Proudly SA chief executive Eustace Mashimbye on a locally produced couch in his office in Rosebank, Johannesburg. Photo: Philippa Larkin
Proudly SA chief executive Eustace Mashimbye on a locally produced couch in his office in Rosebank, Johannesburg. Photo: Philippa Larkin

Proudly SA: South Africa companies needs local procurement

By Eustace Mashimbye Time of article published Feb 4, 2020

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JOHANNESBURG - Since this is my first column of the year, I should be wishing all our readers a prosperous and happy new year, but I won’t. Partly because it’s February already and I think there should be a cut-off for new year greetings, but also because, truthfully, if we do not do things differently this year, none of us should expect a prosperous 2020.

Certainly those South Africans who face retrenchment this year cannot expect prosperity - 3000 additional jobs being shed at Telkom, 1440 from Massmart, 600 from Samancor Chrome and 665 from Glencore Alloys. And the list goes on.

Rating agency downgrades and the continuous adjustment of projected economic growth to way below 1percent creates a perpetual cycle - poor prospects lead to less investment, less investment leads to lower growth and we may never scramble out of the current Slough of Despond in which we find ourselves.

And so we pin our hopes on the Budget, which will be delivered by Finance Minister Tito Mboweni on February 26. And if he makes the right noises and promises, Moody’s - by far the most optimistic of the three big rating agencies - may look favourably upon us at the end of next month when they next deliver their judgement on our flailing economy.

Without dwelling on the mistakes of the past, which may only be forgiven if we see some legal consequences being meted out to those found guilty of stealing from the state, we now have to pull together as a nation to right those wrongs and get the country back on its feet.

The reality is we need to create 500 000 jobs annually just to keep up with the number of young people entering the job market. From our experience working with many small, medium, and micro enterprises and creative, innovative entrepreneurs who bravely continue to contribute a few jobs here and a few jobs there, will not even make a dent in that number, as much as we duly celebrate even one new job.

For every 100 jobs created in the small business sector, big business and manufacturing are losing thousands more. Manufacturing must be protected and nurtured at all costs as that is where the highest potential for job creation lies and where semi-skilled and unskilled workers can be absorbed.

Countries such as China and the US know this, and that is why we are seeing the trade wars between them as they fight for their products’ place in the global market, so they can retain and even grow employment levels in their respective countries.

China has a population of 1.4billion people and an unemployment rate of only 3.67percent. The US has a population of 329million with their unemployment sitting also at about 3.6percent. South Africa cannot keep 30percent of its relatively meagre 57million inhabitants in jobs, so clearly something more than government policy is wrong.

Of course the government has to play its part, for example by sorting out the electricity supply that keeps business going, but we have to ask South Africans to make this the year that they make procurement choices not based on brand loyalty, corrupt practices, or on profiteering off cheap imports where a local alternative exists, but on ensuring that our rand is ploughed back into the South African economy. This will increase the tax base, create jobs and then we may see the green shoots of much-needed growth.

As we know, the government has legislated its own entities to meet local procurement thresholds for 24 designated items.

What if we had the private sector volunteer to commit at least 10percent of their procurement budget on local content?

From retailers, blue chip companies right down to small business owners - chief executives, shareholders and boards must implement regulations around local procurement. 

Many reading this will laugh, knowing their own local procurement and supply chain spend is way more than 10percent, but we need everyone on board, not just those few with a social conscience.

As unemployment spirals, the country’s customer base is shrinking and soon those companies giving no thought to helping other South African enterprises by buying from them, will be putting more employees out on the pavement because their orders have dried up.

And so the cycle continues, and cheap imports will prevail because that will be all that we can find on our shelves.

The crisis is real, and we have to acknowledge that buying local has a critical role to play in getting us out of it.

The challenges that we are facing point to a struggle, and like Thandiswa’s hit song Zabalaza this is exactly what we need - a new struggle - a struggle to get local content to dominate the shelves in our retail stores and in all our production plants and offices, in order to turn our economy round.

Eustace Mashimbye is the chief executive of Proudly South African.

BUSINESS REPORT 

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