Q&A with Coenraad Bezuidenhout: Overcoming the decline in manufacturing production

Just weeks to go until the upcoming Manufacturing Indaba 2015, we spoke to Coenraad Bezuidenhout, executive director of the Manufacturing Circle, to ask questions such as why manufacturing has decreased this year in South Africa, what are some of the main challenges the industry is facing, and what can be done to overcome such challenges.
Evan-Lee CourieBy Evan-Lee Courie
4 Jun 2015
Coenraad Bezuidenhout, Executive Director of the Manufacturing Circle.
Coenraad Bezuidenhout, Executive Director of the Manufacturing Circle.

With recent news that manufacturing production has decreased by half a percent in February 2015 compared with February 2014, can you explain this decline in South Africa?

Coenraad Bezuidenhout: The year-on-year growth dip in February was largely due to the number of stage three loadshedding outages. This impacts heavy manufacturing where furnaces and injection moulding operations need to be switched off intermittently. It involves production interruptions and higher maintenance and wastage costs shrinking margins.

The Manufacturing Circle Survey for 2015 Q1 shows manufacturers who procure their power from Eskom having experienced four days in total without electricity throughout the quarter. In March there seems to have been some recovery and some capitalisation on the public holidays shifting to April this year with a 3,8% year-on-year improvement.

With that said, what are some of the main challenges the industry is facing?

Bezuidenhout: The biggest concerns for manufacturers at present are:

  • Security of electricity and water supply and consequent problems such as vulnerability to crime, higher maintenance costs, wastage and threats to worker safety in certain instances,
  • Wage increases having exceeded productivity improvements in recent years and general labour instability,
  • Unfair competition from imports,
  • Policy uncertainty and predictability with respect to a range of issues (BBBEE, incentive rules etc.),
  • Lack of coherence and coordination in policy execution (local procurement and enforcement of compulsory standards and health and safety standards), and
  • Certainty of market access regarding AGOA and improved access to markets on the rest of the continent, in Asia and South America.

    What can be done to overcome such challenges in this sector?

    Bezuidenhout: In the Manufacturing Circle our members have set three goals for themselves to address these matters comprehensively:

    Goal 1: Achieve a competitive manufacturing environment


    • Encourage coherent, coordinated and consistent economic policy, regulation and policy implementation.
    • Ensure efficient spending, cost recoupment and price regulation for public infrastructure and utility services that support manufacturing growth.
    • Engage on the importance and maintenance of a skills pipeline.
    • Endorse environmental measures and legislation that support sustainable access to land, raw materials and beneficiation.

    Goal 2: Attain a supportive international trade position:


    • Thrust fair trade forward through necessary adjustment to tariff and non-tariff barriers.
    • Tie up closer with African regions and key export markets.
    • Track better transport linkages to regional and key markets.
    • Take up the benefits of a stable and competitive exchange rate.

    Goal 3: Advance the reputation of SA manufactured products:


    • Promote preferential procurement for locally manufactured and beneficiated products.
    • Partner in a strong above-the-line buy local and buy South Africa campaign.

    With manufacturing production on the decline, this will surely have an impact on employment? What are your thoughts on the situation?

    Bezuidenhout: Employment has remained stubbornly under the contraction mark for more than a year now. Chief threats to employment retention and growth are mechanisation and the substitution of locally manufactured inputs for imported equivalents. The chief drivers in the case of all three are the spectre of labour instability and and in the instance of the latter, electricity outages.

    You will be speaking at the upcoming Manufacturing Indaba. What are some of the issues that you will be addressing?

    Bezuidenhout: The Manufacturing Circle will be launching its three goals in a more fleshed document entitled Three Goals to Grow Manufacturing: South Africa's Greatest Opportunity for Job-rich Growth.

    These such gatherings always seem to bring some optimism to the industry. Do you believe that South Africa can recover from the challenges we're faced with?

    Bezuidenhout: Absolutely! There are huge opportunities on the continent that could boost manufacturing as well as changing global dynamics which could yield positive results for South Africa's competitiveness as a manufacturing investment destination.

    Coenraad Bezuidenhout will be presenting at The Manufacturing Indaba which takes place from 29-30 June 2015 at Emperors Palace in Gauteng, South Africa.

    For more, go to www.manufacturingindaba.co.za

    • About Evan-Lee Courie

    Group Editor: Retail and Lifestyle
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