Treasury and President Ramaphosa make manufacturing recovery a priority.
In the recently released 2022 Budget Review, it was revealed that, despite increasing by 10.3% in the first three quarters of 2021, relative to the same period in 2020, manufacturing production remains well below pre‐pandemic levels. Furthermore, the outlook remains subdued.
It was noted in the Budget Review that, not only do business confidence indicators point to constrained business conditions, including supply chain disruptions and increased production costs, but that the sector is also susceptible to ongoing supply and logistical disruptions. “Compounding this is the decline of our ports and railway infrastructure over the past decade or two which has placed heavy strain on manufacturers, wholesalers and distributors,” says Zane van Rooyen, Product Marketing Manager at field sales management CRM and mobile ordering app Skynamo.
“This would, under normal circumstances, be a great burden, however, coupled with the pandemic, lockdowns and supply links breaking both on an import and land-based level, this has resulted in a 24-month unprecedented pressure matrix that we will still be working our way out of for many years to come,” he adds.
Van Rooyen continues, “In his State of the Nation Address, the President rightfully said that our economy cannot grow without efficient ports and railways. My hope is that improvements to these are among the 55 new infrastructure projects that Government is prioritising and which are said to significantly boost long‐term GDP growth. This will help accelerate the recovery of local manufacturing as well as import and export channels which are needed to supply the parts and materials for manufacture as well as for the ability to once again trade on an international stage.
“Had the Covid-19 crisis not happened, the state of our ports and railways would need to compete with many other pressing issues in our economic turnaround strategy which is currently underway. However, the fact that Covid did happen added spotlight to the manufacturing and supply industries in their entirety. The experience of being ‘all in it together’ has forced every manufacturer, wholesaler and distributor to go back to the starting line to develop new relationships, solve new supply chain issues, and approach everything in a new way. This problem-solving mindset has contributed to the resilience of these sectors, and I believe this is what is going to get our ports and supply channels operational faster.”
Van Rooyen adds that, although imports are expected to grow by 5.4% this year, South African manufacturers should be looking to make things locally as global supply chains remain fragile, especially now in light of Russia’s attack on Ukraine. “I’ve witnessed examples of South African manufacturers who used to have tight direct-to-destination export networks set up prior to the pandemic but who now have to send their international order via three continents before it can reach its intended destination. This only results in higher costs both to the distribution line and the consumer. Similarly, this is happening in reverse. Many imports to South Africa at the moment are also experiencing this and we have seen what this is doing at the consumer trolley level. Making local in some instances is a great solution to this. In others, materials, ingredients, parts still need to be imported and right now there is no quick fix.”
He acknowledges that a number of businesses in this sector have not managed to survive the past two years under the pressures heaped upon them. “Initially, they were unable to get stock due to the 17.4% decline in imports in 2020. Then, they got too much following last year’s 8.5% increase and weren’t able to sell this. It all became too much for some. Sadly, they had to either be taken over by larger competitors or close completely. Sales reps too were not spared, and many sales teams had to be slimmed down. Others had to partner with brand management agencies and rely on them for retail execution needs.”
In light of these losses, van Rooyen welcomes the announcement of a new business bounce-back scheme for small and mid-size enterprises (SMEs) by Finance Minister Enoch Godongwana during the 2022/23 Budget Speech. “With small enterprises employing between 50% and 60% of South Africa’s workforce and contributing around 34% of GDP, this will be crucial for the country’s economic recovery. We will be assisting businesses too by giving them the ability to have live reporting data available for immediate use, sales orders that can be placed in real-time, and the information to make informed decisions while the world is full of uncertainty.”
He concludes by saying, “I’m hopeful that with President Ramaphosa and Treasury shining a spotlight on the manufacturing industry, a very vital economy channel, and with the collective mindset being one of finding resolution, we can discover ways to recover together.”
