South Africa’s importation of cheap cement and its lack of investment in the local manufacturing sector could put 2,500 jobs and 20% of government revenue at risk.
This is according to the Centre for African Management and Markets (CAMM) director, Professor Adrian Saville.
South Africa’s manufacturing sector faces an explicit and legally proven dumping of imports.
This means the imports arrive in the country at a price point that is lower than the cost of production and transport in their home economy.
This results in the playing field for South African firms not being level, as they are being held to a different set of regulatory requirements and obligations than companies exporting out of comparative emerging markets.
For example, these firms do not face a carbon tax or South Africa’s transformation obligations.
“South African firms have a different set of conditions that they have to look after, and that places a substantially greater onus on them and pushes them into an uncompetitive position,” he said.
In addition, South Africa is seeing a severe underinvestment in its local manufacturing sector, which is also facing the country’s electricity and logistics challenges.
“This, of course, places a lot of pressure on potential job losses as well as lower government tax collections,” he said.
Saville noted a long structural decline in the local manufacturing sector’s competitiveness. This can be seen in the contribution that manufacturing makes to the country’s GDP.
Thirty years ago, manufacturing made a 25% contribution to GDP. That contribution today is around 12% today, he said.
“It really has been hollowed out in a case of comprehensive, persistent deindustrialization.”
A CAMM report looked at the impact of these factors on PPC – South Africa’s largest cement marker and one of the country’s oldest companies.
The report found that PPC makes a contribution of around R8.8 billion to the South African economy, provides 15,000 full-time equivalent jobs and contributes just over R1 billion per year to government coffers.
“If you displace the domestic production with, for instance, 50% imports, we anticipate that it would lead to the loss of 2,500 jobs, that about 25% of revenue would disappear, and 20% of government revenue would evaporate,” said Saville.
In addition, “there would be a substantial compromise in fixed capital formation in an economy that is already investment starved”.
“South Africa has to seriously square up to the loss in competitive capacity, not productive capability.”
“If you take the case of PPC, specifically, this is a business that’s 130 years old, it’s weathered significant storms and changes and that points to its capacity to weather these types of disruptions and challenges.”
“But it doesn’t take away the fact that, to a large extent, South Africa’s economic circumstance is self-inflicted and that the remedies sit right in front of us.”