Challenges facing South African Panel Manufacturers Part 2 External Challenges

Challenges facing South African Panel Manufacturers – Part 2: External Challenges

In last month’s blog, we highlighted JB Switchgear’s Managing Director, Johan Basson’s thoughts on the internal challenges facing companies in the electrical panel building industry in SA. Johan wrote a piece for the SDC-IBA 2019 conference in which he unpacked both the internal and external challenges facing these specialised manufacturers.

This month we’re unpacking the external challenges that Johan has highlighted in Part 2 of his three-part blog series.

Socio-economic challenges at the forefront of SA’s manufacturing sector

In Johan’s opinion, the main contributing factors that have directly impacted the manufacturing sector in the country are as a result of socio-economic hardships. Johan listed a few factors including:

  • Political instability and insecurity
  • State capture, corruption and mismanagement
  • Infrastructure constraints
  • Low productivity (cost of manufacturing)
  • Lack of skills development
  • Negative perceptions of potential investors

“The challenges are numerous and can seem extremely overwhelming to private businesses and manufacturers” says Johan. He writes, South Africa is at a tipping point. Record levels of unemployment, rising poverty levels and increasing political uncertainty have created an environment where investors are understandably cautious, and are rather seeking investment opportunities abroad.

Against this backdrop, we run the risk of a toxic cocktail of continued further de-industrialisation and job losses. Since 2001 our manufacturing sector has experienced a trade deficit peaking at a whopping R500 Billion in 2016. Since 2002, our manufacturing imports have exceeded our manufacturing exports, and manufacturing as a percentage contribution to GDP has declined as imports have increased.

Since 2013, unemployment has reached crisis levels. Increasing labour costs have resulted in half a million jobs being shed. Wages are increasing, but productivity is falling and labour cost increased by 34% while productivity increased by only 13% over the last ten years.

Johan ends with the sentiment that it is not all doom and gloom. “Employer-body SEIFSA circulated a document titled ‘Map to a Million’ which was produced by a corporate association of manufacturers, called the manufacturing circle. This document addresses the efforts of industry groups to create a million new jobs over the next decade.” Adds Johan.

As leading manufacturers, we need to offer greater commitment to support local manufacturers as a key element to stimulate economic growth and job creation. In next month’s blog, we’ll delve more deeply into what more SA manufacturers can do to overcome the challenges Johan has discussed.

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