Localisation for Africa in the same key markets that we export to, as well as many non-tariff barriers, few of which we apply ourselves.
Customs and Imports? South African manufacturers face huge challenges because of cheap imports from amongst other China, India and Vietnam coming into the South African market at prices that are, in certain instances, below the prices of locally sourced raw materials.
Manufacturers also complain about customs tariffs on raw materials, when end product finished goods enter the country duty-free from some countries. In the case of Chinese imports, fixed currency levels are reported.
The influx of cheap imports has aggravated this margin squeeze.
Labour intensive, added value products find it difficult to compete in the domestic market in the face of such unfair competition. It reduces the economies of scale, which results in destructive marginal squeeze.
This makes it difficult for local manufacturers to maintain their labour forces. It also impacts on their ability to contract out to smaller suppliers, which in turn impact negatively on small business growth. Ultimately, this situation has in numerous instances caused business failure.
In addition, where abuses occur, the lack of transparency caused by outdated provisions in the Customs Act makes it difficult to trace problem products back to importers.
Where stage consignments are granted, the degree to which imports under such provisions enter the country unchecked has yielded massive opportunities for goods that find their way onto the domestic market without attracting import tariffs.
In terms of discriminatory tariff and non-tariff barriers, the impact is obviously negative on the ability of South African manufacturers to leverage demand in export markets.
The Manufacturing Circle is currently engaged with SARS, ITAC and the DTi in this regard. Notwithstanding significant initiatives under way, the Manufacturing Circle in general believes there should be a much greater degree of co-operation between our trade administration, trade policy, standards and customs authorities to facilitate the following:
• Tighter monitoring and control, with regular random sampling to ensure that all imports comply with the necessary quality and safety standards;
• Amending section 4 of the Customs Act to bring it into line with global practice on transparency of imports;
• Rolling out price referencing systems to key / problem industries;
• Reviewing and benchmarking tariff and non-tariff barriers for products being imported to and exported from South Africa on a regular basis to ensure a level playing field and the appropriate apportionment of human and other resources in terms of the operations at our border posts and otherwise;
• A more assertive and bold stance in our trade negotiations with major trading partners that leverages our strategic advantages in raw materials and otherwise to ensure a level playing field for South Africa as a small, open economy, who would like to grow its domestic manufacturing industry by competing with fair imports in its domestic market, as well as competing through fair exports in foreign markets; and,
• The entrenchment of the promotion of domestic manufacturing, growth and job creation through the implementation of trade policy, trade administration, standards and customs provisions as a key concern of the institutions that are responsible for their implementation.
In this regard, the Manufacturing Circle would like to see the willingness of these institutions to provide clarity and a willingness to assist with quick turnaround times in situations where unfair competition is experienced.
What prospects are there for local manufacturers to export into Africa? It is a fact that Africa is growing rapidly, albeit from a low base, and it is expected to maintain its well-above-global average growth for the next few decades. As such, SA needs to have a strategy that gives us a competitive edge within Africa. Such a strategy should have both short and medium term elements.
Numerous members of the Manufacturing Circle have had longstanding arrangements to export into Africa. Namibia, Botswana, Zambia, Kenya and Swaziland are some of the markets that have seen the longest involvement by South African manufacturers. There is also activity in Angola, Botswana, Zambia, Lesotho, Malawi and DRC. Further opportunities are currently investigated in markets like Mozambique, Ghana, Zimbabwe, Mauritius and Nigeria.
In certain cases, manufacturing needs to happen in the destination market rather than imported, which means limited opportunity for exports. In cases such as these, local producers have engaged in scouting for export opportunities on behalf of their South African manufacturing customers. Research into market possibilities is ongoing and the longterm prospects to leverage the demographic trends in Africa through the production of durable consumer goods are under consideration. South African manufacturers compete in these markets on superior service and quality and by developing products that are suited to the affordability, quality and functionality requirements of customer demands.
And challenges in the African market? Lack of basic rail infrastructure and poor road networks to markets, along with protracted border clearance procedures mean significant costs and delays for manufacturers exporting to African markets. Logistics into Africa Overland is also a stumbling block as very few South Africanbased transport companies are geared for cross border travel or have the fleet strength to support this. Credit risk has also rendered challenges for manufacturing Circle members as credit insurance companies take precautionary approaches when dealing with African countries that are of high risk. This necessitates credit insurance companies that are more Africa-focused.
What are the ramifications to the manufacturing sector after Lonmin and the transport sector mass industrial action? Interruptions in the output of the mining sector are always a concern, as manufacturing output is heavily dependent on the mining industry for its sustenance. It is also a concern that a precedent has been set where a violent and unprotected strike has resulted in a superinflationary settlement.
How will the Moody cut effect the manufacturing sector? The rating downgrades will no doubt impact on Government’ s ability to roll out infrastructure at competitive costs, which could lead to less demand for South African manufactured infrastructure inputs, as well as to higher administered prices in the long run.
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