We often hear that South Africa exports its raw materials and then re-imports value-added goods made from the materials at a net negative cost to the trade balance.
The reasons why we are not making these goods – termed “beneficiation” – are complex. However, exacerbating the problem – or its cause – is the decline in manufacturing to its lowest point in decades - 12% of GDP in 2013 – because of a variety of structural and political reasons. If we no longer make things, and are net importers, we will not develop the economy and create jobs and opportunities. The decline of the rand and near-recession GDP growth are evidence of this.
But to government, unions and business with its single-minded obsession with a one-size-fits-all economic approach, beneficiation implies heavy industry – huge factories consuming electricity and environmental resources the country is short of and employing fractious and poorly skilled union workers. The motor industry, which relies on export subsidies paid for by the taxpayer, is an example.
One way manufacturers and entrepreneurs can avoid high input costs are small-scale industries making handmade and quality speciality goods for niche markets – “boutique” manufacturing. It's conducive to environmentally sustainable and community-based job-creation initiatives.
Remember, Apple and Microsoft started in their founders’ garage.
But how successful is this model locally? I don’t have access to the data to answer that question, but my experience these past two months trying to source common, home ware goods of reasonable quality and price has left me almost pulling out my hair out.
Two examples illustrate this:
Item A: After buying a mattress two months ago and returning it a month later because it started collapsing, I found these relatively expensive goods are of dubious quality, made to unknown standards, if any, and have built-in obsolescence. The plethora of manufacturers and retailers pretend to offer variety but really have a cookie-cutter approach to the way they make and sell their products, regardless of customer need or preference – take it or leave it. And we take it because we have little choice.
Then I found a store in Salt River that sells the products of its German parent - Sanders South Africa. They offer affordable and luxury ranges, with each model, within the seven or eight available, having multiple options and sizes – unlike the very limited alternatives available for local goods – to suit the customer’s preferences. What they don’t have in stock, they order from Germany, practically custom made. Which South African manufacturer/supplier would do this?
The thing is: their affordable range is comparable in price to Cape Town or South African-made goods. Plus, you get “made in Germany” standards and quality, where the material composition is fully listed on the label, unlike local goods.
Item B: I can source a bedding accessory locally, made from latex or petroleum-based synthetics like memory foam, which are expensive, overrated, produce toxic fumes and is of questionable utility. Instead, I want it in pure wool which has many benefits. But one can only import the wool product – get this, made from South African merino (or New Zealand wool, if you prefer)! Or one may ask the Sanders to order the wool – or other natural fibres – item from their (German) factory, again in the upper price range of what we would pay for the local synthetics.
Based on my web search, so far I can’t find one local company that makes item B, utilising a natural resource, skills, technology and equipment we have in abundance. And B is ideally suited to boutique manufacturers, of which there are many.
These examples are two of many of how the country unable to develop industry and the economy, and where others are showing us how it can be done. Why should we import goods that can be made here? I think it’s due to a lack of imagination and drive - lethargy of our economy.
What exactly is the purpose of the ministry for small business enterprises in this regard?
Previously published in the Cape Argus 8 October 2015
The reasons why we are not making these goods – termed “beneficiation” – are complex. However, exacerbating the problem – or its cause – is the decline in manufacturing to its lowest point in decades - 12% of GDP in 2013 – because of a variety of structural and political reasons. If we no longer make things, and are net importers, we will not develop the economy and create jobs and opportunities. The decline of the rand and near-recession GDP growth are evidence of this.
But to government, unions and business with its single-minded obsession with a one-size-fits-all economic approach, beneficiation implies heavy industry – huge factories consuming electricity and environmental resources the country is short of and employing fractious and poorly skilled union workers. The motor industry, which relies on export subsidies paid for by the taxpayer, is an example.
One way manufacturers and entrepreneurs can avoid high input costs are small-scale industries making handmade and quality speciality goods for niche markets – “boutique” manufacturing. It's conducive to environmentally sustainable and community-based job-creation initiatives.
Remember, Apple and Microsoft started in their founders’ garage.
But how successful is this model locally? I don’t have access to the data to answer that question, but my experience these past two months trying to source common, home ware goods of reasonable quality and price has left me almost pulling out my hair out.
Two examples illustrate this:
Item A: After buying a mattress two months ago and returning it a month later because it started collapsing, I found these relatively expensive goods are of dubious quality, made to unknown standards, if any, and have built-in obsolescence. The plethora of manufacturers and retailers pretend to offer variety but really have a cookie-cutter approach to the way they make and sell their products, regardless of customer need or preference – take it or leave it. And we take it because we have little choice.
Then I found a store in Salt River that sells the products of its German parent - Sanders South Africa. They offer affordable and luxury ranges, with each model, within the seven or eight available, having multiple options and sizes – unlike the very limited alternatives available for local goods – to suit the customer’s preferences. What they don’t have in stock, they order from Germany, practically custom made. Which South African manufacturer/supplier would do this?
The thing is: their affordable range is comparable in price to Cape Town or South African-made goods. Plus, you get “made in Germany” standards and quality, where the material composition is fully listed on the label, unlike local goods.
Item B: I can source a bedding accessory locally, made from latex or petroleum-based synthetics like memory foam, which are expensive, overrated, produce toxic fumes and is of questionable utility. Instead, I want it in pure wool which has many benefits. But one can only import the wool product – get this, made from South African merino (or New Zealand wool, if you prefer)! Or one may ask the Sanders to order the wool – or other natural fibres – item from their (German) factory, again in the upper price range of what we would pay for the local synthetics.
Based on my web search, so far I can’t find one local company that makes item B, utilising a natural resource, skills, technology and equipment we have in abundance. And B is ideally suited to boutique manufacturers, of which there are many.
These examples are two of many of how the country unable to develop industry and the economy, and where others are showing us how it can be done. Why should we import goods that can be made here? I think it’s due to a lack of imagination and drive - lethargy of our economy.
What exactly is the purpose of the ministry for small business enterprises in this regard?
Previously published in the Cape Argus 8 October 2015
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