Faced with expensive logistics, high energy costs, security concerns, Asian dumping, illicit products, and regulatory instability, manufacturers are making rational decisions to invest elsewhere, argues the author.

Every month without government action means more boardroom decisions in Detroit, Tokyo, Stuttgart and Shanghai choosing Egypt, Vietnam and Mexico over South Africa, with more factories closing, jobs lost and supply chains dismantled, writes Busisiwe Mavuso.

Any aspiration that South Africa has to rebuild its industrial base is disappearing before our eyes. The Department of Trade, Industry and Competition should take the lead in changing that, if it indeed regards industrialisation as strategic to the growth of the South African economy. Should it fail, a generation of South Africans will pay the price.

Manufacturing contributes roughly 12% of GDP and supports more than 1.5 million jobs directly, with many times that number in supply chains. But we are watching this foundation erode. In the last two years alone, Bridgestone and 13 other automotive component manufacturers have shut down operations. Nissan has effectively exited manufacturing here, maintaining only marketing and sales functions after selling its Rosslyn plant – which had built bakkies for over 60 years – to Chinese manufacturer Chery. The problems go far beyond the automotive sector – to cite just one example, British American Tobacco closed its remaining South African factory last year.

Last week Nissan announced a $45 million (R750 million) investment to expand manufacturing capacity in Egypt. Not South Africa. Egypt. That decision speaks volumes about where we stand in the global competition for manufacturing investment.

The DTIC should be the part of government that welcomes manufacturers and helps them succeed. Instead, Minister Parks Tau’s department is becoming a source of policy uncertainty that is actively driving investment away. The proposed amendments to B-BBEE regulations are a recent example.

Original equipment manufacturers have spent years building local supply chains, deliberately including majority black-owned businesses as part of their transformation commitments. Now the DTIC’s proposed amendments threaten to strip them of their BBBEE status because many suppliers are not 100% black-owned. This raises some fundamental questions:

• Where are the black suppliers that should have been systematically developed over the years?
• Where is the pipeline of black businesses that institutions like SEFA, the NEF, and the IDC were meant to build?
• What has become of the Black Industrialisation Programme?
• What tangible outcomes have emerged from the Localisation Fund?
• Answering these questions is essential to assessing the outcomes of BBBEE policy. This will allow for more coherent solutions, rather than sudden changes that risk damaging businesses that are large employers.

Automotive components for specific models cannot simply be swapped out when the BBBEE rules change. Developing new suppliers takes years, requiring testing, certification and integration into production lines. The government-backed interventions should be providing a pipeline of strong black-owned businesses that can compete – if they are not, we should ask why not. Under the proposed amendments, OEMs would lose their BBBEE status immediately. That status is critical to accessing the tax incentives and support schemes that government has established for the industry. No one knows how this could possibly be managed. Boards of directors, many sitting in capitals around the world, are comparing this regulatory uncertainty to other markets. We want South Africa to win that comparison.

I hope the DTIC reverses course on the BBBEE amendments after receiving comments on the drafts last month. That would signal that it understands the needs of businesses and investors.

The DTIC has succeeded in delivering several initiatives. The Automotive Masterplan has kept some investment flowing, with manufacturers like Toyota, BMW and Mercedes-Benz expanding operations in recent years. But we need consistency across policies to ensure investors know there is a government department on their side.

Faced with expensive logistics, high energy costs, security concerns, Asian dumping, illicit products, and regulatory instability, manufacturers are making rational decisions to invest elsewhere. Egypt offers proximity to North African and European markets, policy stability and governments actively courting their investment.

What SA needs

Government needs a coherent strategy to rescue our industrial base as a matter of urgency. This requires specific, immediate action.

First, the DTIC must withdraw the proposed B-BBEE amendments and commit to regulatory stability. Transformation is essential, but policy changes cannot happen overnight in sectors where supply chains take years to build.

Second, Minister Tau must establish a manufacturers’ task force with monthly reporting directly to the president. This cannot be resolved through bilateral negotiations with individual businesses. We need a macro-level understanding of obstacles and coordinated government action to remove them.

Third, the entire Cabinet must recognise that manufacturing is everyone’s responsibility. Energy reliability, logistics costs, port performance, crime and security – these affect manufacturers’ ability to compete globally. When a factory closes, it’s not just the DTIC’s problem.

BLSA constantly engages with many manufacturers and we can document specific obstacles and present them directly to the presidency. We cannot passively watch deindustrialisation happen while government departments add to manufacturers’ challenges instead of solving them. Business will make the case for what must change.

The urgency cannot be overstated. Every month that passes without action means more boardroom decisions in Detroit, Tokyo, Stuttgart and Shanghai choose Egypt, Vietnam, or Mexico over South Africa — more factories closing, jobs lost, supply chains dismantled.

We have manufacturers still operating here who want to succeed. The question is whether government will be their partner or their obstacle. Minister Tau must make his department the manufacturers’ champion it should be. The industrial base we still have depends on it.

Busisiwe Mavuso is CEO of Business Leadership South Africa.

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