To locally manufacture or not is the question

By Andy Camphausen

Unemployment within the borders of South Africa is 27% for Q1 2018, according to Stats SA.

Some believe this figure is actually higher at almost 37%. In fact, 120 000 jobs across the manufacturing sector have been lost since the start of 2018.

South Africa’s unemployment rate is high for both youth and adults; however, the unemployment rate among young people aged 18–34 was 38.2%, implying that more than one in every three young people in the labour force did not have a job in the first quarter of 2018.

Compounded to this are increasing political pressures and agendas that do not assist people to attain jobs or create job opportunities in this country.

Would it not be utopian if we all followed the principle of purchasing and/or procuring locally produced goods and services? If South Africa has the capability and the capacity to locally manufacture a product or offer a service, why buy it from overseas?

Why is it that the likes of massive corporations like Mercedes, Volkswagen, and Renault invest in South Africa in building manufacturing plants to build cars for the export market? They use our expertise. Are we not good enough? Of course we are and that is why they invest.

With the same thinking as above, local manufacturing has attained a reputation of being more expensive than its overseas counterparts.

But why is that? If there was capacity in factories using the economies of scale formula, do you not think that local manufacturers would be able to compete on the world stage, obviously comparing product like for like?

The short answer — of course we can, but there is this false sense of security that if something breaks, I can just replace it as it is cheaper than buying something locally.

Is it really cheaper?

For example

You kit out a bathroom with primarily locally manufactured fittings. As the product is locally manufactured, there is peace of mind from an installation point of view as the service backing is local, too, should something go wrong, or if you just need some advice on how to install a particular product. It is just a phone call away and most often, the service is exemplary.

Obviously, there are things in a bathroom that cannot be procured from a local manufacturer, like porcelain tiles. Now you install lovely, locally manufactured brassware/sanitaryware products and tile with imported porcelain tiles that can cost over R500 per square metre. Eventually, everything is installed and you get paid for the work done and in your opinion, it looks beautiful and much pride is emitted when getting paid from the owner.

On the other hand, you kit out the same bathroom with exclusively imported fittings from overseas. There is no peace of mind as you do not actually know where the fittings have been manufactured.

Yes, it is cheaper and you save some good money on the installation. But there is no one you can phone if you have a problem or need advice.

You then get paid and the same amount of pride is emitted when getting paid as it also looks good and the owner is very happy with the workmanship and the lovely imported fittings.

You leave, but a few weeks later, you get a phone call from the owner, complaining that there is water coming out of the porcelain tiles that you painstakingly laid at R500 per square meter.

This is a plumber or installer’s dread.

Now you have to go back and fix what is wrong, using up the money saved on the cheaper fittings and more often than not, all profit is diminished by a simple principle decision. You phone the store from where you bought the fittings and learn that they cannot assist you.

You now have to remove the tiles at your expense and time (where you could have been doing another paying job), some tiles break, and you only have 10% in backup. You find that the brassware in the wall is leaking. You now have to use your hard-earned profit to sort out a problem that, if you had bought locally manufactured product, would most probably not have happened due to the available after-sales service from the local manufacturer.

The point is, we can complain, shout, scream, and blame the world about our woes and why there is no employment, but if we were asking the plumbing stores whether the product is manufactured in South Africa, it would force these suppliers to procure locally to satisfy the demand of you the plumber or installer and that would put capacity back into the factories, which in turn would reduce the price of goods substantially to compete with the likes of the overseas counterparts.

Whatever you decide, we need to feed our population, and this will never transpire without, among others, the local manufacturing sector.

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