SA must develop appetite for making things here

The private sector received a pat on the back from Economic Development Minister Ebrahim Patel yesterday. Speaking on local procurement initiatives at the Proudly South African summit in Gauteng, he also commended the Walmart Fund, set up by the global company he fought tooth and nail to keep out. Patel urged businesses to “develop an appetite for making things and not simply buying them, for transforming metals and agricultural raw materials into goods that consumers buy”. He cited the example of the taxi industry, which traditionally ordered its 23 000 new taxis from abroad. A new taxi assembly plant opened this year, “and early next year a second one will open, providing local assembly capacity that will meet up to two-thirds of the annual demand for taxis”.

He recorded other success stories. “Fashion retailer Foschini Group acquired a local clothing manufacturer, Prestige Clothing, in March 2012. Prestige is a manufacturer of women’s outerwear and some styles of children’s clothing. It has two factories, one in Cape Town and the other in Caledon, and employs 800 workers. “Foschini is in the process of negotiating to take on a further 300 workers in Caledon. This transaction will not only create new jobs, it will give Foschini a competitive advantage, in speed to market.” In the mining sector he identified AngloGold Ashanti, which was “spending R700 million to assist its South African-based suppliers to export their goods to AngloGold operations in the region. Through its procurement spend, AngloGold is assisting South African companies with export opportunities, technology development and business skills.

“Examples of the direct impact of AngloGold’s initiatives on its local supply base, include the 80 additional jobs at a manufacturer of backfill bags, 40 additional jobs at a producer of work suits and 66 new jobs at a locomotive producer.” The outgoing managing director of Pioneer Foods, Andre Hanekom, said he would still be around to see the company’s half-year results in 2013. Hanekom, who announced his retirement last month, came across as very shy of his company’s poor full-year performance yesterday. His mood changed, however, when he spoke of the company’s current list of capital projects, saying most of them were taking shape. To list a few, the Bokomo Foods business has completed an expansion programme, and the new cornflakes plant started production this month.

The Ceres Beverage division, which reported a dismal result due to fierce competition, was now using its new production plant in Wadeville, Gauteng. Two major projects have been approved for Sasko; a bakery in KwaZulu-Natal and the consolidation of the Malmesbury and Paarl flour mills. At a cost of R300 million, this project will see the closure of the Paarl flour mill and will create capacity for future volume growth in this category. It will be completed in 2014. Hanekom said these projects would not only increase volumes, but would also improve efficiencies and cut costs. Pioneer Foods expected to use its Sasko bakery at Shakaskraal in KwaZulu-Natal by the end of next year. The bakery will replace the 40-year-old bakery in Stanger and will increase market participation in the growing urban and semi-urban markets in the province. The bakery will cost R500m and create a few jobs.

Another milestone that Hanekom leaves behind after 24 years of service will be the completion of the broad-based black economic empowerment deal, which has brought new black shareholders into the business and injected cash of R546m received from the third-party financier and participants. Hanekom said his greatest joy would come from the establishment of an education and community trust that would focus and integrate the company’s corporate social investment spend. Economic Development Minister Ebrahim Patel said yesterday at the Proudly South Africa summit in Gauteng, that South Africa needed to develop “an appetite for industrialisation”.

The appetite was needed “for making things and not simply buying them, for transforming metals and agricultural raw materials into goods that consumers buy”. Reassuringly, he said the government increasingly saw local procurement “as a centrepiece of industrial policy and of our counter-cyclical macro-economic policies”. He cited the example of the manufacturing of taxis. Since 2007, he said all 23 000 of the new taxis bought every year had been fully imported. This, however, had changed because of the work of his department and that of the Department of Trade and Industry, which was responsible for localisation of taxi vehicles.

A new taxi assembly plant at Toyota in Durban had opened and early next year a second would open. The Toyota plant would produce 10 000 taxis a year by 2014. The second, under Beijing Auto Works (BAW), would be built in Springs, Gauteng. It would employ 470 people to assemble a new 16-seater minibus taxi from January. “The Industrial Development Corporation recently provided a R66 million funding package to assist a local company in gearing up its workshops and to fund its working capital requirements to execute a contract for the supply, fabrication and erection of a condenser system for Eskom’s [coal-powered] Kusile power station. The contract value is estimated at R2.4 billion and is expected to consume 53 000 tons of steel and create at least 750 new jobs.”

These examples of good news come hot on the heels of public hearings at Parliament’s trade and industry committee, where countless industrialists spoke about the ill effects of high electricity prices on industry. It seems the government and the parastatals aren’t working together to feed the appetite of industrial investors, but at least there is some good news.