THE losses suffered by dairy manufacturer Clover at its Lichtenburg operations because of poor municipal service delivery could be the straw that broke the camel’s back, analysts said yesterday while warning of the economic ramifications if manufacturers were forced to re-evaluate how they do business in South Africa.
Clover announced that it would move its operations from the Disobotla Municipality in Lichtenburg, North West Province, to Durban after numerous failed attempts to engage the municipality to improve erratic water supply and poor roads.
“The recession and Covid-19 economic ramifications made manufacturers re-evaluate how they do business in South Africa and consolidate where possible. Since consumer purchases are driven by price, due to decreased disposable income manufacturers and retailers continue to be under immense pressure to discount prices to drive volume sales and maintain market share,” said Anje du Plessis, a senior research analyst at market research firm Euromonitor International.
Du Plessis said demand for cheese increased significantly last year, and the category saw strong double-digit growth to more than R25 million in value. The per capita consumption for cheese in South Africa is the largest in the sub-Saharan region, at 3.16kg per person, and will remain a staple of the South African diet.
South African Chamber of Commerce and Industry chief executive Alan Mukoki said that unless the government moved quickly in establishing standards for municipalities, production by firms, employment and personal income tax were in jeopardy.
“We know that our members and the general business community are anxious and under immense pressure from poor municipal service delivery. This is compounded by the problem of erratic electricity supply by Eskom,” he said.
He said companies had reported poor service delivery, from rubble collection in or around their premises to water shortages, and the lack of response to the issues they reported.
He said poor service delivery not only affected production but also poor employment creation, which deprived the government of personal income tax. “A salary paid to workers generates a whole range of taxes, but you destroy a country by mismanaging the small things,” he said.
He pointed out the importance of local authorities to economic growth, because not every business operated from the seat of government in Pretoria, but the economy counted on each municipality being efficient to facilitate business for the private sector.
“You move in some parts of Sandton, which has numerous important businesses, and find unremoved rubble, burst pipes, the barrier lines on roads are not clearly marked and cars get in each other’s lanes. There is filth and dirt on Oxford Road, which is a main artery for corporate business in Johannesburg. If you can’t clean the streets, what environment is that creating for business?” he said.
On efforts to address these issues, Mukoki said there was engagement with the government, which did not lead in improvements. There was talk that the government was setting up merit standards across all municipalities, but his was taking a long time, he said.
South African Local Government Association (Salga) spokesperson Sivuyile Mbabato said no specific issue had been brought to its attention.
“At times, we get some reports, but Salga as a national organisation does not have a comprehensive list of the problems you are enquiring about,” Mbabato said.
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