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South African Business 2019 edition

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The 2019 edition of South African Business is the seventh edition of this annual guide to business and investment in South Africa. Regular pages cover all the main economic sectors of the South African economy and give a snapshot of each of the country’s provincial economies. Feature articles on topical issues such as Special Economic Zones and African trade provide unique insights, together with comprehensive overviews of critical economic sectors. Other special features focus on the exciting new possibilities in renewable energy, airports as engines of regional growth and the maritime sector as an entirely new prospect for South African entrepreneurs and businesses. South African Business is complemented by nine regional publications covering the business and investment environment in each of South Africa’s provinces. The e-book editions can be viewed at

OVERVIEW Manufacturing

OVERVIEW Manufacturing Incentives are in place to support new investment. SECTOR INSIGHT US tariffs on steel imports will affect South Africa. • The leather sector is making a comeback. The manufacturing sector employs the third-most people of South Africa’s economic sectors, about 1.7-million, after financial services and retail. The Department of Trade and Industry (dti) is the state’s lead promoter of the sector. The main vehicle for the dti is the Industrial Policy Action Plan (IPAP) which is periodically updated with particular focus areas. In marking the 10th version of IPAP in 2018, the department noted that some “deep-seated structural problems” in the domestic economy are still in place. The Manufacturing and Competitiveness Enhancement Programme (MCEP) of the National Department of Trade and Industry (dti) announced in 2017 that it had disbursed a total of 1 552 grants to the value of R5.8-billion which had resulted in 230 000 jobs being “sustained”. Plastics, pharmaceuticals and chemicals received 31% of the money, metal fabrication, capital and real transport equipment 28% and agri-processing 21%. Because of the dti’s Clothing and Textile Competitiveness Programme, that sector currently employs around 95 000 workers, contributing 8% to manufacturing GDP and 2.9% to overall GDP. In the leather sector 22 new factories have been opened, supporting 2 200 jobs. Manufacturing value addition for companies receiving the incentive has grown by 60.8%, and productivity by 22.3%. The various IPAPs are intended to create policy certainty to stimulate investment. The creation of an investment “one-stop shop” is another measure aimed at the same goal. Investor support is also available in terms of tax incentives, on budget support measures and Special Economic Zones (SEZs). Increasing demand for goods manufactured locally through government procurement programmes is yet another way of stimulating the manufacturing sector. Growth elsewhere in Africa and beyond is something that South Africa’s manufacturers are increasingly turning their attention to. Relationships with other Southern African countries through SADC, and to Brazil, Russia and India through the BRICS grouping hold tremendous potential for makers of goods in South Africa. Innovation The Support Programme for Industrial Innovation (SPII), run by the Industrial Development Corporation (IDC) on behalf of the dti, promotes technology development. New technology has been embraced by some innovative manufacturers. Desert Wolf’s Skunk Riot Control Chopper is an unmanned light aerial vehicles (UAV) that has proved popular in the world market. Denel makes a drone product that can be adapted for use by conservationists. Another IDC initiative has allocated R23-billion over three years SOUTH AFRICAN BUSINESS 2019 108

to support the Black Industrialist Programme to help existing entrepreneurs grow. Additive manufacturing is receiving support from the state through the Department of Science and Technology and a strategic business unit with a focus on new industries at the dti. Additive manufacturing uses 3D data. The main sectors receiving support (and R358- million in public money has been invested in research since 2014) are jewellery, tooling, medical and dental and aerospace. Products such as titanium medical implants and aerospace components have come out of the programme. The Centre for Advanced Manufacturing (CFAM) is housed at North-West University in Potchefstroom. The centre specialises in extruder technology, an important component in the food-manufacturing process. CFAM works with Gaborona Consulting, the Vaal University of Technology, Thripp (a dti technology programme) and ChemCity, an initiative of Sasol. Metals Among other important sectors are metals beneficiation (more than 50% of the world’s ferrochrome is produced in South Africa), coke and refined petroleum products and information and communication technology. Steel and petroleum collectively make up about 45% of South Africa’s total manufacturing production capacity. Steel has been experiencing a volatile few years, with reduced demand from China severely reducing production volumes in South Africa. The Steel and Engineering Industries Federation of Southern Africa (Seifsa) reported that 19 000 jobs were lost in the metals and engineering sector in the nine months to September 2016. New import tariffs of 25% imposed by US President Trump will further hurt the SA steel sector. This sector makes up 28% of manufacturing in the country. The country consumes about 150 000 tons of stainless steel every year. South Africa makes about 500 000 tons of primary stainless steel (most of which is exported) and imports a further 40 000 tons. OVERVIEW SOLUTIONS FOR AFRICA Modern manufacturers are coming up with ways to improve efficiency. In Africa, water saving and conservation is becoming a vital part of doing business. Marley Pipe Systems has released a revolutionary new hot and cold water supply solution called Profit. Not only is Pro-fit made from the highest grade PE-RT (Polyethylene with Raised Temperature Resistance), which reduces loss through punctures and tears, but it also reduces installation costs by 50% and is resistant to corrosion and impact. Water passing through the system is healthier and by avoiding the use of metal any scrap value is eliminated, thus making the product more secure. The recent extended drought has reminded all South Africans of how fragile water supply can be. The Marley Vynadeep® Rainwater System efficiently channels roofwater into tanks, reducing demand on ground water and supplying vital back-up for individual private or corporate premises. Marley Pipe Systems is active in several parts of Africa and with an increased uptake in the use of gas, Marley’s presence is growing. As big retailers expand their footprints in Namibia, Mozambique and Malawi, so Marley distributes larger volumes through those channels. With the mining sectors of countries such as Zambia, Tanzania and the DRC showing signs of recovery, so the gas market is growing further still. Cheap imports have been at the heart of problems for the steel sector, as they have for textiles, but other issues include energy prices and labour costs. The dti has moved to try to protect the local steel industry by regulating the use in the construction sector of locally produced and manufactured steel and steel products. Another possible intervention is related to 109 SOUTH AFRICAN BUSINESS 2019

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