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Failing service delivery hits industry

Service delivery failures by various municipalities in key manufacturing nodes have come back to haunt the manufacturing industry, threatening to derail the little recovery it has made. Picture, Nokuthula Mbatha.

Service delivery failures by various municipalities in key manufacturing nodes have come back to haunt the manufacturing industry, threatening to derail the little recovery it has made. Picture, Nokuthula Mbatha.

Published Jun 22, 2022

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Service delivery failures by various municipalities in key manufacturing nodes have come back to haunt the manufacturing industry, threatening to derail the little recovery it has made.

The Manufacturing Indaba yesterday heard that manufacturing companies were struggling to deal with municipalities’ failures to service key infrastructure such as roads and also deliver water and electricity.

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Aspen Pharmacare’s group senior executive, Stavros Nicolaou, detailed how the water crisis in Gqeberha was affecting the drugmaker’s productivity.

The Nelson Mandela Bay Municipality in the Eastern Cape is on a brink of “Day Zero” as the dams supplying Gqeberha, Kariega, Despatch and Colchester have run dry, mainly due to drought and the high number of leakages.

Nicolaou said the water crisis has had an impact more on Aspen’s employees and their productivity rather than on the pharmaceutical group getting sterile water to continue producing injections or injectables.

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“So the impact is more at an employee level where employees in surrounding catchment areas are not able to access water. It poses a health risk, it poses productivity issues,” he said.

“On the upside, Aspen and Aspen operations, as we call it in Gqeberha, have been dealing closely with the (business) chamber. There's a very active business chamber. We have been working very closely with them and with the local authorities, and it looks like the situation is being managed somewhat because of those collaborative efforts.

“However, we are certainly not out of the woods yet.”

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Last year, dairy group Clover closed down South Africa's largest cheese factory in Lichtenburg, North West, and moved the plant to Queensburgh in Durban due to "ongoing poor service delivery" by the local municipality.

This was after large losses due to long-standing water and electricity disruptions, as well as a pothole-ridden road leading to its factory.

These service delivery issues were recently highlighted by auditor-general Tsakani Maluleke last week during the release of the audit outcomes for South Africa’s 257 municipalities.

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Maluleke said that poor billing systems and revenue collections were putting pressure on the ability of municipalities to pay salaries and deliver services to communities.

She said the cash-flow challenges had a knock-on effect on the entire municipal ecosystem, while R41.28 billion in debt had been written off by municipalities in the financial year under review.

A number of municipalities had not been able to maintain their infrastructure. “They don’t plan for maintenance, they don’t even budget for maintenance because they don’t have the cash to pay for maintenance,” Maluleke said.

“And what happens is that those assets deteriorate over time and have the detrimental impact on the ability to deliver water, to fix roads, to deliver sanitation and even electricity.”

According to the latest statistics, manufacturing production disappointed in April, declining by 7.8 percent due to the floods in KwaZulu-Natal coupled with the electricity supply disruptions.

Department of Public Enterprises director-general Kgathatso Tlhakudi called for meaningful partnerships between business and the government.

“We can't wait for the government to resolve the economic challenges that we face as a country. Businesses will need to come to the party, and manufacturing business is particularly key in that regard,” Tlhakudi said.

The Industrial Development Corporation’s head of textiles and wood strategic business unit, Mark Goliath, agreed that partnerships would grow the manufacturing industry.

“Collaboration is key to creating a manufacturing value chain that can overcome constraints and limited capacities to increase product exports in South Africa,” Goliath said.

“We have to imagine a South Africa where there's no load shedding, where water and electricity is stable and reliable, an environment where businesses can thrive.”

BUSINESS REPORT

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