to use a chunk of the state’s multibillion-rand procurement budget to facilitate increased local production of goods and services and thereby prop up local producers and create decent jobs. It was exciting news to hear, although as things stand, to achieve this, a few issues with the potential to scuttle these good intentions needed to be attended to.
As a country, we need an appropriate orientation that should make it easy to align all the role-players to a strategic vision that should ensure that our industrialisation drive is realised. The need to have in place a leadership with the right skills, orientation and strategic vision cannot be emphasised more.
Perhaps part of the solution lies with the visionary leadership of Public Service and Administration Minister Lindiwe Sisulu, who, in her drive to turn around and improve performance in the public sector, has come up with the public service charter and the creation of the national school of government.
Moreover, there is a need for the reconfiguration of the small and medium enterprises (SMEs) development landscape and the establishment of an SME bank, into which development finance institutions such as the Small Enterprise Finance Agency and the National Empowerment Fund would be merged and collapsed.
The Small Enterprise Development Agency, on the other hand, would be required to assume a new role of acting as an agent whose primary task would be to mobilise state-issued business opportunities and to facilitate access to finance for those SMEs which had been successful in bidding for opportunities available from the government and state-owned companies. The envisaged SME lending model should never be allowed to assume the character and content of the typical commercial banks lest we allow the whole SME development initiative to be defeated at the outset.
A word of caution, however, is that it must be ensured that the leadership and general personnel of the SME bank is drawn primarily from people with a development finance background. People coming from other disciplines who are not fully equipped to attend to the challenges of socio-economic development and SME financing would be afforded the necessary training with the assistance of the new government school.
Imports contribute to failure of start-ups
The commentary on start-ups in Business Watch (Business Report, March 28) refers.
The reasons start-up businesses fail are varied and complex. For young entrepreneurs, one of the reasons for not being able to succeed may certainly be lack of skills. It takes many years of experience in the business world to acquire the competency and knowledge required to start and grow a small business.
Too much focus and emphasis is placed by corporates, consultants and policymakers on so-called young entrepreneurs and developing young entrepreneurs.
If anyone takes the time to peruse the many books written by and about highly successful entrepreneurs like Richard Branson, Donald Trump and Robert Kiyosaki (to name a few), most of these people failed spectacularly and made whopping mistakes in their first few years of entrepreneurial ventures. It was only after many years of experience and learning “the hard way” that most dollar billionaires became successful in their ventures.
True sustainable success only came to these entrepreneurs in their late 40s.
Sam Walters of Walmart fame started his first store at the age of 46. Anyone under the age of 40 who has started a business and applied for funding knows that track record and experience counts.
No funding institution will even consider an application for funds if the applicant can’t submit a comprehensive business plan, financial model, cash flow forecast and management accounts.
If you are 30 years old and have started a small business, how are you going to do this in the format required by banks? It is all very well to nurture start-ups for a year and mentor the business owner. However, success usually comes after a few mistakes, and what lessons were learnt from those mistakes. That is called experience. And experience is gained over time and with the benefit of hindsight.
While mentoring will certainly go some way towards helping young people learn to manage a start-up, that mentoring is usually focused on areas of accounting and cash-flow management and is usually provided by people who have never started a business from scratch themselves.
Only a person who has made mistakes, been taken for a ride, lost money, been cheated and taken some hard knocks in the process of starting a business, can teach another.
There are some hard lessons to be learnt out in the real world. No amount of mentoring can teach one how to avoid the sharks that swim in the business sea.
It is cute for 88mph to support 10 digital start-ups in 2012 and seven technology start-ups in 2014. This is a good initiative. However, those businesses focus on providing services.Will they succeed and create sustainable jobs?
This country needs manufacturing businesses. As an entrepreneur and owner of a manufacturing micro-enterprise, I can categorically state that there are three fundamental requirements for a start-up to succeed in South Africa.
First, large retail stores should revise their 100 percent mark-ups and buy products, goods and services from local businesses so that we can all make a decent living.
Second, the consumer should demand and buy locally manufactured goods and products. Third, the government should only procure goods, services and products that are locally made.
It is all very well to start a company, but if both the private and public sector continue to procure goods and products imported into South Africa, then not only will start-ups fail, but established business is also going to continue to shrink.
We don’t need digital and technology start-ups; that’s too easy and specialised. We need to do whatever we can to stimulate, grow and support local manufacturing.
The consumers that drove economic growth over the past few years since 2010 were in the construction, manufacturing and mining sectors. That is where the critical mass is.
Create jobs and you create consumers. Those consumers are buying the goods and products.
JZ, you fought for SA, now help the people
An open letter to Jacob Zuma, leader of our country.
Dear Mr President
What if you had never taken up office? Would our leader have led by example or, like you, simply taken advantage of what was on offer?
What do you care about? Your home that cost more than umpteen houses for your poverty-stricken people? Or do you care about South Africa and its people?
I guess people are afraid to confront you. Yet there are human beings suffering and starving in the country you fought for. What are you doing now to help them?
One of your citizens.
Qatar, Saudi stand-off a test for Arab unity
Oil- and gas-rich Qatar, flexing its financial muscle after bailing out Dubai during that emirate’s financial melt-down, and successfully bidding for the 2022 edition of soccer’s World Cup, finds itself under big brother Saudi Arabia’s watchful eye after Qatar’s endorsement of Egypt’s Muslim Brotherhood.
Qatar’s showdown with the Saudis over its relationship with the Muslim Brotherhood is probably the first such schism between the kingdom and the independent emirate, and this polarisation will have a marked effect on the long-standing unity of the Arabian Peninsular states.
Saudi Arabia, Bahrain and the United Arab Emirates have withdrawn their ambassadors from Qatar after alleging that it had been meddling in their internal affairs.
Qatar has been an increasingly vocal diplomatic player, strongly supporting Egypt’s now-ousted Islamist president, Mohammed Mursi and is a key backer of Islamist rebel groups in Syria.
The state is also home to the influential Al Jazeera news network, which broadcasts across the world and has been critical of Saudi Arabia and other Gulf states.
Anti-Saudi programmes broadcast by Al Jazeera were thought to have been a major reason for Riyadh’s decision to withdraw its ambassador to Qatar.
The bold stance of the Qataris in going against the Saudis, and by extension the US, will be the first test of their unity after the Arab Spring.