TRADE: Reasons For Export Downturn
Recent Western Cape Business News
The dwindling competitiveness of the South African manufacturing sector is to blame for the dramatic decline in the country’s exports to the EU, not Europe’s current economic woes, a senior foreign diplomat said in Stellenbosch this week.
Mr Andreas Künne, head of the German Embassy’s department for economic and global issues, was speaking at Stellenbosch University’s 5th International Conference on Competitive Manufacturing.
He said over the first 10 months of 2012 – the latest available figures – Germany’s imports from South Africa went down by 17%, and that much the same was true of other EU countries.
“There is an argument being made by South African policymakers that the problems in Europe are the cause of the decline, but if you look at the figures, this is not true. Eurozone countries have actually increased their imports from outside Europe in 2012.
“So something must be wrong with South African exports specifically. And I will be blunt – the manufacturing competiveness in this country is not pointing upwards,” he said.
“You have soaring electricity costs, your infrastructure is ageing and your skills base is not improving the way it should. Also, if you look at the labour cost per unit in South Africa, you will find it has increased by 134% since 1994. In Europe, this figure over the same period actually decreased, because of improvements in productivity.”
According to Künne, Germany is one of South Africa’s largest trading partners. He said there are more than 600 German companies in the country, employing more than 90 000 people. The most important sector for Germany is the automotive industry, as is evidenced by the fact that three large manufacturers – Volkswagen, BMW and Mercedes-Benz – have plants in South Africa.
“That shows they have confidence in the country. But if something goes wrong here, our companies will have a big problem,” Künne said.
However, he added, “there is no use in just complaining, you have to do something about it. And South Africa has the world’s best track record in terms of successful turnarounds. There is one government document that points the way to the future – the National Development Plan 2030.
“The document says that South Africa is a middle-income country, it needs a broad mid-skills manufacturing base and a focus on niche markets, which do not require large economies of scale.”
Also part of the solution, according to Künne, is for universities to produce the skills that are needed by industry.
In his welcoming address, Stellenbosch University Rector and Vice-Chancellor Prof Russel Botman told delegates there was a need for “investment in education and training to equip a new generation of engineers and scientists with the necessary skills to meet the challenges that we face.”
He said the challenges facing South Africa should be seen as opportunities rather than problems.
“Innovation in manufacturing can help us restore our ecosystems, manage global warming, make renewable energy more viable, close the gaping global wealth gap, provide adequate housing and services to the urbanising poor, produce enough food for everyone and help us do more with less.”
Botman said universities have a key role to play.
“We have to leave the Ivory Tower, roll up our sleeves and tackle real-world challenges to justify our existence. This is exactly what we are doing at Stellenbosch. We follow a science-for-society approach, and the vehicle that we use for that is an initiative called the HOPE Project – because it looks at what we need to do now for the sake of future generations.”
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