Part of the Economic Freedom Fighters' contribution to the 2021 State of the Nation Address (SONA) was a thematic focus on industrialisation and industrial policy.
The reason we focus on industrial policy, is that a correctly applied industrial policy, is a fundamental prerequisite for a developmental and redistributive project that must create jobs, defeat poverty, and reduce inequalities.
South Africa’s poverty crisis is worsened by the lack of a cogent, implementable and aggressive industrial policy.
The role of governments anywhere in the world, particularly in the present age must primarily be about promotion, protection, and enhancement of industrialisation, particularly, in the manufacturing sectors.
The old-age observation by Karl Marx that, "industrialization draws all, even the most barbarian, nations into civilization” is correct. This is further affirmed by the World Bank’s former Chief Economist Justin Yifu Lin who says, “except for a few oil-exporting countries, no countries have ever gotten rich without industrialization first”.
Perhaps the most solid contribution in this regard is Ethiopia’s Arkebe Okubay, who in 2020, said, “As African Industrialisation Day is celebrated, it is important to emphasise that Africa’s future will be determined by focusing on industrialisation, and the transformation of agriculture and the economy”.
These three quotes represent the intergenerational validity of the observation that, it is through decisive industrialisation that South Africa, or any other nation, will be able to defeat poverty in a meaningful and sustainable manner.
Industrial policy in all its manifestations should determine and inform trade, fiscal, monetary, foreign, energy, social security, climate change and educational policies.
A properly conceptualised industrial policy and approach will lead to an appreciation that the country needs adequate instruments to drive industrial development. These include state-owned banks, with a clear developmental mandate to drive industrialisation.
Appropriate industrial policy will make all rational people appreciate that industrial expansion in the modern global capitalist system needs dependable financial institutions to drive labour absorptive industrial expansion. A State-Owned bank is therefore, a non-negotiable prerequisite, in the pursuit of industrial policy.
Industrialisation is singularly responsible for the economic and developmental superiority of all nations and countries that are classified as developed nations in the world.
These include in the first category of industrial nations, countries such as Britain, France, Germany, the United States, and the second category nation-states such as Japan, Malaysia, South Korea, Singapore, and China, including its Taiwanese and Hong Kong manifestation. All these countries developed due to massive labour absorptive industrial expansion based on manufacturing. Notably, all these countries produced goods and products for regional, continental and even global trade and consumption.
Industrial expansion in the United States was symbolised through the production and global exportation of Ford automobiles and the industrial belt innovation. German's industrialisation was symbolised by the production of Mercedes Benz, BMW, Audi, Volkswagen, automobile components and many other useful industrial and household consumable products. The Japanese economy was for a very long time anchored by the production of Toyota automobiles and subsequently Nissan automobiles which enjoyed State guidance and protection until they were globally superior products.
The South Korean economy is anchored by manufactured electronic and household products by Samsung and LG Electronics and enhanced by the Hyundai Motor Company. China’s economy is based on massive manufacturing capacity or virtually all consumer goods and products. The role of State-Owned Companies in China’s industrial expansion is of significant value demonstrated by the fact that 94 of the world’s biggest 500 corporations are Chinese State-Owned Companies.
In its current form, content and direction, South Africa’s industrial policy is misdirected.
That is why in the 2021 State of Nation Address debate, the premier of the Eastern Cape Oscar Mabuyane was celebrating that South Africa is the 2nd biggest exporter of citrus products. The Minister of International Relations Naledi Pandor was gloating over South Africa’s exports of table grapes, pears, avocados, and meat products to the Association of Southeast Asian Nations (ASEAN).
In a feeble attempt to exonerate what he thinks is industrial policy, the Minister of Trade & Industry mentioned insignificant small businesses including a poultry project which evidently does not fit into labour absorptive industrialisation based on manufacturing. Something he has repeatedly said every year since May 2009 without fail, despite a non-existence manufacturing sector in South Africa.
