For South Africa to solve its unemployment problem, about 6,000 new factories will need to be built each year over the next decade, each employing about 100 people.
But government incentives were no match for the founders of Max Smeiman and Associates, a development, value chain strategy, and engineering research consultancy of this scale. Max Sumeiman He spoke at a panel discussion focused on the mining industry on the second day of the Manufacturing Indaba in Sandton on June 22nd.
The panel of speakers agreed that more incentives beyond tax cuts are needed to set up mining manufacturing companies across the country, especially in areas where production is booming such as the North West and Northern Cape. did.
“Many manufacturers are based in Gauteng because of the state’s historic mining prevalence. Work has not moved to remote areas.
“From an original equipment manufacturer (OEM) perspective, South Africa has a wealth of innovation and skills, but manufacturers have no incentive to move to remote locations,” said the CEO of a South African mining equipment manufacturer. I’m here. Lerohonoro moroii.
Industrial Development Corporation Deputy Head of Mining, Manufacturing and Agribusiness Investments in Zambia Murumba Luwatula Zambia’s mining and manufacturing sector is aware of this and is working to acquire various partners to co-invest in operations in areas where there is no existing investment incentive.
“Regionally, if Africa’s population doubles by 2050, the problem of youth unemployment will become increasingly acute. We have a skill set that we can use to enhance our manufacturing and mining capabilities alike,” he added.
Molloy suggested that policy could play a bigger role, defining what is local content and what is not, to increase incentives for manufacturing in mining.
“Mining has always been innovative, but somewhere along the line industry and research institutions were disconnected. [contributing to fewer manufacturing operations being established]however, stakeholders are starting to recognize again the value of research and the brain wealth of South African entrepreneurs and companies,” he explained.
He believed there was a lot of value that the mining sector could add to the region, especially through micro, small and medium enterprises (SMMEs).
However, the main obstacles to this were access to finance, markets and business development, highlighting Absa’s natural resources and energy principals. Dean hack.
He notes that the 30% local content requirement that clients must adhere to and other quality compliance issues often make it difficult for financiers themselves to provide loans as well. Did.
Another challenge is that even though banks are new businesses, they often want to check their existing balance sheets. However, he recommended that more banks take a longer-term view when assessing business potential.
“This is why banks often have supply chain development departments. They look more closely at the commercial financing potential of their businesses.”
Huck added that entrepreneurs need to be aware of the risks of lending to companies where banks only have a single contract and try to access more markets.
Other factors that hinder fundraising are poor business governance and skills. In particular, how are we going to put together the funding package so that it can be presented to the bank? In addition, large companies often bid, and small businesses do not know how to respond to the bids, even though they can meet the requirements.
Therefore, there is an urgent need for business skills assistance provided to SMMEs by multiple possible stakeholders. Hack said SMMEs can be strategic about helping businesses with their skills and gaining market opportunities by appealing to the “social” component of environmental, social and governance initiatives of large companies, and this way. said you can step in the door with
In addition to localization hurdles, Mr. Smeiman argued that the cost of localization is not too high as companies often mention, but when the policies are wrong.
“Localization proposals often overwhelm domestic demand and make no economic sense. Sometimes localization efforts are made only for localization and not because they make economic sense,” he explained, Mining makers have no chance to be competitive unless their energy and cargo services are functioning properly, he added.
Smeiman said that stakeholders, including governments, want to talk about the 4th Industrial Revolution, but there are rigorous standards underpinning the 4th Industrial Revolution to enable connected, frictionless global value chains. said he didn’t want to talk about
“And if we don’t talk about standards such as item identification, South Africa will remain an island,” he lamented.
Furthermore, he suggested that the government should charge manufacturing companies 0% export tax and implement policies that truly enable global competitiveness.
For example, the Preferential Procurement Policy Framework Act is intended to facilitate the participation of historically disadvantaged individuals and SMMEs in the public sector procurement system. This is a good feeling. But while state-owned Transnet, for example, has a lead time of six to nine months to produce operational materials, global competitors can source goods within hours.
“The government is undermining the competitiveness of state-owned enterprises, and the consequences extend to mining and manufacturing companies.”
Sumeiman further suggested that counties should decide whether to compete globally or focus on local markets.
“The global market is not obsessed with local content issues. It is about innovation, quality and price,” he elaborated.
Sumeiman cited Thailand’s automotive sector as an example. He explained that the government’s scrapping of counterintuitive policies has led to the creation of more parts makers.
As of 2019, Thailand’s automotive industry is the largest in Southeast Asia and the 11th largest in the world, producing over 2 million vehicles annually. It accounts for about 12% of the country’s gross domestic product.
The Thai government has already adopted new government incentives to accelerate the transition to electric vehicles (EVs). The incentive is part of the Thai government’s plan to convert half of the country’s car production to EVs by 2030.
The new incentive package announced in April last year includes import tariffs for this year and next year up to 40% on off-the-shelf EVs priced up to Bt2 million and up to 40% on EVs priced between Bt2 million and Bt7. Includes 20% discount. – million baht.
The government also plans to cut sales tax on imported EVs from 8% to 2%.
Eligible manufacturers will also receive a subsidy of 70,000 to 150,000 baht per EV produced.