Government and industry in South Africa and the rest of the continent should seize the disruption caused by the COVID-19 crisis as an opportunity to drive industrialisation and bring production back to the continent.
This could help to spark economic growth and job creation, while delivering more choice and competition to the benefit of consumers.
That’s according to Vinny Perumal, CEO of KAS Africa, Africa’s leading contract manufacturer of personal, home, baby and oral care FMCG products.
She says that the upheaval to global supply chains caused by the pandemic has helped to highlight how important local production capacity is in ensuring the resilience of local economies and continuous supply of essential products.
“The virus outbreak has put South Africa’s manufacturing sector under enormous pressure,” she adds.
“It has caused demand and production in many sectors to slump, disrupted supplies of raw materials and led to financial liquidity concerns for some companies. In other instances, manufacturers have need to reinvent themselves for surge production to meet unexpected demand for some consumers goods.
“As the world starts to emerge from the pandemic, we need to consider the lessons we can learn from it. One of the most important is that we have a globally competitive manufacturing sector in South Africa with scope to grow. Many local factories showed remarkable resilience in pivoting to new industries or accelerating production to meet demand for essential goods during the months of the hard lockdown.”
Perumal says that during this time of crisis, South African manufacturers underlined their ability to deliver innovative, customised products that complied with the most rigorous global standards.
More support for local manufacturers from retailers, government and consumers presents an opportunity to drive local growth and create more jobs, she adds.
The multiplier effect
According to Deloitte, manufacturing is one of the top three multiplier sectors in terms of value addition, job creation, export earnings and revenue generation for every R1 invested.
Focusing on growing local manufacturing production could thus deliver significant returns for our economy, says Perumal.
“Even before COVID-19, we were seeing significant reconfiguration of global value chains,” she adds.
“The trend has now accelerated with a renewed appreciation among retailers and distribution companies about how working with local manufacturers can help them to respond with more agility to local market needs. We are already seeing this unfold in South Africa’s clothing sector.”
Other factors that will help drive localisation of production capacity include the opening up of new export markets and growing pressure to reduce carbon emissions and other environmental impacts from long-haul air and sea cargo shipments, she notes.
“The African Continental Free Trade Area (ACFTA) and South Africa’s close ties with the BRICS bloc mean that there are exciting opportunities to grow exports.
“ACFTA in particular will help to grow the size of the regional market for African manufacturers and enable them to become even more competitive by scaling up production. According to the World Bank, the free-trade area could more than double intra-African trade in manufactured products by 2035.”
It is also encouraging that government is focusing on industrial strategy through the SMME Focused Localisation Policy Framework and the development of master plans for the clothing & textiles, sugar, poultry and automotive sectors, says Perumal.
There are also master plans for localising raw materials and packaging for FMCG products that South Africa currently imports in large quantities.
“As a local manufacturing enterprise, it is encouraging to hear the President repeatedly urge government, state-owned enterprises, businesses and individuals to buy local,” she adds. “We share President Ramaphosa’s belief that domestic investment, confidence and procurement can turn our manufacturing sector into a regional and global player.”
She concludes: “South African manufacturers deserve support not just because they’re creating local jobs and building prosperity — but also because they’re delivering products to our market that are globally competitive in terms of cost and quality. The pandemic could be an inflection point that sees the rebirth of our manufacturing sector.”