In the non-agricultural sectors, South Africa’s industrialisation is based on over-subsidisation and promotion of foreign automobiles without significant localised manufacturing value.
South Africa's automobile assembly plants for Mercedes Benz, BMW, Toyota, FAW and Ford automobiles currently use less than 20% of local components and do not create the necessary and much-needed jobs. Instead, their plants are highly mechanised and the majority of the workers on sight are cleaners, gardeners and catering staff in canteens.
It is a disgrace that the South African government, including its president, prides itself on exporting German, Japanese and American automobiles into the global economy, whilst an option to conceptualise and build original South African automobiles exist.
South Africa's State-Owned DENEL has for many years been conducting intensive research and development and manufacturing sophisticated military vehicles and aircrafts, yet the country has not produced civilian automobiles.
South Africa’s industrial policy and manufacturing must include a genuinely made in South Africa automobile. It is not too late to catch up in the same way Toyota caught up and currently produces more than 10 million cars per year, in the same way, Tata from India is catching up and has thus far produced close to 10 million cars.
South Africa must produce millions of cars and other useful industrial and household products for local, continental and global trade and consumption.
In its current form, South Africa does not have a single massive manufacturing industry that creates jobs and produces globally consumed goods and products in the same way Japan has Toyota and Nissan, and South Korea has LG and Samsung Electronics.
South Africa’s industrial policy and manifestation is anchored by over-subsidised foreign corporations which can relocate to any other destination in the world when offered better subsidies, access to larger markets and protection.
South Africa’s industrial policy cannot be anchored by foreign corporations because these often invade spaces of economic policy sovereignty on threats of relocation to other investment destinations. South Africa must build its own industries to manufacture and trade Made in South Africa brands, and anyone who thinks it is too late to do so, is a coward.
Like it was the case with Toyota, Hyundai and Tata, which came late into the global industrial and manufacturing of automobiles, South Africa’s new industrial products will in the beginning, be treated with suspicions.
Our country must appreciate the African proverb that you learn how to cut trees by chopping them down. And besides, the skills thus far transferred from assembling Japanese, American and German cars, can be of great usage to South Africa.
While we use automobiles as an example of how South Africa should pursue the necessity of industrialisation. This, should apply to many other industrial products such as telecommunications and workplace gadgets, household appliances, and advanced industrial and renewable energy products.
The essence of all these pursuits should be South African ownership and control while allowing space for external investors to play a role. The present dilemma is that almost all industrialisation and manufacturing products are foreign-owned and controlled.
What is often amiss in industrialisation and industrial policy that prioritises sustainable job creation is the building of a solid tax base.
While the number of adult populations has declined from 6,1 million to R2,7 million between 2007 and the present, the number of ultra-poor individuals, earning below minimum wage, increased by 6.6%. This translates to a shrinking tax base. It is estimated that a total of 6,1 million people fall under the middle, upper and top-end class while 21,2 million are ultra-poor, survivors and skilled workers meaning they don't form part of the tax base. These are people who must be employed in decent-paying work to contribute towards fiscus.
The immediate most impact instrument in driving successful industrialisation is and will be State procurement power and capacity.
The South African government annually expends more than R800 billion purchasing foreign-made products which can be made in South Africa.
The government must amend procurement laws to prioritise local procurement of automobiles, telecommunication gadgets, renewable energy appliances, textiles and all other products that all state departments in all spheres of government, including all state-owned entities and companies, procure.
Lastly, industrialisation will need energy security, in an affordable manner. State-owned energy security should necessarily be underpinned by a base load of clean coal technology, whilst gradually and purposefully integrating other energy sources, such as, nuclear energy, renewable energy and liquified natural gas.
The current form and direction of Eskom is misdirected, particularly after the appointment of the current management.
Unless we move towards this direction, South Africa’s industrial policy will continue to be misplaced, out of context, unscientific, ahistorical, and therefore, a dismal miscarriage.
* Floyd Shivambu is the Economic Freedom Fighters’ member of parliament.
** The views expressed here are not necessarily those of Independent Media.